<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
INTEGRATED SECURITY SYSTEMS, INC.
(NAME OF ISSUER)
INTEGRATED SECURITY SYSTEMS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(TITLE OF CLASS OF SECURITIES)
45812J 12 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
GERALD K. BECKMANN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTEGRATED SECURITY SYSTEMS, INC.
8200 SPRINGWOOD DRIVE, SUITE 230
IRVING, TEXAS 75063
(972) 444-8280
WITH A COPY TO:
DAVID ODEN, ESQ.
HAYNES AND BOONE, LLP
901 MAIN STREET
SUITE 3100
DALLAS, TEXAS 75202
(214) 651-5000
(NAME, ADDRESSES AND TELEPHONE NUMBERS OF PERSONS AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
FEBRUARY 26, 1998
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
<TABLE>
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<S> <C>
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Transaction Valuation Amount of Filing Fee
- -----------------------------------------------------------------------------
$589,062.50 (1) $117.81
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</TABLE>
(1) For purposes of calculating fee only. The market value of the Public
Warrants proposed to be acquired by Integrated Security Systems, Inc. was
established by multiplying $0.40625, the average of the bid and ask prices
of the Public Warrants as of February 25, 1998, by 1,450,000, the number
of Public Warrants that the Company has offered to acquire. The amount of
the filing fee calculated in accordance with Rule 0-11 of the Securities
Exchange Act of 1934, as amended, equals 1/50 of 1% of the transaction
valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not Applicable
Form or Registration No.: Not Applicable
Filing Party: Not Applicable
Date Filed: Not Applicable
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<PAGE> 2
ITEM 1. SECURITY AND ISSUER
Preliminary Note: References in this Statement to the "Offering
Circular" are to the Offering Circular dated February 26, 1998, filed herewith
as Exhibit 99.1 and made a part hereof.
(a) The name of the Issuer is Integrated Security Systems, Inc., a
Delaware corporation (the "Company"), and the address of its principal
executive office of the Company is 8200 Springwood Drive, Suite 230, Irving,
Texas 75063.
(b) As of February 25, 1998, the Company had 1,450,000 Redeemable
Common Stock Purchase Warrants (the "Public Warrants") outstanding held by 52
record holders. The Company is offering to purchase any or all outstanding
Public Warrants by exchanging one warrant (the "Exchange Warrants") to purchase
one (1) share of the Company's common stock, $.01 par value per share (the
"Common Stock"), for each Public Warrant validly tendered, upon the terms and
subject to the conditions set forth in the Offering Circular and related Letter
of Transmittal, a copy of which is filed herewith as Exhibit 99.2 and
incorporated by reference herein. The information set forth in the Offering
Circular on the Cover Page and under the captions "Summary," "The Offer--Terms
of the Offer; Number of Public Warrants," and "Description of Exchange
Warrants, Public Warrants and Common Stock," is hereby incorporated by
reference herein.
(c) The information set forth in the Offering Circular under the
captions "Price Range of the Public Warrants," "The Offer--Effect of the Offer
on the Market for the Public Warrants; Stock Exchange Listing; Registration
Under the Exchange Act" and "The Offer--Listing of the Exchange Warrants" is
hereby incorporated by reference herein.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The information set forth in the Offering Circular on the
Cover Page and under the captions "The Offer--Terms of the Offer; Number of
Public Warrants" and "Description of Exchange Warrants, Public Warrants and
Common Stock" is hereby incorporated by reference herein.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
The information set forth in the Offering Circular under the caption
"Purpose of the Offer" in the Offering Circular is incorporated herein by
reference.
Other than as described in this Item, the Company presently has no
plans or proposals which relate to or would result in any of the matters listed
in Items 3(a) through 3(j) of Schedule 13E-4. Reference is made to the
information under the captions "The Offer--Effect of the Offer on the Market
for the Public Warrants; Stock Exchange Listing; Registration Under the
Exchange Act," "The Offer--Listing of the Exchange Warrants" and "Description
of Exchange Warrants, Public Warrants and Common Stock" in the Offering
Circular, which information is hereby incorporated by reference herein.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
Neither the Company nor, to the best of its knowledge, any of the
other persons covered by Item 4 of Schedule 13E-4 has effected any transaction
in the Public Warrants during the 40 business days preceding the date of the
Offering Circular. The information set forth in the Offering Circular under
the caption "Description of Exchange Warrants, Public Warrants and Common
Stock" is hereby incorporated by reference herein.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES
Except as set forth in the Offering Circular under the captions
"Purpose of the Offer" and "Description of Exchange Warrants, Public Warrants
and Common Stock," which are incorporated herein by reference, there are no
contracts, arrangements, understandings or relationships relating, directly or
indirectly, to the Offer (whether or not legally enforceable) between the
Company, any of its executive officers or directors, and any person, with
respect to any securities of the Company (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies, consents or authorizations).
2
<PAGE> 3
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
As stated in the Offering Circular, the Company will not make any
payments to brokers, dealers or other persons for soliciting or recommending
acceptances of the Offer.
The information appearing in the Offering Circular under the captions
"The Offer--Solicitation of Tenders; Expenses" is incorporated herein by
reference.
ITEM 7. FINANCIAL INFORMATION
(a) Reference is hereby made to the financial information of the
Company in its Annual Report on Form 10-KSB for the fiscal year ended June 30,
1997, filed with the Commission on September 26, 1997, and its Quarterly
Reports on Form 10-QSB for the fiscal quarter ended September 30, 1997, filed
with the Commission on November 14, 1997, and for the fiscal quarter ended
December 31, 1997, filed with the Commission on February 17, 1998, all of which
are incorporated by reference herein.
(b) Not Applicable.
ITEM 8. ADDITIONAL INFORMATION
(a) Not Applicable.
(b) Not Applicable.
(c) The information appearing in the Offering Circular under the
caption "The Offer--Effect of the Offer on the Market for the Public Warrants;
Stock Exchange Listing; Registration Under the Exchange Act" is incorporated
herein by reference.
(d) Not Applicable.
(e) The Offering Circular and the Letter of Transmittal, each of
which is filed as an exhibit hereto, are incorporated herein in their entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
99.1 -- Form of Offering Circular dated February 26, 1998
99.2 -- Form of Letter of Transmittal
99.3 -- Form of Letter to Warrant holders from the President and Chief
Executive Officer of the Company
99.4 -- Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.5 -- Form of Letter to Clients
99.6 -- Form of Notice of Guaranteed Delivery
99.7 -- Press release issued February 26, 1998
99.8 -- Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
99.9 -- Warrant Agreement, dated as of April 20, 1993, by and among
the Company, American Stock Transfer & Trust Company and
Thomas James Associates, Inc., a New York corporation, filed
as Exhibit 4.3 to the Company's Registration Statement on Form
SB-2 (File No. 33-59870-FW) and incorporated by reference
therein
99.10 -- Warrant Agreement, dated as of February 25, 1998, by and
between the Company and the American Stock Transfer & Trust
Company
3
<PAGE> 4
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 26, 1998 INTEGRATED SECURITY SYSTEMS, INC.
By: /s/ GERALD K. BECKMANN
----------------------------
Gerald E. Beckmann
President and Chief Executive
Officer
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT NAME
- ------- ------------
<S> <C>
99.1 -- Form of Offering Circular dated February 26, 1998
99.2 -- Form of Letter of Transmittal
99.3 -- Form of Letter to Warrant holders from the President and
Chief Executive Officer of the Company
99.4 -- Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.5 -- Form of Letter to Clients
99.6 -- Form of Notice of Guaranteed Delivery
99.7 -- Press release issued February 26, 1998
99.8 -- Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
99.9 -- Warrant Agreement, dated as of April 20, 1993, by and among
the Company, American Stock Transfer & Trust Company and
Thomas James Associates, Inc., a New York corporation, filed
as Exhibit 4.3 to the Company's Registration Statement on
Form SB-2 (File No. 33-59870-FW) and incorporated by
reference therein
99.10 -- Warrant Agreement, dated as of February 25, 1998, by and
between the Company and the American Stock Transfer & Trust
Company
</TABLE>
5
<PAGE> 1
EXHIBIT 99.1
OFFERING CIRCULAR
INTEGRATED SECURITY SYSTEMS, INC.
OFFER TO EXCHANGE
WARRANTS TO PURCHASE COMMON STOCK, $.01 PAR VALUE
FOR ANY AND ALL
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON APRIL 17, 1998 (THE "EXPIRATION DATE"). PUBLIC WARRANTS TENDERED
PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
INTEGRATED SECURITY SYSTEMS, INC. (the "Company") hereby offers, upon
the terms and subject to the conditions set forth herein and in the related
letter of Transmittal (collectively, the "Offer"), to issue warrants (the
"Exchange Warrants") to purchase 2.1 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), until April 20, 1999, at an exercise
price of $3.17 per share of Common Stock, in exchange for the Company's
Redeemable Common Stock Purchase Warrants (the "Public Warrants") validly
tendered on or prior to the Expiration Date and not properly withdrawn. Each
Public Warrant validly tendered on or prior to the Expiration Date and not
properly withdrawn will be entitled to receive one Exchange Warrant.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF PUBLIC
WARRANTS BEING TENDERED.
Each Exchange Warrant entitles the holder to purchase 2.1 shares of
the Company's Common Stock until April 20, 1999, at an exercise price of $3.17
per share of Common Stock, subject to certain adjustments. The Exchange
Warrants are redeemable for $.25 per Exchange Warrant, at the option of the
Company, upon 30 days' written notice.
________________________
The date of this Offering Circular is February 26, 1998
<PAGE> 2
IMPORTANT
Any holder of Public Warrants desiring to tender all or any portion of
his or her Public Warrants should either (1) complete and sign the Letter of
Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of Transmittal and mail or deliver it together with his or her Public
Warrant certificate(s) and any other required documents to American Stock
Transfer & Trust Company, the Company's Transfer Agent (the "Transfer Agent")
or tender such Public Warrants pursuant to the procedure for book-entry
transfer set forth in this Offering Circular under "The Offer--How to Tender"
or (2) request his or her broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for him. A holder of Public Warrants
whose Public Warrants are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee to tender such Public
Warrants. A holder of Public Warrants who desires to tender Public Warrants
and whose certificates for such Public Warrants are not immediately available,
or who cannot comply with the procedure for book-entry transfer on a timely
basis, may tender his or her Public Warrants by following the procedure for
guaranteed delivery set forth in this Offering Circular under "The Offer--How
to Tender."
Questions and requests for assistance may be directed to the Company
at the address and telephone number set forth on the last page of this Offering
Circular. Requests for additional copies of this Offering Circular may be
directed to the Company or to brokers, dealers, commercial banks or trust
companies.
The Offer is being made by the Company in reliance on the exemption
from the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), afforded by Section 3(a)(9) thereof. The Company will not
pay any commission or other remuneration to any broker, dealer, salesman or
other person for soliciting tenders of the Public Warrants. The Company will
assist warrant holders in obtaining copies of the materials relating to the
Offer. Regular employees of the Company may solicit tenders from holders of
Public Warrants, but they will not receive additional compensation therefor.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS
OFFERING CIRCULAR. IF GIVEN OR MADE, THE INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THE DELIVERY OF
THIS OFFERING CIRCULAR SHALL NOT, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
NEITHER THIS TRANSACTION NOR THE SECURITIES OFFERED HEREBY HAVE BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO ANY PERSON IN
ANY JURISDICTION IN WHICH THAT OFFER WOULD BE UNLAWFUL, AND THE COMPANY WILL
NOT ACCEPT TENDERS FROM WARRANT HOLDERS IN ANY JURISDICTION IN WHICH SUCH
ACCEPTANCE WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF
SUCH JURISDICTION.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements and
other information are available for inspection at the Commission's public
reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the
Commission maintains a web site on the Internet that can be accessed at
http://www.sec.gov and that contains information filed electronically regarding
the Company.
The Company has filed with the Commission an Issuer Tender Offer
Statement on Schedule 13E-4 under the Exchange Act furnishing certain
additional information with respect to the Offer. Such Schedule 13E-4 and any
amendments thereto, including exhibits (collectively, the "Schedule 13E-4"),
may be inspected without charge at the offices of the Commission, the addresses
of which are set forth above, and copies may be obtained therefrom at
prescribed rates.
1
<PAGE> 4
SUMMARY
The following is a summary of certain items of the Offer and certain
of the other information contained in this Offering Circular. It is not
intended to be complete and is qualified in its entirety by the more detailed
information contained elsewhere, or incorporated by reference, in this Offering
Circular.
PURPOSE OF THE OFFER
The purpose of the Company's offer to exchange the Public Warrants for
the Exchange Warrants is to (i) provide the holders of the outstanding Public
Warrants with a longer opportunity to profit from the exercise thereof, (ii)
after April 20, 1998, modify the terms providing for the adjustment of the
exercise price and the number of shares purchasable upon exercise of the
warrants, and (iii) permit the Company and the Transfer Agent to modify the
exercise price from time to time without obtaining the consent of any of the
holders of the Exchange Warrants.
THE OFFER
Exchange Ratio . . . . . . . . . . . . One Exchange Warrant for each Public
Warrant (the "Exchange Ratio").
Expiration Date . . . . . . . . . . . . 12:00 midnight, New York City time,
on April 17, 1998.
Number of Warrants . . . . . . . . . . Subject to the terms and conditions
of the Offer, all Public Warrants
will be accepted if duly tendered
and not withdrawn prior to the
Expiration Date. The Offer is not
conditioned upon any minimum number
of Public Warrants being tendered.
Exchange Warrants . . . . . . . . . . . Each Exchange Warrant entitles the
holder to purchase 2.1 shares of the
Company's Common Stock until April
20, 1999, at an exercise price of
$3.17 per share of Common Stock,
subject to certain adjustments. The
Exchange Warrants are redeemable, in
whole but not in part, for $.25 per
Exchange Warrant, at the option of
the Company, upon 30 days' written
notice. The Transfer Agent and the
Company may, by amendment or
supplemental agreement, modify the
exercise price from time to time
without obtaining the consent of any
of the holders of the Exchange
Warrants.
Public Warrants . . . . . . . . . . . . The Public Warrants were issued by
the Company in its initial public
offering (the "IPO") on April 20,
1993. As of February 25, 1998, there
were 1,450,000 Public Warrants
outstanding held by 52 record
holders. Each Public Warrant
entitles the holder to purchase 2.1
shares of the Company's Common Stock
at any time prior to April 20, 1998,
at an exercise price equal to $3.17
per share of Common Stock, subject
to certain adjustments. The exercise
price and the number of shares
purchasable upon exercise of the
Public Warrants are adjusted, among
other reasons, if the Company issues
shares of Common Stock below the
current exercise price of the Public
Warrants. The Public Warrants are
redeemable, in whole but not in
part, for $.25 per Public Warrant,
at the option of the Company, upon
30 days' written notice and with the
prior written consent of the
representative of the underwriters
of the IPO.
