Document:

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                                                                     EXHIBIT 4.2

                           CONVERTIBLE PROMISSORY NOTE

$157,474.00                                                    February 27, 2001

         For value received, INTEGRATED SECURITY SYSTEMS, INC., a Delaware
corporation (hereinafter referred to as "Maker"), promises to pay to the order
to HBW INVESTMENT PARTNERS II, L.P. (hereinafter referred to as "Payee"), the
principal sum of One Hundred Fifty Seven Thousand Four Hundred Seventy Four and
No/100 Dollars ($157,474.00). The principal of and interest on this Note shall
be due and payable in lawful money of the United States of America, at the
office of Payee at 13355 Noel Road, Suite 1650, Dallas, Texas 75240, or at such
other place as the holder hereof may from time to time designate by written
notice to Maker.

         1. Interest. Interest shall accrue on the unpaid principal balance
under this Note at an annual rate equal to nine percent (9%). Interest shall
accrue from and including the date of this Note until, but not including, the
day on which it is paid in full. In no event shall the interest charged
hereunder exceed the maximum rate of interest allowed from time to time by law.
Interest shall be due and payable monthly on the first (1st) day of each month.

         2. Payment of Note. The principal balance of, and all accrued unpaid
interest on, this Note shall be due and payable one hundred twenty (120) days
from the date hereof, except as otherwise provided herein. ("Maturity Date").

         3. Prepayment. This Note may be prepaid in whole or in part at any
time, at the option of Maker, without premium or penalty.

         4. Conversion. This note shall be convertible, at the option of Payee
in its sole and absolute discretion, in whole or in part and at any time or from
time to time, into fully paid and nonassessable shares (the "Conversion Shares")
of Common Stock, $.01 par value (the "Common Stock"), of Integrated Security
Systems, Inc., a Delaware corporation (the "Company"), at the conversion price
of $0.20 per share. If Payee elects to exercise its option, the following shall
occur:

           (a) Payee shall deliver to Maker a notice of such election (the
           "Conversion Notice"), indicating the amount of principal of this Note
           to be converted (such amount to be converted referred to herein as
           the "Converted Amount").

           (b) Promptly upon receipt of the Conversion Notice, Maker shall
           deliver to the Company (i) a certificate or certificates of Maker's
           Common Stock representing at least the number of shares issuable to
           Payee upon conversion of the Converted Amount, duly endorsed in blank
           or accompanied by a stock transfer power executed in like manner, and
           (ii) a copy of the Conversion Notice.

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           (c) Upon its receipt of Maker's endorsed Common Stock certificate(s)
           and the Conversion Notice, the Company shall immediately issue and
           deliver to Payee or its designated affiliates a certificate or
           certificates for the number of shares of Common Stock, registered in
           Payee's or its designated affiliates' name(s), to which Payee shall
           be entitled upon such conversion, bearing such legends as may be
           required by applicable state and federal securities laws. The Company
           shall issue to Maker a certificate representing any shares
           surrendered by Maker in excess of the shares issued to Payee upon
           conversion.

           (d) If this Note is converted in whole, Payee shall deliver this Note
           to Maker marked "Cancelled," and Maker shall immediately pay to Payee
           all accrued and unpaid interest then due and owing on the date of
           such conversion. If this Note is converted in part, Maker shall
           immediately pay to Payee all accrued and unpaid interest then due and
           owing on the date of such conversion, and Payee shall deliver to
           Maker a replacement Note for any outstanding principal amount not
           converted. Dated the date of such conversion, with the same Maturity
           Date and provisions as contained in this Note.

           (e) No fractional shares will be issued on conversion of this Note.

         5. Adjustment for Issuance of Shares at Less Than the Conversion Price.
If and whenever any Additional Common Stock (herein defined) shall be issued by
Maker (the "Stock Issue Date") for a consideration per share less than the
Conversion Price, Then in each such case the initial Conversion Price shall be
reduced to a new Conversion Price in an amount equal to the price per share of
the Additional Common Stock the issued, as determined in accordance with general
accepted accounting principles, if issued other than for cash, and the number of
shares issuable to Payee upon conversion shall be proportionately increased;
and, in the case of Additional Common Stock issued without consideration, the
initial Conversion Price shall be reduced in amount and the number of shares
issued upon conversion shall be increased in an amount so as to maintain for the
Payee the right to convert this Note into shares equal in amount to the same
percentage interest in the Common Stock of the Company as existed for the Payee
immediately preceding the Stock Issue Date.

         6. Sale of Shares. In case of the issuance of Additional Common Stock
for a consideration part or all of which shall be cashed, the amount of the cash
consideration therefore shall be deemed to be the gross amount of the cash paid
to Maker for such shares, before deducting any underwriting compensation or
discount in the sale, underwriting or purchase thereof by underwriters or
dealers or others performing similar services for any expenses incurred in
connection therewith. In case of the issuance of any shares of Additional Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefore, other than cash, shall be deemed to be
the then fair market value of the property received.

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         7. Stock Dividends. Shares of Common Stock issued as a dividend or
other distribution on any class of capital stock of Maker shall be deemed to
have been issued without consideration.

