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 ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇), 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 ▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇.
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.
2
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
3
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
4
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.
5
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
6
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
7
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.
8
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
9
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
10
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
11
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.
12
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
13
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.
14
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
15
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
16
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.
17
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.
18
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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, 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 ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
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.
19
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.
* * * * *
20
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/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ ▇. ▇▇▇▇▇▇
----------------------------
Authorized Officer
21
22
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.
22
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
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