Trading and Market Price. . . . . . . . Since April 20, 1993, the Public
Warrants have been quoted on the
Nasdaq Small Cap Market under the
symbol "IZZIW" and on the Boston
Stock Exchange under the symbol
"ISIW." On February 23,
2
<PAGE> 5
1998, the last reported sales price
for the Public Warrants as reported
on the Nasdaq Small Cap Market was
$0.313. See "Price Range of Public
Warrants."
In general, persons other than
affiliates of the Company whose
tender of Public Warrants is
accepted will receive unrestricted
and freely transferrable Exchange
Warrants. The Company intends to
apply for listing on the Nasdaq
Small Cap Market of the Exchange
Warrants. There can be no
assurance, however, that the
Exchange Warrants will be admitted
for trading on the Nasdaq Small Cap
Market or that a trading market for
the Exchange Warrants will otherwise
develop. See "The Offer--Listing of
the Exchange Warrants."
Federal Income Tax Consequences . . . . The Company has concluded that the
exchange of Public Warrants for
Exchange Warrants pursuant to the
Offer qualifies as a tax-free
reorganization within the meaning of
Section 368(a)(1)(E) of the Internal
Revenue Code of 1986, as amended.
The federal income tax consequences
regarding the exchange, ownership
and disposition of the Public
Warrants and Exchange Warrants are
set forth under "Certain Federal
Income Tax Consequences."
Withdrawal Rights . . . . . . . . . . . Tenders may be withdrawn (i) at any
time prior to the Expiration Date.
and (ii) if not yet accepted for
exchange, at any time after April
15, 1998. See "The
Offer--Withdrawal Rights."
How to Tender . . . . . . . . . . . . . Tendering warrant holders must
either (i) complete and sign a
Letter of Transmittal, have their
signatures guaranteed if required,
forward the Letter of Transmittal
and any other required documents to
the Transfer Agent at the address
set forth on the last page of this
Offering Circular and either deliver
the certificates representing the
tendered warrants to the Company or
tender such warrants pursuant to the
procedures for book-entry transfer
or (ii) request a broker, dealer,
bank, trust company or other nominee
to effect the transaction for them.
Holders of Public Warrants
registered in the name of a broker,
dealer, bank, trust company or other
nominee must contact such
institution to tender their Public
Warrants. Certificates for Public
Warrants may be physically
delivered, but physical delivery is
not required if a confirmation of a
book-entry transfer of such warrants
to the Transfer Agent's account at
the Book-Entry Facility (as defined
below) is delivered in a timely
fashion. Certain provisions have
also been made for holders whose
warrant certificates are not readily
available or who cannot comply with
the procedure for book-entry
transfer on a timely basis.
Questions regarding how to tender
and requests for information should
be directed to the Company. See
"Offer--How to Tender."
Acceptance of Tenders . . . . . . . . Subject to the terms and conditions
of the Offer, Public Warrants
validly tendered will be accepted on
or promptly after the Expiration
Date. Subject to such terms and
conditions, certificates for
Exchange Warrants to be issued in
exchange for properly tendered
Public Warrants will be mailed by
the Transfer Agent promptly after
acceptance of the tendered Public
Warrants. See "The Offer--Acceptance
of Tenders."
3
<PAGE> 6
FINANCIAL INFORMATION ABOUT THE COMPANY
Reference is hereby made to the Company's Annual Report on Form 10-KSB
for the year ended June 30, 1997, filed with the Commission on September 26,
1997, and the Company's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1997, filed with the Commission on February 17, 1998.
The Company will provide, without charge, to each person to whom a
copy of this notice is delivered, upon written or oral request of such person,
a copy of any and all of the information that has been or may be incorporated
by reference herein (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents). Such requests,
including a request for any additional information regarding this notice or the
exchange procedures described herein, should be directed to the Chief Financial
Officer of the Company, at the principal executive offices of the Company, 8200
Springwood Drive, Suite 230, Irving, Texas 75063.
PRICE RANGE OF PUBLIC WARRANTS
Since April 20, 1993, the Public Warrants have been quoted on the
Nasdaq Small Cap Market under the symbol "IZZIW" and on the Boston Stock
Exchange under the symbol "ISIW." The following table sets forth, for the
period indicated, the high and low bid quotations for the Public Warrants on
the Nasdaq Small Cap Market. Trading prices for the Public Warrants on the
Boston Stock Exchange are substantially similar to the prices set forth below
for the Nasdaq Small Cap Market. These over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark- down or commission
and may not represent actual transactions. The trading market in the Public
Warrants may at times be relatively illiquid due to low volume.
<TABLE>
<CAPTION>
1997 Prices 1996 Prices
----------------- -----------------
High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter $1.625 $0.938 $0.875 $0.063
Second Quarter 1.313 0.688 1.688 0.313
Third Quarter 1.343 0.531 1.00 0.625
Fourth Quarter 1.00 0.406 1.313 0.688
</TABLE>
On February 23, 1998, the last reported sales price for the Public
Warrants as reported on the Nasdaq Small Cap Market was $0.313.
PURPOSE OF THE OFFER
The purpose of the Company's offer to exchange the Public Warrants for
the Exchange Warrants is to provide the holders of the outstanding Public
Warrants with a longer opportunity to profit from the exercise of the warrant.
The Exchange Warrants extend the exercise date to April 20, 1999 from April 20,
1998, as provided in the Public Warrants. Accordingly, the holders of the
Exchange Warrants will have a longer opportunity to exercise their warrant
rights.
An additional purpose of the Company's offer to exchange the Public
Warrants for the Exchange Warrants is also to modify the terms providing for
the adjustment of the exercise price and the number of shares purchasable upon
exercise of the warrants. The Public Warrants provide that the exercise price
and the number of shares
4
<PAGE> 7
purchasable upon exercise is to be adjusted whenever the Company issues Common
Stock at a price less than the current exercise price of the Public Warrants.
The Exchange Warrants contain an identical provision effective only through
April 20, 1998. Thereafter, no such adjustments will be made. This
modification may reduce the number of times that the exercise price and the
number of shares purchasable will be adjusted.
Further, the Exchange Warrants permit the Company and the Transfer
Agent to modify the exercise price from time to time without obtaining the
consent of any of the holders of the Exchange Warrants.
To the extent that any Public Warrants are exchanged by the Company
at the option of the holders thereof, such Public Warrants will be retired.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE
OFFER BUT IS NOT MAKING ANY RECOMMENDATION TO HOLDERS OF PUBLIC WARRANTS AS TO
WHETHER OR NOT TO TENDER PUBLIC WARRANTS. EACH HOLDER OF PUBLIC WARRANTS MUST
MAKE HIS OR HER OWN DECISION WHETHER OR NOT TO TENDER PUBLIC WARRANTS, AND, IF
SO, HOW MAY PUBLIC WARRANTS TO TENDER.
THE OFFER
TERMS OF THE OFFER; NUMBER OF PUBLIC WARRANTS
The Company hereby offers, upon the terms and conditions set forth
herein and in the related Letter of Transmittal, to issue Exchange Warrants for
Public Warrants at the Exchange Ratio. On February 25, 1998, there were
1,450,000 Public Warrants outstanding. The Offer is not conditioned upon any
minimum number of Public Warrants being tendered.
THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE
EXPIRATION DATE. See "Expiration and Extension of Tender Period; Termination;
Amendment."
Holders of Public Warrants who wish to exchange Public Warrants for
Exchange Warrants and who validly tender certificates for Public Warrants to
the Company or validly tender Public Warrants by complying with the book-entry
transfer procedures described below and, in each case, who furnish the Letter
of Transmittal and any other required documents to the Transfer Agent, will
have certificates for Exchange Warrants mailed to them by the Transfer Agent,
promptly after tender is accepted by the Company. Subject to the terms and
conditions of the Offer, properly tendered Public Warrants will be accepted on
or promptly after the Expiration Date. Subject to the applicable rules of the
Commission, the Company, however, reserves the right to delay acceptance of
tendered warrants upon the occurrence of any of the conditions set forth below
under the caption "Certain Conditions of the Offer."
This Offering Circular and the related Letter of Transmittal will be
mailed to record holders of Public Warrants and will be furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear
on the list of holders of Public Warrants or, if applicable, who are listed as
participants in a clearing agency's position listing for subsequent transmittal
to beneficial owners of Public Warrants.
EFFECT OF THE OFFER ON THE MARKET FOR THE PUBLIC WARRANTS; STOCK EXCHANGE
LISTING; REGISTRATION UNDER THE EXCHANGE ACT.
The Public Warrants are currently listed on the Nasdaq Small Cap
market and the Boston Stock Exchange. The expiration date for the Public
Warrants is April 20, 1998. Thereafter, no trading market for the Public
Warrants will exist, regardless of whether the Public Warrants are exchanged.
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LISTING OF THE EXCHANGE WARRANTS
In general, persons other than affiliates of the Company whose tender
of Public Warrants is accepted will receive unrestricted and freely
transferrable Exchange Warrants. Although the Company intends to apply for
listing on the Nasdaq Small Cap Market, there can be no assurance that the
Exchange Warrants will be admitted for trading on the Nasdaq Small Cap Market
or that even if initially listed, the Nasdaq Small Cap Market will not delist
the Exchange Warrants in the future if the Exchange Warrants do not meet its
listing requirements. If the Exchange Warrants not listed for trading on the
Nasdaq Small Cap Market, they would trade on the NASDAQ "bulletin board." Such
trading would adversely affect the market value and liquidity of the Exchange
Warrants.
EXPIRATION AND EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The Offer will expire at 12:00 midnight, New York City time, on the
Expiration Date. The Company expressly reserves the right, in its sole
discretion, to terminate the Offer and not accept for exchange any Public
Warrants not theretofore accepted for exchange or, subject to applicable law,
to postpone the exchange of Public Warrants upon the occurrence of any of the
conditions specified in this Offering Circular by making a public announcement
of such termination. Applicable federal securities regulations require that the
Company permit Public Warrants tendered pursuant to the Offer to be withdrawn
(i) at any time during the period the Offer remains open and (ii) if not yet
accepted for exchange, after the expiration of 40 business days from
commencement of the Offer. Such regulations require that the Company return the
Public Warrants tendered promptly after termination or withdrawal of a tender
offer.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, the Company will
not be required to issue Exchange Warrants in respect of any properly tendered
Public Warrants not accepted and may terminate the Offer (by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service) and, subject to
compliance with the applicable rules of the Commission, delay the acceptance of
the tendered warrants if any of the following events shall have occurred (or
shall have been determined by the Company to have occurred) and which in the
Company's sole judgment in any such case makes it inadvisable to proceed with
the Offer:
(a) Any action or proceeding, order, decree or injunction
shall have been taken or threatened, instituted or pending, or any
statute, rule, regulation, judgment, order, stay, decree or injunction
shall have been sought, promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Company taken as a whole, by or
before any court or governmental, regulatory or administrative
authority or agency or tribunal, which (i) challenges the making of
the Offer, the acquisition of the Public Warrants or issuance of the
Exchange Warrants pursuant to the Offer or might directly or
indirectly prohibit, prevent, restrict or delay consummation of the
Offer, or (ii) materially adversely affects the business, operations,
condition (financial or otherwise), results of operations, prospects,
assets, liabilities, working capital or reserves of the Company taken
as a whole, or otherwise materially impairs in any way the
contemplated future conduct of the business of the Company taken as a
whole.
(b) There shall have occurred (i) the declaration of any
banking moratorium or suspension of payments in respect of banks in
the United States, (ii) any general suspension of trading in, or
limitation on prices for, securities on any national securities
exchange or in the over-the-counter market, (iii) the commencement of
a war, armed hostilities or any other national or international crisis
directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory) by any government or
governmental, regulatory or administrative agency or authority on, or
any event which in the Company's sole judgment might adversely affect,
the extension of credit by banks or other lending institutions in the
United States, or (v) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof.
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(c) There shall have occurred any event that has
resulted, or may in the sole judgment of the Company result, in an
actual or threatened change in the business, operations, condition
(financial or otherwise), results of operations, prospects, assets,
liabilities, working capital or reserves of the Company.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company in its sole discretion regardless of the
circumstances (including any action or inaction by the Company) giving rise to
any such conditions, or may be waived by the Company, in its sole discretion,
in whole or in part at any time.
HOW TO TENDER
A HOLDER OF PUBLIC WARRANTS MAY TENDER PUBLIC WARRANTS BY (a) PROPERLY
COMPETING AND SIGNING THE LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (ALL
REFERENCES IN THIS OFFERING CIRCULAR TO THE LETTER OF TRANSMITTAL SHALL BE
DEEMED TO INCLUDE A FACSIMILE THEREOF) AND DELIVERING THE SAME, TOGETHER WITH
THE CERTIFICATES REPRESENTING THE PUBLIC WARRANTS BEING TENDERED (OR A
CONFIRMATION OF A BOOK-ENTRY TRANSFER OF SUCH PUBLIC WARRANTS INTO THE TRANSFER
AGENT'S ACCOUNT AT THE DEPOSITARY TRUST COMPANY), TO THE TRANSFER AGENT ON OR
PRIOR TO THE EXPIRATION DATE, OR (b) REQUESTING A BROKER, DEALER, BANK, TRUST
COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH HOLDER OF PUBLIC
WARRANTS PRIOR TO THE EXPIRATION DATE.
If tendered warrants are registered in the name of the signer of the
Letter of Transmittal and the Exchange Warrants to be issued in exchange
therefor are to be issued in the name of the registered holder and delivered to
the address appearing on the Company's transfer books, the signature of such
signer need not be guaranteed. If Exchange Warrants are to be issued in the
name of a person other than the registered holder of the Public Warrants, the
tendered certificates must be endorsed or accompanied by stock powers or
written instruments of transfer in form satisfactory to the Company and duly
executed by the registered owner, and the signature on the endorsement or stock
power must be guaranteed by a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of a recognized
Medallion Program approved by The Securities Transfer Association, Inc. (any of
the foregoing hereinafter referred to as an "Eligible Institution"). If the
Exchange Warrants are to be delivered to an address other than that of the
registered holder appearing on the Company's transfer books, the signature in
the Letter of Transmittal must be guaranteed by an Eligible Institution.
The Transfer Agent will establish an account with respect to the
Public Warrants at The Depository Trust Company (the "Book-Entry Facility")
shortly after the date of this Offering Circular, and any financial institution
which is a participant in the Book-Entry Facility may make book-entry delivery
of the warrants by causing the Book-Entry Facility to transfer such warrants
into the Transfer Agent's account in accordance with the Book-Entry Facility's
procedure for such transfer. Although delivery of warrants may be effected
through book-entry transfer into the Transfer Agent's account at the Book-Entry
Facility, the Letter of Transmittal, with any required signature guarantees and
any other required documents, must in any case be transmitted to and received
by the Transfer Agent on or prior to the Expiration Date at its address set
forth on the last page of this Offering Circular, or the guaranteed delivery
procedure described below must be complied with. Delivery of documents to the
Book-Entry Facility does not constitute delivery to the Transfer Agent. All
references in this Offering Circular to deposit or delivery of warrants shall
be deemed to include the Book-Entry Facility's book-entry delivery method.
THE METHOD OF DELIVERY OF PUBLIC WARRANTS AND ALL OTHER DOCUMENTS,
INCLUDING DELIVERY THROUGH THE BOOK-ENTRY FACILITY, IS AT THE ELECTION AND RISK
OF THE WARRANT HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
RETURN RECEIPT REQUESTED, BE USED, AND PROPER INSURANCE BE OBTAINED.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING, A WARRANT HOLDER
MUST PROVIDE THE TRANSFER AGENT WITH HIS OR HER CORRECT TAXPAYER IDENTIFICATION
NUMBER AND CERTIFY WHETHER SUCH WARRANT HOLDER IS SUBJECT TO BACKUP WITHHOLDING
OF FEDERAL INCOME TAX BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE
LETTER OF TRANSMITTAL. CERTAIN WARRANT HOLDERS (INCLUDING, AMONG OTHERS, ALL
CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS) ARE NOT SUBJECT TO THESE BACKUP
WITHHOLDING AND REPORTING
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REQUIREMENTS. IN ORDER FOR A FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT
RECIPIENT, THE WARRANT HOLDER MUST SUBMIT A FORM W-8, SIGNED UNDER PENALTIES
OF PERJURY, ATTESTING TO THAT INDIVIDUAL'S EXEMPT STATUS. SEE "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES--OWNERSHIP AND DISPOSITION OF THE EXCHANGE WARRANTS AND
PUBLIC WARRANTS--BACK-UP WITHHOLDING."
If a warrant holder desires to tender Public Warrants pursuant to the
Offer and such warrant holder's certificates for such warrants are not
immediately available or time will not permit all of the above documents to
reach the Transfer Agent prior to the Expiration Date, or such warrant holder
cannot complete the procedure for book-entry transfer on a timely basis, such
tender may be effected if the following conditions are satisfied:
(a) such tenders are made by or through an Eligible
Institution;
(b) a properly completed and duly executed Notice of
Guaranteed Delivery, in substantially the form provided by the
Company, is received by the Transfer Agent as provided below on or
prior to the Expiration Date; and
(c) the certificates for all tendered warrants, in proper
form for transfer (or confirmation of book-entry transfer of such
warrants into the Transfer Agent's account at the Book-Entry Facility
as described above), together with a properly completed and duly
executed Letter of Transmittal and all other documents required by
the Letter of Transmittal are received by the Transfer Agent within
three New York Stock Exchange, Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmission or mail to the Transfer Agent and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
A tender will be deemed to have been received as of the date when the
tendering warrant holder's duly signed Letter of Transmittal accompanied by
certificates (or a timely confirmation received of a book-entry transfer of
such warrants into the Transfer Agent's account at the Book-Entry Facility) or
a Notice of Guaranteed Delivery from an Eligible Institution is received by the
Transfer Agent. Issuances of Exchange Warrants in exchange for Public Warrants
tendered pursuant to a Notice of Guaranteed Delivery by an Eligible Institution
will be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered certificates (or a timely confirmation
received of a book-entry transfer of such warrants into the Transfer Agent's
account at the Book-Entry Facility) with the Transfer Agent.
Any whole number of Public Warrants may be tendered. Tendering warrant
holders may tender less than all of the Public Warrants represented by the
certificates they hold provided they appropriately indicate this fact on the
Letter of Transmittal accompanying the tendered Public Warrant certificates.
Tenders of fractional warrants will not be accepted.
With respect to tenders of Public Warrants, the Company reserves full
discretion to determine whether the documentation is complete and generally to
determine all questions as to tenders, including the date of receipt of a
tender, the propriety of execution of any document, and other questions as to
the validity, form, eligibility or acceptability of any tender. The Company
reserves the right to reject any tender not in proper form or otherwise not
valid or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful or to waive any irregularities or conditions,
and the Company's interpretation of the terms and conditions of the Offer
(including the instructions on the Letter of Transmittal) will be final. The
Company shall not be obligated to give notice of any defects or irregularities
in tenders and shall not incur any liability for failure to give any such
notice. Public Warrants shall not be deemed to have been duly or validly
tendered unless and until all defects and irregularities have been cured or
waived. Certificates for all improperly tendered warrants, as well as balance
certificates representing warrants in excess of those tendered for exchange,
will be returned (unless irregularities and
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<PAGE> 11
defects are timely cured or waived), without cost to the tendering warrant
holder (or, in the case of warrants delivered by book-entry transfer within the
Book-Entry Facility, will be credited to the account maintained within the
Book-Entry Facility by the participant who delivered such warrants), promptly
after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms
and conditions, which are summarized below and are part of the Offer.
Public Warrants tendered in exchange for Exchange Warrants (or a
timely confirmation of a book-entry transfer of such warrants into the Transfer
Agent's account at the Book-Entry Facility) must be received by the Transfer
Agent, with the Letter of Transmittal and any other required documents by 12:00
midnight, New York City time, on or prior to the Expiration Date, or within the
time periods set forth above in "How to Tender" pursuant to a Notice of
Guaranteed Delivery from an Eligible Institution. The party tendering the
warrants for exchange (the "Holder") sells, assigns and transfers the Public
Warrants to the Transfer Agent and irrevocably constitutes and appoints the
Transfer Agent as the Holder's agent and attorney-in-fact to cause the warrants
to be transferred and exchanged. The Holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Public Warrants
and to acquire the Exchange Warrants issuable upon the exchange of such
tendered warrants, that the Company will acquire good and unencumbered title to
the tendered warrants, free and clear of all liens, restrictions, charges and
encumbrances, and that the Public Warrants tendered for exchange are not
subject to any adverse claims when accepted by the Company. The Holder also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the tendered warrants. All
authority conferred or agreed to be conferred in the Letter of Transmittal by
the Holder will survive the death or incapacity of the Holder and any
obligation of the Holder shall be binding upon the heirs, personal
representatives, successors and assigns of such Holder.
Signature(s) on the Letter of Transmittal will be required to be
guaranteed and endorsement(s) on the certificates being tendered will be
required as set forth above in "How to Tender." All questions as to the
validity, form, eligibility (including time of receipt) and acceptability of
any tender will be determined by the Company, in its sole discretion, and such
determination will be final and binding. Unless waived by the Company,
irregularities and defects must be cured by the Expiration Date. The Company
will pay all stock transfer taxes applicable to the transfer and exchange of
Public Warrants tendered unless warrants are transferred to a third party.
WITHDRAWAL RIGHTS
All tenders may be withdrawn (i) at any time prior to the Expiration
Date or (ii) if not yet accepted for exchange, after April 23, 1998. To be
effective, a notice of withdrawal must be timely received by the Transfer Agent
at the address set forth below under "Transfer Agent" and on the back cover of
this Offering Circular. Any notice of withdrawal must specify the person named
in the Letter of Transmittal as having tendered the number of Public Warrants
to be withdrawn and the name of the registered holder of such warrants. If the
Public Warrants have been physically delivered to the Transfer Agent, the
tendering warrant holder must also submit the serial number shown on the
particular certificate(s) to be withdrawn. If the Public Warrants have been
delivered pursuant to the book-entry procedures set forth above under "How to
Tender," any notice of withdrawal must specify the name and number of the
participant's account at the Book-Entry Facility to be credited with the
withdrawn warrants. The Transfer Agent will return the properly withdrawn
Public Warrants as soon as practicable following receipt of notice of
withdrawal. All questions as to the validity, including time of receipt, of
notices of withdrawals will be determined by the Company, and such
determination will be final and binding on all parties.
ACCEPTANCE OF TENDERS
Subject to the terms and conditions of the Offer, Public Warrants
tendered (either physically or through book-entry delivery as described in "How
to Tender") with a properly executed Letter of Transmittal and all other
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<PAGE> 12
required documentation, and not withdrawn, will be accepted on or promptly
after the Expiration Date. Subject to such terms and conditions, delivery of
certificates of Exchange Warrants to be issued in exchange for properly
tendered Public Warrants will be made by the Transfer Agent promptly after
acceptance of the tendered warrants. Subject to the applicable rules of the
Commission, the Company, however, reserves the right to delay acceptance of
tendered warrants upon the occurrence of any of the conditions set forth above
under the caption "Certain Conditions of the Offer."
The tender of warrants pursuant to any one of the procedures set forth
in "How to Tender" will constitute an agreement between the tendering warrant
holder and the Company upon the terms and subject to the conditions of the
Offer.
SOLICITATION OF TENDERS; EXPENSES
The Company will not make any payments to brokers, dealers or other
persons for soliciting or recommending acceptances of the Offer. The Company
will, however, pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Offering Circular and related documents to the
beneficial owners of the Public Warrants and in handling or forwarding tenders
for their customers.
No person has been authorized to give any information or to make any
representations in connection with the Offer other than those contained in this
Offering Circular. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Offering Circular nor any exchange made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. This Offering Circular does not constitute an offer to exchange,
or a solicitation of an offer to exchange, any securities other than the
securities covered by the Offering Circular by the Company or any other person,
nor does it constitute an offer to exchange or a solicitation of an offer to
exchange such securities by the Company, or any such other person in any
jurisdiction in which or to any person to whom it is unlawful to make any such
offer or solicitation. In any jurisdiction the laws of which require the offer
to be made by a licensed broker or dealer, the offer is being made on behalf of
the Company by one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of the Company, the following discussion accurately
sets forth the material federal income tax consequences of (i) the exchange of
Public Warrants for Exchange Warrants pursuant to the Offer, and (ii) the
ownership and disposition of Exchange Warrants. The Company has concluded that
the exchange of Public Warrants for Exchange Warrants pursuant to the Offer
qualifies as a tax-free reorganization within the meaning of Section
368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
The opinion of the Company is not binding on the Internal Revenue Service (the
"Service") or the courts. There can be no assurances that the Service will
take a similar view as to any of the tax consequences described below. The
Company has not sought, nor does it intend to seek, a ruling from the Service
that its position as reflected in the following discussion will be accepted by
the Service.
The following discussion is a summary of certain federal income tax
consequences relevant to (i) the exchange of Public Warrants for Exchange
Warrants pursuant to the Offer, and (ii) the ownership and disposition of
Exchange Warrants, but does not purport to be a complete analysis of all the
potential tax effects thereof. The discussion is based upon the Code,
Regulations, and Service rulings and judicial decisions now in effect, all of
which are subject to change at any time by legislative, judicial or
administrative action. No information is provided herein with respect to estate
and gift, state, local or foreign tax consequences. This information is
directed to offerees who will hold the Exchange Warrants as "capital assets"
within the meaning of Section 1221 of the Code. In addition, this discussion
does not address the tax consequences to certain holders as to whom special
rules apply (including
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life insurance companies, tax-exempt organizations, banks and dealers in
securities, individuals who are not citizens or residents of the Untied States,
and foreign corporations). Each offeree should consult his or her own tax
advisor concerning the tax consequences to him of the exchange of Public
Warrants for Exchange Warrants pursuant to the Offer, and of the ownership and
disposition of Exchange Warrants.
EXCHANGE OF PUBLIC WARRANTS FOR EXCHANGE WARRANTS
Tax Consequences of the Exchange to the Tendering Warrant Holder. The
exchange of Public Warrants for Exchange Warrants pursuant to the Offer will
qualify as a recapitalization, and therefore, a reorganization within the
meaning of Section 368(a)(1)(E) of the Code. Consequently, a tendering warrant
holder will not recognize gain or loss on the exchange of Public Warrants for
Exchange Warrants.
Tax Consequences of the Exchange to the Company. No gain or loss will
be recognized to the Company upon its receipt of Public Warrants in exchange
for Exchange Warrants pursuant to the Offer.
Treatment of Exchange Warrants. A warrant holder's initial tax basis
for the Exchange Warrants received pursuant to the Offer will be equal to the
basis of the Public Warrants surrendered in exchange therefor. The holding
period of the Exchange Warrants will include the holding period during which
the Public Warrants surrendered in exchange therefor were held by the warrant
holder, provided that the Public Warrants were held as capital assets on the
date of the exchange.
OWNERSHIP AND DISPOSITION OF THE EXCHANGE WARRANTS
Disposition of Exchange Warrants. Generally, any sale or other
disposition of the Exchange Warrants will be a taxable event and will result in
capital gain or loss if the Exchange Warrants are held as a capital asset at
the time of the sale or other disposition. The amount of such gain or loss will
generally be the difference between the adjusted basis of the Exchange Warrants
on the date of the sale or other disposition and the cash and fair market value
of the property received. Such gain or loss will be long-term gain or loss if
the Exchange Warrants are held for more than eighteen months.
Exercise of Exchange Warrants. In general, no gain or loss will be
recognized for federal income tax purposes on exercise of the Exchange
Warrants. In general, the tax basis for shares of Common Stock received on
conversion will be equal to the tax basis of the Exchange Warrants surrendered
therefor, increased by the amount paid to exercise such warrants. The holding
period of the shares of Common Stock begins upon acquisition of the Common
Stock.
Backup Withholding. Under the backup withholding provisions of the
Code and applicable Regulations, a holder of Exchange Warrants may be subject
to back-up withholding at a rate of thirty-one percent (31%) with respect to
dividends or interest paid, original issue discount accrued with respect to, or
proceeds received from a sale, exchange or redemption of, Exchange Warrants.
The payor will be required to deduct and withhold a tax if (i) the payee fails
to furnish a taxpayer identification number ("TIN") to the payor or establish
an exemption from backup withholding, (ii) the Service notifies the payor that
the TIN furnished by the payee is incorrect, (iii) there has been a notified
payee under reporting with respect to interest, dividends or original issue
discount described in Section 3406(c) of the Code, or (iv) there has been a
failure of the payee to certify under the penalty of perjury that the payee is
not subject to withholding under Section 3406(a)(1)(C) of the Code. Backup
withholding will not be required if such holder (a) is a corporation or comes
within certain other exempt categories and when required demonstrates this fact
or (b) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules.
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DESCRIPTION OF EXCHANGE WARRANTS, PUBLIC WARRANTS
AND COMMON STOCK
THE PUBLIC WARRANTS
The Public Warrants were issued by the Company in the IPO on April 20,
1993. The following is a brief summary of certain provisions of the Public
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Warrant Agreement (the
"Public Warrant Agreement"), dated as of April 20, 1993, by and among the
Company, the Transfer Agent and Thomas James Associates, Inc., as
representative of the underwriters in the IPO (the "Representative"). A copy
of the Public Warrant Agreement has been filed as Exhibit 99.9 to the Schedule
13E-4. See "Available Information."
Exercise Price and Terms. As of February 23, 1998, there were
1,450,000 Public Warrants outstanding held by 52 record holders. Each Public
Warrant entitles the holder to purchase 2.1 shares of the Company's Common
Stock at any time prior to April 20, 1998, at an exercise price equal to $3.17
per share of Common Stock, subject to adjustment in accordance with the
anti-dilution and other provisions referred to below. The holder of any Public
Warrant may exercise such Public Warrant by surrendering the certificate
representing the Public Warrant to the Transfer Agent, with the subscription
form on the reverse side of such certificate properly completed and executed,
together with payment of the exercise price. The Public Warrants may be
exercised at any time in whole or in part at the applicable exercise price
until expiration of the Public Warrants on April 20, 1998.
The Public Warrants are subject to redemption, in whole but not in
part, at $.25 per Public Warrant on 30 days' written notice with the
Representative's prior written consent. The Company shall promptly announce
any redemption by publication in The Wall Street Journal at the time of the
mailing of the redemption notice to the holders. In the event the Company
exercises the right to redeem the Public Warrants, such Public Warrants will be
exercisable until the close of business on the date for redemption fixed in
such notice. If any Public Warrant called for redemption is not exercised by
such time, it will cease to be exercisable and the holder will be entitled only
to the redemption price.
The exercise price of the Public Warrant bears no relation to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the Common Stock.
Adjustments. The exercise price and the number of shares of Common
Stock purchasable upon the exercise of the Public Warrants are subject to
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, combinations or reclassifications of the Common Stock, or sale by
the Company of shares of its Common Stock at a price below the then applicable
exercise price of the Public Warrants. Additionally, an adjustment would be
made in the case of a reclassification or exchange of Common Stock,
consolidation or merger of the Company with or into another corporation or sale
of all or substantially all of the assets of the Company in order to enable
holders of Public Warrants to acquire the kind and number of shares of stock or
other securities or property receivable in such event by a holder of the number
of shares of Common Stock that might otherwise have been purchased upon the
exercise of the Public Warrants. No adjustments will be made until the number
of shares issued by the Company exceeds 5% of the number of Common Stock and
certain convertible securities of the Company outstanding following the
consummation of the IPO, and thereafter no adjustments will be made until the
cumulative adjustments in the exercise price per share amount to $.05 or more.
No adjustment to the exercise price of the shares subject to the Public
Warrants will be made for dividends (other than stock dividends), if any, paid
on the Common Stock or for securities issued pursuant to the Company's Stock
Option Plan or other employee benefit plans of the Company.
Transfer, Exchange and Exercise. The Public Warrants are in
registered form and may be presented to the Transfer Agent for transfer,
exchange or exercise at any time on or prior to their expiration date, April
20, 1998, at which time the Public Warrants become wholly void and of no value.
A holder of Public Warrants may also sell
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the Public Warrants instead of exercising them. There can be no assurance,
however, that the market for the Public Warrants will continue.
Each such holder of Public Warrants will be entitled to exchange his
or her Public Warrants for Exchange Warrants, in accordance with and subject to
the terms of the Offer.
To the Company's knowledge, there have been no transactions involving
the Public Warrants effected during the past 40 business days by the Company,
any executive officer or director of the Company or any other person in
control, directly or indirectly, of the Company. None of the officers,
directors or affiliates of the Company holds any of the Public Warrants.
THE EXCHANGE WARRANTS
The following is a brief summary of certain provisions of the Exchange
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Warrant Agreement (the
"Exchange Warrant Agreement"), dated as of February 25, 1998, between the
Company and the Transfer Agent. A copy of the Exchange Warrant Agreement has
been filed as Exhibit 99.10 to the Schedule 13E-4. See "Available Information."
Exercise Price and Terms. Each Exchange Warrant entitles the holder
to purchase 2.1 shares of the Company's Common Stock at any time prior to April
20, 1998, at an exercise price equal to $3.17 per share of Common Stock,
subject to adjustment in accordance with the anti-dilution and other provisions
referred to below. The holder of any Exchange Warrant may exercise such
Exchange Warrant by surrendering the certificate representing the Exchange
Warrant to the Transfer Agent, with the subscription form on the reverse side
of such certificate properly completed and executed, together with payment of
the exercise price. The Exchange Warrants may be exercised at any time in
whole or in part at the applicable exercise price until expiration of the
Exchange Warrants on April 20, 1999.
The Exchange Warrants are subject to redemption, in whole but not in
part, at $.25 per Exchange Warrant on 30 days' written notice. The Company
shall promptly announce any redemption by publication in The Wall Street
Journal at the time of the mailing of the redemption notice to the holders. In
the event the Company exercises the right to redeem the Exchange Warrants, such
Exchange Warrants will be exercisable until the close of business on the date
for redemption fixed in such notice. If any Exchange Warrant called for
redemption is not exercised by such time, it will cease to be exercisable and
the holder will be entitled only to the redemption price.
The exercise price of the Exchange Warrant bears no relation to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the Common Stock.
Adjustments. The exercise price and the number of shares of Common
Stock purchasable upon the exercise of the Exchange Warrants are subject to
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, combinations or reclassifications of the Common Stock. Until
April 20, 1998, adjustments will also be made if the Company sells shares of
its Common Stock at a price below the exercise price of the Exchange Warrants.
Thereafter, no further adjustments will be made as a result of stock sales (if
any) at less than the exercise price of the Exchange Warrants. An adjustment
would be made in the case of a reclassification or exchange of Common Stock,
consolidation or merger of the Company with or into another corporation or sale
of all or substantially all of the assets of the Company in order to enable
holders of Exchange Warrants to acquire the kind and number of shares of stock
or other securities or property receivable in such event by a holder of the
number of shares of Common Stock that might otherwise have been purchased upon
the exercise of the Exchange Warrants. No adjustments will be made until the
number of shares issued by the Company exceeds 5% of the number of shares
outstanding as of the date of the Exchange Warrant Agreement, and thereafter no
adjustments will be made until the cumulative adjustments in the exercise price
per share amount to $.05 or more. No adjustment to the exercise price of the
shares subject to the Exchange Warrants will be made for dividends (other than
stock dividends), if any, paid
13
<PAGE> 16
on the Common Stock or for securities issued pursuant to the Company's Stock
Option Plan or other employee benefit plans of the Company.
Modification of the Exercise Price. The Transfer Agent and the
Company may, by amendment or supplemental agreement, modify the exercise price
from time to time without obtaining the consent of any of the holders of the
Exchange Warrants.
Transfer, Exchange and Exercise. The Exchange Warrants are in
registered form and may be presented to the Transfer Agent for transfer,
exchange or exercise at any time on or prior to their expiration date, April
20, 1998, at which time the Exchange Warrants become wholly void and of no
value. If a market for the Exchange Warrants develops, the holder of Exchange
Warrants may also sell the Exchange Warrants instead of exercising them. There
can be no assurance, however, that the market for the Exchange Warrants will
develop or continue.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders. There is no cumulative
voting with respect to the election of Directors, with the result that the
holders of more than 50% of the shares voted in the election of Directors can
elect all of the Directors. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors of
the Company out of funds legally available therefor. Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company after payment of all
debts and liabilities and liquidation preferences of outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights.
Facsimile copies of the Letter of Transmittal will be accepted. The
Letter of Transmittal, warrant certificates and other required documents should
be sent or delivered by each warrant holder or his or her broker, dealer,
commercial bank, trust company or other nominees to the Transfer Agent at the
address set forth below.
The Transfer Agent:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NEW YORK 10005
(718) 921-8200
Any questions and requests for assistance or additional copies of this
Offering Circular, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Company at the telephone number and address
below. You may also contact your local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
The Company:
INTEGRATED SECURITY SYSTEMS, INC.
8200 SPRINGWOOD DRIVE, SUITE 230
IRVING, TEXAS 75063
(972) 444-8280
<PAGE> 1
EXHIBIT 99.2
LETTER OF TRANSMITTAL
TO ACCOMPANY PUBLIC WARRANTS OF
OF
INTEGRATED SECURITY SYSTEMS, INC.
TENDERED PURSUANT TO THE OFFERING CIRCULAR
DATED FEBRUARY 26, 1998
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF) AND ALL
OTHER DOCUMENTS AND INSTRUMENTS REQUIRED HEREBY SHOULD BE SENT OR DELIVERED TO
THE TRANSFER AGENT AT THE ADDRESSES SET FORTH BELOW. TENDERS MUST BE RECEIVED
BY THE TRANSFER AGENT PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON APRIL
17, 1998 (THE "EXPIRATION DATE").
The Transfer Agent:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Hand Delivery: Facsimile Transmission: By Mail:
or Overnight
(718) 921-8323 40 Wall Street
6201 15th Avenue New York, New York 10005
Brooklyn, New York 11219
Confirm by Telephone:
1 (800) 937-5449
</TABLE>
_________________________
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
OF INSTRUCTION VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE
APPROPRIATE SPACE PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 INCLUDED
HEREIN.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Public
Warrants (as defined below) either if (1) certificates for such warrants are to
be forwarded herewith or (2) if delivery of Public Warrants is to be made by
book- entry transfer to the account maintained by the Transfer Agent at The
Depository Trust Company (the "Book-Entry Facility") pursuant to the procedures
set forth under the caption "The Offer--How to Tender" in the Offering Circular
(as defined below). Delivery to the Book-Entry Facility does not constitute
delivery to the Transfer Agent.
Holders of Public Warrants whose certificates are not immediately
available or who cannot deliver their certificates or deliver confirmation of
the book-entry transfer of their warrants into the Transfer Agent's account at
the Book-Entry Facility and all other documents required hereby to the Transfer
Agent on or prior to the Expiration Date must tender their Public Warrants
pursuant to the guaranteed delivery procedure set forth under the caption "The
Offer--How to Tender" in the Offering Circular. See Instruction 2 herein.
<PAGE> 2
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY.)
[ ] CHECK HERE IF TENDERED PUBLIC WARRANTS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE TRANSFER AGENT'S ACCOUNT AT THE BOOK-ENTRY FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
---------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED PUBLIC WARRANTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE TRANSFER AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
--------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Institution which Guaranteed Delivery:
-----------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Name of Tendering Institution:
---------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
DESCRIPTION OF PUBLIC WARRANTS TENDERED
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
If blank, please print name and Certificate(s) Tendered
address of registered holder (Attach additional signed list if necessary)
- -------------------------------------------------------------------------------------------------------------------
Total Number
of Public Warrants Number of
Certificate Represented by Public Warrants
Number(s) (1) Certificate(s)(1) Tendered (2)
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Public
Warrants
- -------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by holders of Public Warrants tendering by book-entry transfer.
(2) Unless otherwise indicated, it will be assumed that all Public Warrants described above are being
tendered. See Instruction 4.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE
IN REPLACING THEM. THE TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH
REPLACEMENT INSTRUCTIONS. (SEE INSTRUCTION 9.)
2
<PAGE> 3
Ladies and Gentlemen:
Pursuant to the terms and subject to the conditions of the Offer (as
described below) of Integrated Security Systems, Inc., a Delaware corporation
(the "Company"), to holders of the Company's Redeemable Common Stock Purchase
Warrants (the "Public Warrants"), as set forth in the Offering Circular dated
February 26, 1998 (the "Offering Circular") and this Letter of Transmittal
(which, together with the Offering Circular, constitute the "Offer"), receipt
of which are hereby acknowledged, the signer of this Letter of Transmittal (the
"Holder") hereby accepts the Offer and tenders the Public Warrants listed on
this Letter of Transmittal in exchange for one warrant (the "Exchange Warrant")
to purchase 2.1 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), until April 20, 1999, at an exercise price of $3.17 per
share of Common Stock, for each Public Warrant tendered and accepted. No
fractional Exchange Warrants will be issued.
Accordingly, subject to, and effective upon, acceptance for exchange of the
Public Warrants tendered herewith in accordance with the terms and conditions
of the Offer, the Holder hereby sells, assigns and transfers to the Company all
right, title and interest in and to all of the Public Warrants that are being
tendered for exchange hereby and hereby irrevocably constitutes and appoints
the Transfer Agent the true and lawful agent and attorney-in-fact of the Holder
with respect to such warrants, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver certificates for Public Warrants tendered hereby or transfer
ownership of such warrants on the account books maintained by the Book-Entry
Facility together, in either such case, with the accompanying evidences of
transfer and authority, to the Company upon the receipt by the Transfer Agent,
as the Holder's agent, of the consideration therefor pursuant to the Offer,
(ii) present such warrants for registration and transfer on the books of the
Company and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such warrants.
THE HOLDER HEREBY REPRESENTS AND WARRANTS THAT THE HOLDER HAS FULL POWER AND
AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE PUBLIC WARRANTS
TENDERED HEREBY AND TO ACQUIRE THE EXCHANGE WARRANTS ISSUABLE UPON THE EXCHANGE
OF SUCH TENDERED WARRANTS, THAT THE COMPANY WILL ACQUIRE GOOD AND UNENCUMBERED
TITLE TO SUCH TENDERED WARRANTS, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS,
CHARGES AND ENCUMBRANCES, AND THAT THE PUBLIC WARRANTS TENDERED HEREBY ARE NOT
SUBJECT TO ANY ADVERSE CLAIM WHEN THE SAME ARE ACCEPTED BY THE COMPANY. THE
HOLDER WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED
BY THE COMPANY OR THE TRANSFER AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE
THE EXCHANGE, SALE, ASSIGNMENT AND TRANSFER OF THE PUBLIC WARRANTS TENDERED
HEREBY.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the Holder and any
obligation of the Holder hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the Holder. Except as stated in the
Offering Circular, this tender is irrevocable.
A tender of warrants pursuant to the procedures described in the Offering
Circular and in the instructions hereto will constitute the Holder's acceptance
of the terms and conditions of the Offer and a binding agreement between the
tendering warrant holder and the Company upon the terms and subject to the
conditions of the Offer. The Holder recognizes that, under certain
circumstances set forth in the Offering Circular, the Company may not be
required to accept any of the Public Warrants tendered for exchange hereby.
Unless otherwise indicated in the box entitled "Special Issuance Instructions,"
the Holder hereby directs that the certificates for the Exchange Warrants
and/or any certificates for any Public Warrants not exchanged be issued in the
name of the Holder. The Holder understands that holders who tender Public
Warrants by book-entry transfer ("Book-Entry Warrant Holders") may request that
any Public Warrants not exchanged will be returned by crediting the account
maintained by the Book-Entry Facility, by making an appropriate entry under
"Special Issuance Instructions." Unless otherwise indicated in the box
entitled "Special Delivery Instructions," the Holder hereby directs that the
certificates for the Exchange Warrants and/or any certificates for any Public
Warrants not exchanged be mailed to the person at the address shown in the box
entitled "Description of Public Warrants Tendered." The Holder recognizes that
the Company has no obligation pursuant to the Special Issuance Instructions to
transfer any Public Warrants from the name(s) of the registered holder(s)
thereof if the Company does not accept for exchange any of the warrants so
tendered.
3
<PAGE> 4
- --------------------------------------------------------------------------------
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 AT THE BACK OF THIS LETTER OF TRANSMITTAL)
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))*
Dated:
--------------------------------------------------------------------------
* Must be signed by registered holder(s) as name(s) appear(s) on the
certificate(s) for the Public Warrants or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please provide the following
information and see Instruction 5.
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm (if applicable):
---------------------------------------------------
Capacity (Full Title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Daytime Area Code and Telephone Number:
-----------------------------------------
Taxpayer Identification or Social Security No.
----------------------------------
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(If Required--See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(Please Print)
Name of Firm
--------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-------------------------------------------------
Dated:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4
<PAGE> 5
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 2, 4, 5, 6 AND 7)
To be completed ONLY if certificates for Exchange Warrants and/or
certificates for Public Warrants not exchanged are to be issued in the name of
and mailed to a beneficial owner other than the Holder or if Public Warrants
tendered by book-entry transfer which are not exchanged are to be returned by
credit to an account at the Book-Entry Facility other than the account
designated above.
Issue certificate(s) to:
Name:
---------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9)
[ ] Credit unpurchased Public Warrants tendered by book-entry transfer to
the account set forth below:
Name of Account Party:
----------------------------------------------------------
Account Number:
-----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Exchange Warrants and/or
certificates for Public Warrants not exchanged are to be sent to someone other
than the Holder or to the Holder at an address other than that shown above.
Mail certificate(s) to:
Name:
---------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9)
- --------------------------------------------------------------------------------
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER.
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below,
signatures on this Letter of Transmittal must be guaranteed by a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of a recognized Medallion Program approved by The Securities
Transfer Association, Inc. (an "Eligible Institution"), unless the Public
Warrants tendered hereby are tendered (i) by the registered holder (which term,
for purposes of this document, shall include any participant in the Book-Entry
Facility whose name appears on a security position listing as the owner of the
Public Warrants) of such Public Warrants who has completed neither the box
labeled "Special Issuance Instructions" nor the box labeled "Special Delivery
Instructions" herein or (ii) for the account of an Eligible Institution. See
Instruction 5. If the certificates representing the tendered Public Warrants
are registered in the name of a person other than the signer of this Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing the unexchanged Public Warrants are to be issued or returned to, a
person other than the registered owner, then the certificates representing the
tendered Public Warrants must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on such certificates or stock powers guaranteed by an
Eligible Institution as provided herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. In order to
participate in the Offer and receive Exchange Warrants, a warrant holder must
properly complete and duly execute (with signatures guaranteed if required by
Instructions 1 or 5) the Letter of Transmittal (or a facsimile thereof) and
mail or deliver it, together with the certificate(s) representing the Public
Warrants to be tendered for exchange (or the Transfer Agent must receive a
timely confirmation of a book-entry transfer into the Transfer Agent's account
at the Book-Entry Facility) and any other required documents, to the Transfer
Agent. The Transfer Agent must receive the foregoing documents and instruments
on or prior to the Expiration Date. Delivery of documents to the Book-Entry
Facility does not constitute delivery to the Transfer Agent.
If a warrant holder desires to tender Public Warrants pursuant to the
Offer and such warrant holder's certificate(s) for such warrants are not
immediately available, or if the procedure for book-entry transfer cannot be
completed on a timely basis, or such warrant holder cannot deliver the
certificate(s) and all other required documents to the Transfer Agent prior to
the Expiration Date, such warrants may be tendered if all of the following
guaranteed delivery procedures are complied with: (i) such tenders are made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, in substantially the form provided by the
Company, is received by the Transfer Agent on or prior to the Expiration Date,
and (iii) the certificates for all tendered warrants, in proper form for
transfer (or confirmation of book-entry transfer of such warrants into the
Transfer Agent's account at the Book-Entry Facility as described in the
Offering Circular), together with a properly completed and duly executed Letter
of Transmittal and all other documents required by this Letter of Transmittal,
are received by the Transfer Agent within three New York Stock Exchange, Inc.
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as provided under the caption "The Offer--How to Tender" in the Offering
Circular.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptability of Public Warrants tendered will be determined by
the Company, in its sole discretion, and such determinations will be final and
binding. The Company reserves the right to reject any and all tenders
determined by it not to be in proper form or otherwise not valid or the
acceptance for exchange of which may, in the opinion of the Company's counsel,
be unlawful. The Company's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and Instructions thereto) will also
be final and binding. The Company and the Transfer Agent are not under any
duty to give notification of any irregularities or defects and shall not incur
any liability for failure to give any such notification. Tenders will not be
deemed to have been made until such irregularities or defects have been cured
or waived. Any tender (including the Letter of Transmittal and warrant
certificates) that is not properly completed and executed, and as to which
irregularities or defects are not cured or waived, will be returned by the
6
<PAGE> 7
Transfer Agent to the tendering warrant holder promptly after the Expiration
Date (or, in the case of warrants delivered by book-entry transfer within the
Book-Entry Facility, the tendered warrants will be credited to the account
maintained within the Book-Entry Facility by the participant and the Book-Entry
Facility which delivered such warrants).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES
FOR PUBLIC WARRANTS AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH THE BOOK-ENTRY FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING
WARRANT HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE TRANSFER AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. All
tendering warrant holders, by execution of this Letter of Transmittal or
facsimile thereof, waive any rights to receive any notice of the acceptance of
their tender.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
the certificate numbers and the number of warrants should be listed on a
separate signed schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO BOOK-ENTRY WARRANT HOLDERS).
If fewer than all the warrants evidenced by any certificate submitted are to be
tendered, the number of warrants that are to be tendered should be stated in
the box entitled "Number of Warrants Tendered." New certificate(s) for the
remainder of the warrants which are evidenced by old certificate(s) will be
sent to the registered holder of the certificate(s) tendered, unless otherwise
provided by checking the appropriate box on the Letter of Transmittal, as soon
as practicable after the tender has been accepted. All warrants represented by
certificates listed are deemed to have been tendered unless otherwise
indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder
of the certificate(s) tendered hereby, the signature must correspond exactly
with the name as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If the Public Warrants tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Public Warrants are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder(s) of
the certificate(s) listed and transmitted hereby, no endorsement of
certificates or separate stock powers are required. If, however, any
certificates for Exchange Warrants or any certificates for Public Warrants not
tendered are to be issued to a person other than the registered holder, then
endorsement of certificates transmitted hereby or separate stock powers are
required. Signatures on any such certificate(s) or stock powers must be
guaranteed by an Eligible Institution. If this Letter of Transmittal is signed
by a person other than the registered holder of the certificate(s) listed, such
certificate(s) must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on the certificate(s). Signatures on such certificate(s) or
stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate(s) or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Company of their
7
<PAGE> 8
authority so to act must be submitted. Signatures on any such certificate(s)
or stock powers must be guaranteed by an Eligible Institution.
6. DELIVERY OF EXCHANGE WARRANTS. Delivery of Exchange Warrants
will be made promptly after the Expiration Date for all Public Warrants
properly tendered and accepted for exchange by the Company. The Exchange
Warrants will be issued in the name of the registered holder(s) of the Public
Warrants and mailed to him or her, unless otherwise provided in the appropriate
box on this Letter of Transmittal. In the case of tenders by Notice of
Guaranteed Delivery, Exchange Warrants will not be delivered until the Letter
of Transmittal, the certificate(s) representing tendered warrants relating to
such Notice of Guaranteed Delivery (or a timely confirmation of a book-entry
transfer of such warrants into the Transfer Agent's account at the Book-Entry
Facility) and all other required documents have been received by the Transfer
Agent.
7. STOCK TRANSFER TAXES. The Company will pay all stock transfer
taxes, if any, applicable to the exchange of warrants tendered and accepted
pursuant to the Offer. If, however, issuance of Exchange Warrants is to be
made to, or (in circumstances permitted hereby) if warrants not tendered are to
be registered in the name of any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer must be paid to the Company or the Transfer Agent (or
the transferee must establish to the satisfaction of the Company the such taxes
have been paid or need not be paid) before the Exchange Warrants will be
issued.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. WAIVER OF CONDITIONS. Subject to limitations set forth in the
Offering Circular, the conditions of the Offer may be waived by the Company, in
whole or in part, at any time or from time to time, in the Company's sole
discretion in the case of any Public Warrants tendered.
9. LOST, DESTROYED OR STOLEN CERTIFICATES. If the certificate(s)
has (have) been lost, stolen or destroyed, check the box on the front of this
Letter of Transmittal and send the Letter of Transmittal to the Transfer Agent.
In such event, the Transfer Agent will forward an Affidavit of Loss and Bond of
Indemnity, which will require you to pay an insurance premium and a service
charge. You are urged to properly complete and return documents immediately.
10. REQUESTS FOR ADDITIONAL COPIES. Questions and requests for
additional copies of the Offering Circular and this Letter of Transmittal may
be directed to the Company at the address and telephone numbers set forth on
the last page of the Offering Circular.
11. SUBSTITUTE FORM W-9. Each tendering warrant holder is required
to provide the Transfer Agent with a correct Taxpayer Identification Number
("TIN"), generally the warrant holder's social security or federal employer
identification number, on Substitute Form W-9 enclosed herewith. If a warrant
holder fails to provide a TIN to the Transfer Agent, such warrant holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. The
"Certificate of Awaiting Taxpayer Identification Number" should be completed if
the tendering warrant holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future. If such
certificate is completed and the Transfer Agent is not provided with a TIN
within 60 days, the Transfer Agent will withhold 31% of all payments of cash
thereafter until a TIN is provided to the Transfer Agent. The warrant holder
is required to give the Transfer Agent the social security number or employer
identification number of the record owner of the Public Warrants or of the last
transferee appearing on the stock powers attached to, or endorsed on, the
Public Warrants. If the Public Warrants are in more than one name or is not in
the name of the actual owner, consult the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
guidance on which number to report.
8
<PAGE> 9
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY HEREOF
(TOGETHER WITH PUBLIC WARRANT CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE TRANSFER AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Certain warrant holders (including, among others, all corporations and
certain foreign individuals) are not subject to backup withholding. In order
for a foreign individual to qualify as an exempt recipient, that warrant holder
must submit a Form W-8, signed under penalties of perjury, attesting to that
individual's exempt status. A Form W-8 can be obtained from the Transfer Agent.
See the enclosed Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 for additional instructions.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
9
<PAGE> 10
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE Part I--PLEASE PROVIDE YOUR TIN IN Social Security Number or
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW.
INTERNAL REVENUE SERVICE
-----------------------------------
(If awaiting TIN, write "Applied For")
--------------------------------------------------------------------------
Part II--Certifications: Under penalties of perjury, I certify that:
(1) the number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be issued for
me) and
(2) I am not subject to backup withholding either because (a) I am
exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
--------------------------------------------------------------------------
Payer's Request for Taxpayer Certification Instructions--You must cross out item
Identification Number ("TIN") (2) in Part II above if you have been notified by
the IRS that you are currently subject to backup Part 3--
withholding because of under-reporting interest or
dividends on you tax return. However, if after
being notified by the IRS that you were subject to Awaiting TIN [ ]
backup withholding, you received another
notification from the IRS that you are no longer
subject to backup withholding, do not cross out such
Item (2). (Also see instructions in the enclosed
Guidelines.)
Signature
--------------------------------------------
Date
-------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM W-9 MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate IRS
Center or Social Security Administration Office or (2) I intend to mail or
deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments pursuant to the Offer made to me thereafter will be withheld until I
provide a number.
----------------------------------------------- --------------------
Signature Date
- --------------------------------------------------------------------------------
10
<PAGE> 1
EXHIBIT 99.3
[LETTERHEAD OF INTEGRATED SECURITY SYSTEMS, INC.]
February 26, 1998
Dear Warrant Holder:
Integrated Security Systems, Inc. is offering you the opportunity to exchange,
on a tax-free basis, warrants (the "Exchange Warrants") to purchase 2.1 shares
of the Company's common stock, par value $.01 per share (the "Common Stock"),
until April 20, 1999, at an exercise price of $3.17 per share of Common Stock
for the Company's currently outstanding Redeemable Common Stock Purchase
Warrants (the "Public Warrants"). The Public Warrants expire on April 20,
1998.
This Offer is for all of the Company's outstanding Public Warrants. Each
Exchange Warrant entitles the holder to purchase 2.1 shares of the Company's
Common Stock until April 20, 1999, at an exercise price of $3.17 per share of
Common Stock, subject to certain adjustments. The Exchange Warrants are
redeemable for $.25 per Exchange Warrant, at the option of the Company, upon 30
days' written notice. You may tender all or any portion of your Common Stock.
The purpose of the Company's offer to exchange the Public Warrants for the
Exchange Warrants is to (i) provide the holders of the outstanding Public
Warrants with a longer opportunity to profit from the exercise of the warrants,
(ii) modify the terms providing for the adjustment of the exercise price and
the number of shares purchasable upon exercise of the warrants to permit such
adjustments only upon the occurrence of stock splits, stock dividends,
recapitalizations or similar events, and (iii) permit the Company and the
Transfer Agent to modify the exercise price from time to time without obtaining
the consent of any of the holders of the Exchange Warrants.
The Company has concluded that the exchange qualifies as a tax-free
reorganization under the Internal Revenue Code of 1986. There are additional
tax issues which may affect tendering stockholders which are discussed fully in
the Offering Circular and as a result, offerees should consult their own tax
advisor concerning all tax consequences.
The Offer is being made to all the holders of the Public Warrants. The Offer
will expire at midnight, New York City time, on April 17, 1998.
The Board of Directors of the Company has approved the making of the Offer but
is not making any recommendation to stockholders as to whether or not to tender
the Public Warrants. Each holder of Public Warrants must make his or her own
decision whether or not to tender his or her Public Warrants and, if so, how
many warrants to tender.
The Offer is explained in detail in the enclosed Offering Circular and Letter
of Transmittal. If you decide to tender all or part of your warrants, the
instructions on how to do this are contained in the enclosed materials.
Questions and requests for assistance with respect to the mechanics of the
Offer may be directed to the Company, at (972) 444-8280.
Sincerely,
Gerald K. Beckmann
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 99.4
INTEGRATED SECURITY SYSTEMS, INC.
OFFER TO EXCHANGE
EXCHANGE WARRANTS FOR PUBLIC WARRANTS
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Integrated Security Systems, Inc., a Delaware corporation (the
"Company"), is offering, upon the terms and subject to the conditions set forth
in the enclosed Offering Circular dated February 26, 1998 (the "Offering
Circular") and the related Letter of Transmittal (which together with the
Offering Circular, the "Offer"), to issue warrants (the "Exchange Warrants") to
purchase 2.1 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), until April 20, 1999, at an exercise price of $3.17 per
share of Common Stock in exchange for the Company's currently outstanding
Redeemable Common Stock Purchase Warrants (the "Public Warrants").
We are asking you to contact your clients for whom you hold Public
Warrants registered in your name or in the name of your nominee or who hold
Public Warrants registered in their own names.
Enclosed are sets of Offer material, consisting of the following:
1. The Offering Circular.
2. The Letter of Transmittal for your use and for the information
of your clients.
3. A Letter to Warrant Holders from the President and Chief
Executive Officer of the Company.
4. Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
5. A form of letter which may be sent to your clients for whose
account you hold Public Warrants registered in your name or
the name of your nominee, with space provided for obtaining
such client's instructions with regard to the Offer.
6. Notice of Guaranteed Delivery for Public Warrants to be used
to accept the Offer if certificates for Public Warrants are
not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis.
Please forward this material as soon as possible to your beneficial
holders. The Company will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of Public Warrants pursuant to
the Offer. You will be reimbursed by the Company for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials
for your clients. The Company will pay all transfer taxes, if any, applicable
to the transfer and exchange of the Public Warrants, except as otherwise
provided in Instruction 7 of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. THE OFFER WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON APRIL 17, 1998.
To participate in the Offer, certificates Public Warrants and a duly
executed and properly completed Letter of Transmittal or facsimile thereof,
together with any other required documents, must be delivered to the Transfer
Agent as indicated in the Offering Circular. Alternatively, in lieu of
delivery of certificates, a warrant holder may tender by causing a transfer of
his Public Warrants to the Transfer Agent's account at The Depository Trust
Company at which the Transfer Agent has established an account with respect to
the Public Warrants.
<PAGE> 2
If warrant holders wish to tender, but it is impracticable for them to
forward their warrant certificates prior to the expiration of the Offer, a
tender may be effected by following the guaranteed delivery procedures
described in the Offering Circular under "The Offer--How to Tender."
Your solicitation of tenders of Public Warrants will constitute your
representation to the Company that (i) in connection with such solicitation,
you have complied with the applicable requirements of the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
applicable state securities or blue sky law, and the applicable rules and
regulations thereunder, (ii) if a foreign broker or dealer, you have conformed
to the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. in making solicitations and (iii) in soliciting tenders of such
warrants, you have not used any solicitation materials other than those
furnished by the Company.
The Offer is not being made to, nor will tenders be accepted from or
on behalf of, holders of Public Warrants residing in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction.
Additional copies of the enclosed material may be obtained from the
Company at (972) 444-8280.
Very truly yours,
INTEGRATED SECURITY SYSTEMS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER
YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY, THE TRANSFER AGENT OR ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM
WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS
CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT 99.5
INTEGRATED SECURITY SYSTEMS, INC.
OFFER TO EXCHANGE
EXCHANGE WARRANTS FOR PUBLIC WARRANTS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON APRIL 17, 1998.
To Our Clients:
Enclosed for your consideration are the Offering Circular dated
February 26, 1998 (the "Offering Circular"), and the related Letter of
Transmittal (which together with the Offering Circular, the "Offer"), to issue
warrants (the "Exchange Warrants") to purchase 2.1 shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), until April 20,
1999, at an exercise price of $3.17 per share of Common Stock, in exchange for
the Company's currently outstanding Redeemable Common Stock Purchase Warrants
(the "Public Warrants"), upon the terms and conditions set forth in the Offer.
This material is being forwarded to you as the beneficial owner of the Public
Warrants carried by us in your account but not registered in your name.
WE ARE THE HOLDER OF RECORD OF PUBLIC WARRANTS HELD BY US FOR YOUR
ACCOUNT. A TENDER OF SUCH PUBLIC WARRANTS CAN BE MADE ONLY BY US AS THE HOLDER
OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER PUBLIC
WARRANTS HELD BY US FOR YOUR ACCOUNT.
EACH WARRANT HOLDER SHOULD MAKE HIS OR HER OWN DECISION WHETHER TO
TENDER PUBLIC WARRANTS, AND, IF SO, HOW MANY WARRANTS TO TENDER.
We request instructions as to whether you wish to tender any or all of
the Public Warrants held by us for your account, pursuant to the terms and
conditions set forth in the Offer.
Your attention is invited to the following:
1. The Company's Board of Directors has approved the making of
the Offer but has made no recommendation to warrant holders as
to whether or not to tender their Public Warrants in the
Offer.
2. The Offer is not conditioned upon any minimum number of Public
Warrants being tendered.
3. The Offer and withdrawal rights will expire at 12:00 midnight,
New York City time, April 17, 1998.
4. Any brokerage fees, commissions or stock transfer taxes
applicable to the sale of Public Warrants to the Company
pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 7 of the Letter of
Transmittal.
If you wish to have us tender any or all of your Public Warrants,
please so instruct us by completing, executing, detaching and returning to us
the attached instruction form. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Public Warrants, all such warrants
will be tendered unless otherwise specified on the attached instruction form.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION OF THE OFFER. THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON APRIL
17, 1998.
<PAGE> 2
The Offer is not being made to, nor will tenders be accepted from or
on behalf of, warrant holders in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
Tear Here Tear Here
- --------------------------------------------------------------------------------
INSTRUCTIONS WITH RESPECT TO THE OFFER TO EXCHANGE EXCHANGE
WARRANTS FOR PUBLIC WARRANTS
The undersigned acknowledges receipt of your letter enclosing the
Offer to Purchase dated February 26, 1998 of Integrated Security Systems, Inc.,
and the related Letter of Transmittal, relating to the issuance of warrants
(the "Exchange Warrants") to purchase 2.1 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), until April 20, 1999, at an
exercise price of $3.17 per share of Common Stock for the Company's Redeemable
Common Stock Purchase Warrants (the "Public Warrants").
You are instructed to tender the number of Public Warrants indicated
below (or, if no number is indicated below, all Public Warrants) held by you
for the account of the undersigned, upon the terms and conditions set forth in
such Offer to Purchase and the related Letter of Transmittal.
Number of Public Warrants to be Tendered(*) Sign Here
Warrants
- ------------------------------ -----------------------------------
-----------------------------------
Signature(s)
Name(s)
----------------------------
-----------------------------------
(Please print name(s)
Address(es)
------------------------
-----------------------------------
(Include Zip Code)
Dated: , 1998 Area Code and Telephone Number(s)
--------------- ------
Tax Identification or
Social Security Number(s)
------------
(*)Unless otherwise indicated, it will be assumed that all your Public Warrants
are to be tendered.
2
<PAGE> 1
EXHIBIT 99.6
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF PUBLIC WARRANTS
OF
INTEGRATED SECURITY SYSTEMS, INC.
This form or one substantially equivalent to that set forth below
must be used to accept the Offer (as defined below) if certificates for
Redeemable Common Stock Purchase Warrants (the "Public Warrants"), of
Integrated Security Systems, Inc., a Delaware corporation, are not immediately
available, or the procedure for book-entry transfer cannot be completed on a
timely basis, or a warrant holder cannot deliver the certificate(s) and all
other required documents to the Transfer Agent prior to the Expiration Date (as
defined in the Offering Circular referred to below). Such form must be
delivered by hand or sent by facsimile transmission or mail to the Transfer
Agent, and must be received by the Exchange Agent on or prior to the Expiration
Date. See "The Offer--How to Tender" in the Offering Circular.
The Transfer Agent:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Hand Delivery: Facsimile Transmission: By Mail:
or Overnight
(718) 921-8323 40 Wall Street
6201 15th Avenue New York, New York 10005
Brooklyn, New York 11219
Confirm by Telephone:
1 (800) 937-5449
</TABLE>
_________________________
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE NUMBER, OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Integrated Security Systems, Inc., a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offering Circular dated February 26, 1998 (the "Offering Circular") and in
the related Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged, the number of Public Warrants shown
below, pursuant to the guaranteed delivery procedures set forth in the Offering
Circular under the caption "The Offer--How to Tender."
<TABLE>
<S> <C> <C>
Number of Warrants Name(s) of Record Holder(s)
----------------------------------------------------- ------------------------------------------------------
------------------------------------------------------
Certificate Nos. For Warrants (if available) (Please Type or Print)
Address(es)
----------------------------------------------------- -------------------------------------------
----------------------------------------------------- ------------------------------------------------------
(Including Zip Code)
------------------------------------------------------
Area Code and Telephone Number(s)
[ ] Check box if Warrants will be tendered by
book-entry transfer ------------------------------------------------------
------------------------------------------------------
Signature(s)
Account Number Dated , 1998
-------------------------------------- -----------------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the
Securities Transfer Agent's Medallion Program, guarantees that the undersigned
will deliver to the Transfer Agent the certificates representing the shares
tendered hereby in proper form for transfer, or timely confirmation of
book-entry transfer of such shares into the Transfer Agent's account at The
Depository Trust Company, together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) with any required
signature guarantees and any other required documents, all within three New
York Stock Exchange, Inc. trading days after the date hereof.
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------- ------------------------------------------------------
(Name of Firm) (Address)
----------------------------------------------------- ------------------------------------------------------
(Area Code and Telephone Number) (Authorized Signature)
Dated: , 1998
---------------------------------------
</TABLE>
The institution which completes this form must communicate the
guarantee to the Transfer Agent and must deliver the Letter of Transmittal and
certificates for Common Stock to the Exchange Agent within the time period
shown herein. Failure to do so could result in a financial loss to such
institution.
NOTE: DO NOT SEND CERTIFICATES FOR WARRANTS WITH THIS NOTICE.
PUBLIC WARRANT CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 99.7
INTEGRATED SECURITY SYSTEMS, INC. ANNOUNCES EXCHANGE OFFER:
EXCHANGE WARRANTS FOR PUBLIC WARRANTS
IRVING, TEXAS (February 26, 1998) - Integrated Security Systems, Inc.
(Nasdaq: IZZI) announced today that it has commenced an offer to exchange new
Redeemable Common Stock Purchase Warrants (the "Exchange Warrants") in return
for the Company's currently outstanding Redeemable Common Stock Purchase
Warrants (the "Public Warrants"). Each Public Warrant accepted in the offer
will be exchanged for one Exchange Warrant.
The offer is expected to qualify as a tax-free reorganization under
the Internal Revenue Code of 1986. The offer commences today and will expire at
midnight, New York City time, on April 17, 1998.
Each Exchange Warrant to be issued in the offer entitles the holder to
purchase 2.1 shares of the Company's Common Stock until April 20, 1999, at an
exercise price of $3.17 per share of Common Stock, subject to certain
adjustments. The Exchange Warrants are redeemable for $.25 per Exchange
Warrant, at the option of the Company, upon 30 days' written notice.
The purpose of the Company's offer to exchange the Public Warrants for
the Exchange Warrants is to (i) provide the holders of the outstanding Public
Warrants with a longer opportunity to profit from the exercise of the warrants,
(ii) modify the terms providing for the adjustment of the exercise price and
the number of shares purchasable upon exercise of the warrants, and (iii)
permit the Company and the Transfer Agent to modify the exercise price from
time to time without obtaining the consent of any of the holders of the
Exchange Warrants.
The exchange offer will be subject to various terms and conditions
described in offering materials to be distributed to warrant holders later this
week.
The Board of Directors of the Company has approved the offer but is
not making any recommendation to warrant holders as to whether to tender Public
Warrants. Each warrant holder should decide whether to tender warrants, and if
so, how many.
Requests for further information about the offer may be directed to
the Company at (972) 444-8280.
Headquartered in Irving, Texas, the Company is a developer,
manufacturer and national supplier of total security solutions for the
industrial and commercial marketplaces. The Company is also a leading supplier
of automatic gates and lane changers to the U.S. road and bridge industry. The
Company conducts its manufacturing, distribution and systems integration
activities as a holding company through four wholly-owned subsidiaries, B&B
Electromatic, Inc., Golston Company, Innovative Security Technologies, Inc. and
Tri-Coastal Systems, Inc.
Contact:
Integrated Security Systems, Inc.
Gerald K. Beckmann, President and Chief Executive Officer
Holly J. Burlage, Vice President, Finance
(214) 444-8280
or
The Company's Investor Relations Counsel:
The Equity Group Inc.
Loren B. Goldstein
(212) 836-9604
[email protected]
<PAGE> 1
EXHIBIT 99.8
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens
(i.e., 000-00-0000). Employer identification numbers have nine digits
separated by only one hyphen (i.e., 000-000000). The table below will help
determine the number to give the payer.
<TABLE>
<CAPTION>
- ---------------------- -------------------------- --------------------------- -----------------------
Give the EMPLOYER
For this type of Give the SOCIAL For this type of account: IDENTIFICATION number
account: SECURITY number of -- of --
- ---------------------- -------------------------- --------------------------- -----------------------
<S> <C> <C> <C>
1. An individual's The individual 8. Sole proprietorship The Owner(4)
account account
2. Two or more The actual owner of the 9. A valid trust, Legal entity (Do not
individuals account or, if combined estate, or pension furnish the identifying
(joint account funds, any one of the trust number of the personal
individuals' representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
3. Husband and wife The actual owner of the 10. Corporate Account The corporation
(joint account) account or, if joint
funds, either person1
4. Custodian The minor(2) 11. Religious, The organization
account of a charitable, or
minor (Uniform educational
Gift to Minors organization account
Act)
5. Adult and minor The adult or, if the 12. Partnership account The partnership
(joint account) minor is the only held in the name of
contributor, the minor the business
6. Account in the The ward, minor, or 13. Association, club, or The organization
name of guardian incompetent person(3) other tax-exempt
or committee for organization
a designated
ward, minor, or
incompetent
person
7. a. The usual The grantor-trustee1 14. A broker or The broker or nominee
revocable registered nominee
savings trust
account
(grantor is
also trustee)
b. So-called The actual owner(1) 15. Account with the The public entity
trust account Department of
that is not a Agriculture in the
legal or name of a public
valid trust entity (such as a
under State State or local
law government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: if no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
<TABLE>
<S> <C>
OBTAINING A NUMBER NOTE: You may be subject to backup withholding
if this interest is $600 or more and is paid in
If you don't have a taxpayer identification number the course of the payer's trade or business and
or you don't know your number, obtain Form SS-5. you have not provided your correct taxpayer
Application for a Social Security Number Card, or identification number to the payer:
Form SS-4, Application for Employer Identification
Number, at the local office of the Social Security o Payments of tax-exempt interest (including
Administration or the Internal Revenue Service and exempt interest dividends under section 852).
apply for a number.
o Payments described in section 6049(b)(5) to
PAYEES EXEMPT FROM BACKUP WITHHOLDING nonresident aliens.
Payees specifically exempted from backup o Payments on tax-free covenant bonds under
withholding on ALL payments include the following: section 1451.
o A corporation. o Payments made by certain foreign
organizations.
o A financial institution.
o Payments made to a nominee.
o An organization exempt from tax under section
501(a), or an individual retirement plan. Exempt payees described above should file Form W-9
to avoid possible erroneous backup withholding.
o The United States or any agency or FILE THIS FORM WITH THE PAYER. FURNISH YOUR
instrumentality thereof. TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON
THE FACE OF THE FORM, AND RETURN IT TO THE PAYER,
o A State, the District of Columbia, a IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
possession of the United States, or any PATRONAGE DIVIDENDS. ALSO SIGN AND DATE THE FORM.
subdivision or instrumentality thereof.
o A foreign government, a political subdivision Certain payments other than interest, dividends,
of a foreign government, or agency or and patronage dividends that are not subject to
instrumentality thereof. information reporting are also not subject to
backup withholding. For details, see the
o An international organization or any agency, regulations under sections 6041, 6041A (a), 6045,
or instrumentality thereof. and 6050A.
o A registered dealer in securities or PRIVACY ACT NOTICE.--Section 6109 requires most
commodities registered in the U.S. or a recipients of dividend, interest, or other
possession of the U.S. payments to give taxpayer identification numbers
to payers who must report the payments to IRS.
o A real estate investment trust. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not
o A common trust fund operated by a bank under recipients are required to file tax returns.
section 584(a). Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend and
o An exempt charitable remainder trust or a certain other payments to a payee who does not
non-exempt trust described in section furnish a taxpayer identification number to a
4947(a)(1). payer. Certain penalties may also apply.
o An entity registered at all times under the PENALTIES
Investment Company Act of 1940.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER
o A foreign central bank of issue. IDENTIFICATION NUMBER.--If you fail to furnish
your taxpayer identification number to a payer,
Payments of dividends and patronage dividends not you are subject to a penalty of $50 for each such
generally subject to backup withholding include failure unless your failure is due to reasonable
the following: cause and not to willful neglect.
o Payments to nonresident aliens subject to (2) CIVIL PENALTY FOR FALSE INFORMATION WITH
withholding under section 1441. RESPECT TO WITHHOLDING.--If you make a false
statement with no reasonable basis which results
o Payments to partnerships not engaged in trade in no imposition of backup withholding, you are
or business in the U.S. and which have at subject to a penalty of $500.
least one nonresident partner.
(3) CRIMINAL PENALTY FOR FALSIFYING
o Payments of patronage dividends where the INFORMATION.--Falsifying certifications or
amount received is not paid in money. affirmations may subject you to criminal penalties
including fines and/or imprisonment.
o Payments made by certain foreign
organizations. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
o Payments made to a nominee.
Payments of interest not generally subject to
backup withholding include the following:
o Payments of interest on obligations issued by
individuals.
</TABLE>
<PAGE> 1
EXHIBIT 99.10
WARRANT AGREEMENT
WARRANT AGREEMENT (this "Agreement"), dated as of February 26, 1998,
by and between INTEGRATED SECURITY SYSTEMS, INC., a Delaware corporation (the
"Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York
corporation, as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, in connection with a public offering pursuant to a
registration statement on Form SB-2 declared effective by the Securities and
Exchange Commission on April 20, 1993, as amended (the "Registration
Statement"), of 1,450,000 units ("Units") (and up to 217,500 additional Units
covered by an over-allotment option consisting of up to 217,500 additional
Warrants (defined below) granted by the Company and up to 217,500 shares of
Common Stock (defined below) granted by Mr. Philip R. Thomas), with each Unit
consisting of one (1) share of the Company's Common Stock, par value $.01
("Common Stock"), and one (1) Redeemable Common Stock Purchase Warrant (the
"IPO Warrants"), the Company issued 1,450,000 IPO Warrants; and
WHEREAS, pursuant to an exchange offer by the Company commencing on
February 26, 1998 (the "Exchange Offer"), the Company shall offer to exchange
one (1) new Redeemable Common Stock Purchase Warrant (the "Warrant") for each
IPO Warrant; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties
hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms
shall have the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the authorized stock of the Company
of any class, whether now or hereafter authorized, which has the right to
participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage, which at the date hereof consists of
30,000,000 shares of Common Stock, $.01 par value.
(b) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business shall
be administered, which office is located on the date hereof at 40 Wall Street,
New York, New York.
<PAGE> 2
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent shall have received both (a) the certificate
representing such Warrant (the "Warrant Certificate"), with the exercise form
thereon duly executed by the Registered Holder thereof or his attorney duly
authorized in writing, and (b) payment in cash, or by official bank or
certified check made payable to the Company, of any amount in lawful money of
the United States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean, as to each,
Warrant, the date of this Agreement.
(e) "Purchase Price" shall mean the price to be paid for each
share of Common Stock purchased upon exercise of each Warrant in accordance
with the terms hereof, which price shall be $3.17 per share of Common Stock,
subject to adjustment from time to time pursuant to the provisions of Section 9
and Section 10 hereof, and subject to the Company's right to modify the
Purchase Price upon notice to all Warrantholders pursuant to Section 17 hereof.
(f) "Redemption Price" shall mean the price at which the Company
may, at its option, redeem the Warrants, in accordance with the terms hereof,
which price shall be $0.25 per Warrant, subject to adjustment from time to time
pursuant to the provisions of Section 9 and Section 10 hereof.
(g) "Registered Holder" shall mean the person in whose name any
certificate representing a Warrant shall be registered on the books maintained
by the Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 p.m. (New York City
time) on April 20, 1999, or the Redemption Date as defined in Section 8,
whichever is earlier; provided that if such date shall in the State of New York
be a holiday or a day on which banks are authorized to close, then 5:00 p.m.
(New York City time) on the next following day which in the State of New York
is not a holiday or a day on which banks are authorized to close. Upon notice
to all Warrantholders, the Company shall have the right to extend the Warrant
Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase 2.1 shares of
Common Stock upon the exercise thereof (so that a Warrant exercised in full
would have a total exercise price of $6.66), in accordance with the terms
hereof, subject to modification and adjustment as provided in Section 9 and
Section 10.
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<PAGE> 3
(b) Upon execution of this Agreement and thereafter, Warrant
Certificates representing the number of Warrants exchanged pursuant to the
Exchange Offer shall be executed by the Company and delivered to the Warrant
Agent. Upon written order of the Company signed by its President or Chairman
or a Vice President and by its Secretary or an Assistant Secretary, the Warrant
Certificates shall be countersigned, issued and delivered by the Warrant Agent
to the holders of IPO Warrants that have exchanged such IPO Warrants pursuant
to the Exchange Offer.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 1,450,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise
of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued upon the exercise of fewer than all Warrants
represented by any Warrant Certificate, to evidence any unexercised Warrants
held by the exercising Registered Holder, (iii) those issued upon any transfer
or exchange pursuant to Section 6; (iv) those issued in replacement of lost,
stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7; and
(v) at the option of the Company, in such form as may be approved by its Board
of Directors, to reflect any adjustment or change in the Purchase Price, the
number of shares of Common Stock purchasable upon exercise of the Warrants or
the Redemption Price therefor made pursuant to Section 9 or Section 10 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A and may have such letters, numbers or other marks
of identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant Certificates shall
be dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered
serially with the letter W on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by
its Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery
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<PAGE> 4
thereof, such Warrant Certificates may nevertheless be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as though
the person who signed such Warrant Certificates had not ceased to be such
officer of the Company. After countersignature by the Warrant Agent, Warrant
Certificates shall be delivered by the Warrant Agent to the Registered Holder
without further action by the Company.
SECTION 4. Exercise. Each Warrant may be exercised by the
Registered Holder thereof at any time on or after the date hereof, but not
after the Warrant Expiration Date, upon the terms and subject to the conditions
set forth herein and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date and the person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the holder upon
exercise thereof as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date the Warrant Agent shall deposit the
proceeds received from the exercise of a Warrant and shall notify the Company
in writing of the exercise of the Warrants. Promptly following, and in any
event within five days after the date of such notice from the Warrant Agent,
the Warrant Agent, on behalf of the Company, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon
such exercise (plus a Warrant Certificate for any remaining unexercised
Warrants of the Registered Holder), unless prior to the date of issuance of
such certificates the Company shall instruct the Warrant Agent to refrain from
causing such issuance of certificates pending clearance of checks received in
payment of the Purchase Price pursuant to such Warrants. Upon the exercise of
any Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Warrant to the Company or as the
Company may direct in writing.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes;
Etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery, be duly and validly issued,
fully paid, nonassessable and free from all taxes, liens and charges with
respect to the issue thereof (other than those which the Company shall promptly
pay or discharge) and that upon issuance such shares shall be listed on each
national securities exchange, if any, on which the other shares of outstanding
Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval. The Company will use
reasonable efforts to obtain appropriate approvals or registrations under state
"blue sky" securities laws with respect to any such securities. However,
Warrants may not be exercised
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<PAGE> 5
by, or shares of Common Stock issued to, any Registered Holder in any state in
which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed upon the Company with
respect to the issuance of Warrants, or the issuance or delivery of any shares
upon exercise of the Warrants; provided, however, that if the shares of Common
Stock are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being exercised,
then no such delivery shall be made unless the person requesting the same has
paid to the Warrant Agent the amount of transfer taxes or charge incident
thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock required upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Warrants, unless the Warrant Agent
and the Transfer Agent are the same entity.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants, of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office,
and upon satisfaction of the terms and provisions hereof, the Company shall
execute and the Warrant Agent shall countersign, issue and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its Corporate Office books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with its
regular practice. Upon due presentment for registration of transfer of any
Warrant Certificate at such Corporate Office, the Company shall execute and the
Warrant Agent shall issue and deliver to the transferee or transferees a new
Warrant Certificate or Certificates representing an equal aggregate number of
Warrants of the same class.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or
his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
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<PAGE> 6
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly canceled
by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of this Agreement or resignation as Warrant Agent, or disposed of
or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and
loss, theft, destruction or mutilation of any Warrant Certificate and (in case
of loss, theft or destruction) of indemnity satisfactory to them, and (in the
case of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. Redemption.
(a) Commencing as of the date of this Agreement, on not less than
thirty (30) days' prior written notice, the Warrants may be redeemed by the
Company, at the option of the Company, at a redemption price of $0.25 per
Warrant. All Warrants must be redeemed if any of the Warrants are redeemed.
(b) If the Company shall desire to exercise its right to so redeem
the Warrants, it shall request the Warrant Agent to mail a notice of redemption
to each of the Registered Holders of the Warrants to be redeemed, first class,
postage prepaid, not later than the thirtieth day before the date fixed for
redemption, at their last address as shall appear on the records of the Warrant
Agent. Any notice mailed in the manner provided herein shall be conclusively
presumed to have been duly given whether or not the Registered Holder receives
such notice.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered, (iv) the redemption price to be paid and (v)
that the right to exercise the Warrant shall terminate at 5:00 p.m. (New York
City time) on the close of business on the date for redemption fixed in the
notice. The date fixed for the redemption of the Warrants that have been
called for redemption shall be the Redemption Date. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a holder (a) to
whom notice was not mailed or (b) whose notice was
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<PAGE> 7
defective. An affidavit of the Warrant Agent or of the Secretary or an
Assistant Secretary of the Company that notice of redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(d) Any right to exercise a Warrant that has been called for
redemption shall terminate at 5:00 p.m. (New York City time) on the close of
business on the date for redemption fixed in the notice. On and after the
Redemption Date, Holders of the redeemed Warrants shall have no further rights
except to receive, upon surrender of the redeemed Warrant, the Redemption
Price.
(e) From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption, upon presentation
and surrender to the Company by or on behalf of the Registered Holder thereof
of one or more Warrants to be redeemed, deliver or cause to be delivered to or
upon the written order of such Holder a sum in cash equal to the redemption
price of each such Warrant. From and after the date fixed for redemption and
upon the deposit or setting aside by the Company of a sum sufficient to redeem
all the Warrants called for redemption, such Warrants shall expire and become
void and all rights hereunder and under the Warrant Certificates, except the
right to receive payment of the redemption price, shall cease.
SECTION 9. Adjustment of Exercise Price and Number of Shares of
Common Stock or Warrants on or Before April 20, 1998. On or before April 20,
1998, the provisions of this Section 9 shall apply:
(a) Subject to the exceptions referred to in Section 9(g) below,
in the event the Company shall, at any time or from time to time prior to or on
April 20, 1998, (i) sell any shares of Common Stock for a consideration per
share less than the then current Purchase Price, (ii) issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or (iii)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares (any such sale, issuance, subdivision or combination
being herein called a "Prior Change of Shares"), then, and thereafter upon each
further Prior Change of Shares, the applicable Purchase Price in effect
immediately prior to such Prior Change of Shares shall be changed to a price
(including any applicable fraction of a cent) determined by multiplying the
Purchase Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to such Prior Change of Shares and (b) the number
of shares of Common Stock which the aggregate consideration received by the
Company upon such sale, issuance, subdivision or combination could have
purchased at the then current Purchase Price, and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such Prior Change of Shares.
Upon each adjustment of the applicable Purchase Price pursuant to this
Section 9, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in Section
9(b) hereof) be such number of shares (calculated to the nearest tenth)
purchasable at the applicable Purchase Price immediately prior to such
adjustment multiplied by a fraction, the numerator of which shall be the
applicable Purchase Price in effect immediately prior to such adjustment and
the
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<PAGE> 8
denominator of which shall be the applicable Purchase Price in effect
immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the applicable
Purchase Price pursuant to this Section 9, to adjust the number of Warrants
outstanding, in lieu of adjusting the number of shares of Common Stock
purchasable upon the exercise of each Warrant as hereinabove provided, so that
each Warrant outstanding after such adjustment shall represent the right to
purchase one share of Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator or which shall be the applicable Purchase Price in
effect immediately prior to such adjustment and the denominator of which shall
be the applicable Purchase Price in effect immediately after such adjustment.
Upon each such adjustment of the number of Warrants, the Redemption Price in
effect immediately prior to such adjustment also shall be adjusted by
multiplying such Redemption Price by a fraction, the numerator of which shall
be the Purchase Price in effect immediately after such adjustment and the
denominator of which shall be the Purchase Price in effect immediately prior to
such adjustment. Upon each adjustment of the number of Warrants pursuant to
this Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 11 hereof,
the number of additional Warrants, if any, to which such Holder shall be
entitled as a result of such adjustment or, at the option of the Company, cause
to be distributed to such Holder in substitution and replacement for the
Warrant Certificates held by him prior to the date of adjustment (and upon
surrender thereof, if required by the Company) new Warrant Certificates
evidencing the number of Warrants to which such Holder shall be entitled after
such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization, or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon exercise of such Warrant,
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
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<PAGE> 9
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the applicable Purchase
Price per share, the number of shares purchasable thereunder and the Redemption
Price therefor as the Purchase Price per share, and the number of shares
purchasable thereunder and the Redemption Price therefor were expressed in the
Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer of an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
applicable Purchase Price as so adjusted, (ii) the number of shares of Common
Stock purchasable upon exercise of each Warrant after such adjustment, and, if
the Company shall have elected to adjust the number of Warrants to which the
registered holder of each Warrant shall then be entitled, and the adjustment in
Redemption Price resulting therefrom and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly file such
certificate with the Warrant Agent and cause a brief summary thereof to be sent
by ordinary first class mail to each Registered Holder of Warrants at his last
address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary
or an Assistant Secretary of the Company that such notice has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (i) through (vi) shall also be applicable:
(i) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock owned or held by
or for the account of the Company, and the sale or issuance of such
treasury shares or the distribution of any such treasury shares shall
not be considered a Prior Change of Shares for purposes of said
sections.
(ii) No adjustment of the Purchase Price shall be made
unless such adjustment would require an increase or decrease of at
least $.05 in such price; provided that any adjustments which by
reason of this clause (ii) are not required to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment(s) so
carried forward, shall require an increase or decrease of at least
$.05 in the Purchase Price then in effect hereunder.
(iii) In case of (1) the sale by the Company solely for
cash of any rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or any securities
convertible into or exchangeable for Common Stock without the payment
of any further consideration other than cash, if any (such convertible
or
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<PAGE> 10
exchangeable securities being herein called "Convertible Securities"),
or (2) the issuance by the Company, without the receipt by the Company
of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist solely of cash, whether or not such
rights, warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or
options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities issuable
upon the exercise of such rights, warrants or options) is less than
the then Purchase Price immediately prior to the date of the sale of
such Convertible Securities, then the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of such
Convertible Securities (as of the date of the sale of such Convertible
Securities) shall be deemed to be outstanding shares of Common Stock
for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to
have been sold for cash in an amount equal to such price per share.
(iv) In case of the sale by the Company solely for cash of
any Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing the
total amount of consideration received by the Company for the sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable the
conversion or exchange of such Convertible Securities) is less than
the then Purchase Price immediately prior to the date of the issuance
or sale of such Convertible Securities; then the total maximum number
of shares of Common Stock issuable upon the exercise of such
Convertible Securities (as of the date of the issuance or sale of such
Convertible Securities) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall
be deemed to have been sold for cash in an amount equal to such price
per share.
(v) If the exercise or purchase price provided for in any
right, warrant or option referred to in (iii) above, or the rate at
which any Convertible Securities referred to in (iii) or (iv) above
are convertible into or exchangeable for Common Stock, shall change at
any time (other than under or by reason of provisions designed to
protect against dilution), the Purchase Price then in effect hereunder
shall forthwith be readjusted to such Purchase Price as would have
been obtained (1) had the adjustments made upon the issuance or sale
of such rights, warrants, options or
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<PAGE> 11
Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the
exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities, (2) had adjustments been made
on the basis of the Purchase Price as adjusted under clause (1) for
all transactions (which would have affected such adjusted Purchase
Price) made after the issuance or sale of such rights, warrants,
options or Convertible Securities, and (3) had any such rights,
warrants, options or Convertible Securities then still outstanding
been originally issued or sold at the time of such change. On the
expiration of any such right, warrant or option or the termination of
any such right to convert or exchange any such Convertible Securities,
the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have been obtained (a) had
the adjustments made upon the issuance or sale of such rights,
warrants, options or Convertible Securities been made upon the basis
of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities and (b)
had adjustments been made on the basis of the Purchase Price as
adjusted under clause (a) for all transactions (which would have
affected such adjusted Purchase Price) made after the issuance or sale
of such rights, warrants, options or Convertible Securities.
(vi) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company
therefore shall be deemed to be the gross sales price therefor without
deducting therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed
by the Company in connection therewith. Notwithstanding anything
contained herein to the contrary, no adjustment in the Purchase Price
shall be made until the number of shares of Common Stock or
Convertible Securities issued by the Company exceeds five percent (5%)
of the number of shares of Common Stock outstanding as of the date of
this Agreement.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each Warrant
will be made pursuant to this Section 9, however,
(i) upon the grant or exercise of any options or warrants
outstanding on the date hereof or options which may hereafter be
granted or exercised under any stock option plan of the Company as
described in the Registration Statement; or
(ii) upon the sale or exercise of the Warrants; or
(iii) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants
or options were outstanding on the date of the original sale of the
IPO Warrants or issuance of the Warrants or were thereafter issued or
sold; or
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<PAGE> 12
(iv) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not
any adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such Convertible Securities and whether
or not such Convertible Securities were outstanding on the date of the
original sale of the IPO Warrants or the date of this Agreement or
were thereafter issued or sold; or
(v) upon any amendment to or change in the terms of any
rights or warrants to subscribe for or purchase, or options for the
purchase of, Common Stock or Convertible Securities or in the terms of
any Convertible Securities, including, but not limited to, any
extension of any expiration date of any such right, warrant or option,
any change in any exercise or purchase price provided for in any such
right, warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable for Common
Stock or any change in the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than
rights, warrants, options or Convertible Securities issued or sold
after the close of business on the date of this Agreement (i) for
which an adjustment in the Purchase Price then in effect was
theretofore made or required to be made, upon the issuance or sale
thereof, or (ii) for which such an adjustment would have been required
had the exercise or purchase price of such rights, warrants or options
at the time of the issuance or sale thereof or the rate of conversion
or exchange of such Convertible Securities, at the time of the sale of
such Convertible Securities, or the issuance or sale of rights or
warrants to subscribe for or purchase, or options for the purchase of,
such Convertible Securities, been the price or rate as changed, in
which case the provisions of Section 9(f)(v) hereof shall be
applicable if, but only if, the exercise or purchase price thereof, as
changed, or the rate of conversion or exchange thereof, as changed,
consists solely of cash or requires the payment of additional
consideration, if any, consisting solely of cash and the Company did
not receive any consideration other than cash, if any, in connection
with such change).
(h) As used in this Section 9, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
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<PAGE> 13
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to this Section 9, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of Directors
of the Company.
(j) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each of the then
Registered Holders of the Warrants all of such rights, warrants or options to
which each such holder would have been entitled if, on the date of
determination of stockholders entitled to the rights, warrants or options being
granted by the Company, such holder were the holder of record of the number of
whole shares of Common Stock then issuable upon exercise (assuming, for
purposes of this Section 9(j), that exercise of Warrants is permissible during
periods prior to the Initial Warrant Exercise Date) of his Warrants. Such
grant by the Company to the holders of the Warrants shall be in lieu of any
adjustment which otherwise might be called for pursuant to this Section 9.
SECTION 10. Adjustment of Exercise Price and Number of Shares of
Common Stock or Warrants After April 20, 1998. After April 20, 1998, the
provisions of Section 9 shall be inapplicable, and the provisions of this
Section 10 shall apply:
(a) In the event the Company shall, at any time or from time to
time after April 20, 1998, (i) issue any shares of Common Stock as a stock
dividend to the holders of Common Stock or (ii) subdivide or combine the
outstanding shares of Common Stock into a greater or lesser number of shares
(any such issuance, subdivision or combination being herein called a
"Subsequent Change of Shares"), then, and thereafter upon each further
Subsequent Change of Shares, the applicable Purchase Price in effect
immediately prior to such Subsequent Change of Shares shall be proportionately
adjusted.
Upon each adjustment of the applicable Purchase Price pursuant to this
Section 10, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in Section
10(b) hereof) be such number of shares (calculated to the nearest tenth)
purchasable at the applicable Purchase Price immediately prior to such
adjustment multiplied by a fraction, the numerator of which shall be the
applicable Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the applicable Purchase Price in effect
immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the applicable
Purchase Price pursuant to this Section 10, to adjust the number of Warrants
outstanding, in lieu of adjusting the number of shares of Common Stock
purchasable upon the exercise of each Warrant as hereinabove provided, so that
each Warrant outstanding after such adjustment shall represent the right to
purchase one share of Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator or which shall be the applicable Purchase Price in
effect immediately
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<PAGE> 14
prior to such adjustment and the denominator of which shall be the applicable
Purchase Price in effect immediately after such adjustment. Upon each such
adjustment of the number of Warrants, the Redemption Price in effect
immediately prior to such adjustment also shall be adjusted by multiplying such
Redemption Price by a fraction, the numerator of which shall be the Purchase
Price in effect immediately after such adjustment and the denominator of which
shall be the Purchase Price in effect immediately prior to such adjustment.
Upon each adjustment of the number of Warrants pursuant to this Section 10, the
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment
Warrant Certificates evidencing, subject to Section 11 hereof, the number of
additional Warrants, if any, to which such Holder shall be entitled as a result
of such adjustment or, at the option of the Company, cause to be distributed to
such Holder in substitution and replacement for the Warrant Certificates held
by him prior to the date of adjustment (and upon surrender thereof, if required
by the Company) new Warrant Certificates evidencing the number of Warrants to
which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization, or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon exercise of such Warrant,
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 10. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the applicable Purchase
Price per share, the number of shares purchasable thereunder and the Redemption
Price therefor as the Purchase Price per share, and the number of shares
purchasable thereunder and the Redemption Price therefor were expressed in the
Warrant Certificates when the same were originally issued.
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<PAGE> 15
(e) After each adjustment of the Purchase Price pursuant to this
Section 10, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer of an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
applicable Purchase Price as so adjusted, (ii) the number of shares of Common
Stock purchasable upon exercise of each Warrant after such adjustment, and, if
the Company shall have elected to adjust the number of Warrants to which the
registered holder of each Warrant shall then be entitled, and the adjustment in
Redemption Price resulting therefrom and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly file such
certificate with the Warrant Agent and cause a brief summary thereof to be sent
by ordinary first class mail to each Registered Holder of Warrants at his last
address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary
or an Assistant Secretary of the Company that such notice has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(f) For purposes of Section 10(a) and 10(b) hereof, the following
provisions (i) through (vi) shall also be applicable:
(i) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock owned or held by
or for the account of the Company, and the sale or issuance of such
treasury shares or the distribution of any such treasury shares shall
not be considered a Subsequent Change of Shares for purposes of said
sections.
(ii) No adjustment of the Purchase Price shall be made
unless such adjustment would require an increase or decrease of at
least $.05 in such price; provided that any adjustments which by
reason of Section 9(f)(ii) or this clause (ii) are not required to be
made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or
decrease of at least $.05 in the Purchase Price then in effect
hereunder.
(g) As used in this Section 10, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 10(c) hereof, the stock securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision
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<PAGE> 16
or combination or consisting of a change in par value, or from par value to no
par value, or from no par value to par value, such shares of Common Stock as so
reclassified or changed.
(h) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to this Section 10, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of Directors
of the Company.
SECTION 11. Fractional Warrants and Fractional Shares. The
Company shall not be required to issue fractions of shares, upon exercise of
the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall round such fraction downward to the nearest
whole share, without the payment of any further consideration.
SECTION 12. Warrantholders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such holder shall have exercised such
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
SECTION 13. Rights of Action. All rights of action with respect
to this Agreement are vested in the respective Registered Holders of the
Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, in his own behalf and
for his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificates and this Agreement.
SECTION 14. Agreement of Warrantholders. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his attorney
duly authorized in writing and only if the Warrant Certificates representing
such Warrants are surrendered at the office of the Warrant Agent, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to the Warrant
Agent and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
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<PAGE> 17
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and as
the absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 7 hereof.
SECTION 15. Cancellation of Warrant Certificates. If the company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and canceled by it and retired. The Warrant Agent shall also
cancel Common Stock following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split-up, combination or
exchange.
SECTION 16. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make many representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby
or of any securities or other property delivered upon exercise of any Warrant
or whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided in
this Agreement, or to determine whether any fact exists which may require any
such adjustments, or with respect to the nature or extent of any such
adjustment, when made, or with respect to the method employed in making the
same. It shall not (i) be liable for any recital or statement of facts
contained herein or for any action taken, suffered or omitted by it in reliance
on any Warrant Certificates or other document of instrument believed by it in
good faith to be genuine and to have been signed or presented by the proper
party or parties, (ii) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations contained in this
Agreement or in any Warrant Certificate, or (iii) be liable for any act or
omission in connection with this Agreement except for its own negligence or
willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed
by the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
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<PAGE> 18
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's negligence
or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall cause
a copy of such notice of resignation to be mailed to the Registered Holder of
each Warrant Certificate at the Company's expense. Upon such resignation, or
any inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. If the Company shall fail to make such
appointment within a period of 15 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for
the appointment of a new warrant agent. Any new warrant agent, whether
appointed by the Company or by such a court shall be a bank or trust company
having a capital and surplus as shown by its last published report to its
stockholders, of not less than $10,000,000, or a stock transfer company. After
acceptance in writing of such appointment by the new warrant agent is received
by the Company, such new warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein
as the Warrant Agent, without any further assurance, conveyance, act or deed;
but if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
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<PAGE> 19
SECTION 17. Modification of Agreement. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not less
than 50% of the Warrants then outstanding, and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Warrant, or the Purchase Price therefor, or the acceleration of the
Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate representing such Warrant, other
than such changes as are specifically prescribed by this Agreement as
originally executed.
Notwithstanding the preceding or anything else in this Agreement to
the contrary, the Warrant Agent and the Company may by amendment or
supplemental agreement from time to time modify the Purchase Price without the
obtaining the consent of any of the Registered Holders of the Warrants.
SECTION 18. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company, at 8200 Springwood Drive, Suite 230, Irving,
Texas 75063, attention: President, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if to the Warrant
Agent, at 40 Wall Street, New York, New York 10005.
SECTION 19. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws.
SECTION 20. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Company and, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law,
or to impose upon any other person any duty, liability or obligation.
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<PAGE> 20
SECTION 21. Termination. This Agreement shall terminate at the
close of business on the Expiration Date of all the Warrants of such earlier
date upon which all Warrants have been exercised, except that the Warrant Agent
shall account to the Company for cash held by it and the provisions of Section
16 hereof shall survive such termination.
SECTION 22. Counterparts. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
* * * * *
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
INTEGRATED SECURITY SYSTEMS, INC.
By: /s/ GERALD K. BECKMANN
----------------------------
Gerald K. Beckman
President and Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ H. LEMMER
----------------------------
Authorized Officer
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EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
Warrants
VOID AFTER April 20, 1999
WARRANT CERTIFICATE FOR PURCHASE
OF
COMMON STOCK
OF
INTEGRATED SECURITY SYSTEMS, INC.
This certifies that FOR VALUE RECEIVED ____________________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Common Stock Purchase Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), 2.1 fully paid and nonassessable shares of Common Stock,
$.01 par value, of Integrated Security Systems, Inc., a Delaware corporation
(the "Company") at any time prior to or on the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of American Stock Transfer & Trust Company as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $3.17 per share (the
"Purchase Price") in lawful money of the United States of America in cash or by
official bank or certified check made payable to the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated as of
February 26, 1998, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
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<PAGE> 23
The term "Expiration Date" shall mean 5:00 p.m. (New York City time)
on April 20, 1999, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall be 5:00 p.m. (New
York City time) the next following day which in the State of New York is not a
holiday or a day in which banks are authorized to close. The Company shall not
be obligated to deliver any securities pursuant to the exercise of this Warrant
unless a registration statement under the Securities Act of 1933, as amended,
with respect to such securities is effective. The Company has covenanted and
agreed that it will file a registration statement and will use its best efforts
to cause the same to become effective and to keep such registration statement
current while any of the Warrants are outstanding. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment together with any
tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Commencing 90 days after the date of the Warrant Agreement, this
Warrant may be redeemed at the option of the Company at redemption price of
$.25 per Warrant. Notice of redemption shall be given not later than the
thirtieth day before the date fixed for redemption, all as provided in the
Warrant Agreement. On and after the date fixed for redemption, the Registered
Holder shall have no rights with respect to this Warrant except to receive the
$.25 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
23
<PAGE> 24
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: INTEGRATED SECURITY SYSTEMS, INC.
-----------
By:
----------------------------
Title: President
By:
----------------------------
Title: Secretary
[Seal]
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
----------------------------
Authorized Officer
24