         8. Stock Splits, Subdivisions or Combinations. In the event of a stock
split or subdivision of shares of Common Stock into a greater number of shares,
the Conversion Price shall be proportionately decreased, and in the event of a
combination of shares of Common Stock into a smaller number of shares, the
Conversion Price shall be proportionately increased, such increase or decrease,
as the case may be, becoming effective at the record date.

         9. Exceptions. The term "Additional Common Stock" herein shall mean all
shares of Common Stock hereafter issued by Maker (including Common Stock held in
the treasury of Maker), except for (A) Common Stock issued upon the conversion
of this Note; (B) Common Stock issued upon exercise of any outstanding warrants,
options or convertible debt instruments; and (C) Common Stock issued upon
exercise of outstanding employee stock options.

         10. Adjustment for Mergers, Sales and Consolidations. In the event of
any consolidation or merger of the Company with or into, or the sale of all or
substantially all of the properties and assets of the Company, to any person,
and in connection therewith, consideration is payable to holders of Common Stock
in cash, securities or other property, then as a condition of such
consolidation, merger or sale, lawful provision shall be made, and duly executed
documents evidencing the same shall be delivered to the Payee, so that the Payee
shall have the right at any time prior to the maturity of this Note to purchase,
at a total price equal to the Conversion Price immediately prior to such event,
the kind and amount of cash , securities or other property receivable in
connection with such consolidation, merger or sale, by a holder of the same
number of shares of Common Stock as were exercisable by the Payee immediately
prior to such consolidation, merger or sale. In any such case, appropriate
provision shall be made with respect to the rights and interest of the Payee so
that the provisions hereof shall thereafter be applicable with respect to any
cash, securities or property deliverable upon exercise hereof. Notwithstanding
the foregoing, (i) if the Company merges or consolidates with or sells all or
substantially all of its property and assets to, any other person, and
consideration is payable to holders of Common Stock in exchange for their Common
Stock in connection with such merger, consolidation or sale which consists
solely of cash, or (ii) in the event of the dissolution, liquidation or winding
up of the Company, then the Payee shall be entitled to receive distributions on
the date of such event on an equal basis with holders of Common Stock as if this
Note had been converted immediately prior to such event, less the Conversion
Price. Upon receipt of such payment, if any, the rights of the Payee shall
terminate and cease and this Note shall expire. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring person and, in the
event of any dissolution, liquidation or wind up of the Company, the Company
shall promptly, after receipt of this surrendered Note, make payment by
delivering a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such person as it may be directed in writing by the Payee surrendering this
Note.

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         11. Adequate Shares. Maker will at times reserve and keep available,
for the purpose of issuance upon conversion, a sufficient number of shares of
Common Stock owned by Maker deliverable upon Payee's exercise of its conversion
rights under this Note.

         12. Default, Enforcement. Upon default in payment of this Note, Payee
may pursue any and all remedies to which Payee may be entitled.

         13. Limitation of Interest. All agreements between Maker and Payee,
whether now existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration or the maturity of
the unpaid principal balance hereof, or otherwise, shall the amount contracted
for, charged, received, paid or agreed to be paid to the holder hereof for the
use, forbearance or detention of the money evidenced by this Note or for the
payment or performance of any covenant or obligation contained herein or in any
other document pertaining to the indebtedness evidenced by this Note exceed the
maximum amount permissible under applicable usury laws. If, from any
circumstance whatsoever, fulfillment of any provision hereof or of any other
agreement shall, at the time fulfillment of such provision be due, involve
transcending the limits of validity prescribed by law which a court of competent
jurisdiction may deem applicable hereto the ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if from any
circumstance the holder hereof shall ever receive as interest an amount which
would exceed the maximum lawful rate, any amount equal to any excessive interest
shall (a) be applied to the reduction of the unpaid principal balance due
hereunder and not to the payment of interest, or (b) if such excess interest
exceeds the unpaid principal balance of this Note, such excess shall be refunded
to Maker. All sums contracted for, charged or received hereunder for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of this Note until payment in full so that the rate of
interest on account of such indebtedness is uniform throughout the term hereof.
The terms and provisions of this paragraph shall control and supersede every
other provision of all agreements between Maker and the holder hereof.

         14. Waiver. Except as otherwise expressly provided herein, Maker waives
demand, notice of intent to accelerate, notice of acceleration, notice of
nonpayment or dishonor, grace, protest, notice of protest, all other notices,
and any and all diligence or delay in collection or the filing of suit hereon.

         15. Governing Law and Venue. This Note shall be construed according to
and governed by the laws of the State of Texas. The obligations of Maker under
this Note are performable in Dallas County, Texas.

         16. Registration Rights. The shares of Common Stock issued upon
conversion of this Note shall be restricted from transfer by the Payee, unless
the shares are duly registered for sale pursuant to the Securities Act of 1933,
as amended, or the transfer is exempt from registration.

         17. Security Agreement. This Note is secured by the accounts receivable
of Intelli-Site, Inc.

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         18. Successors and Assigns. This Note shall bind Maker's successors and
assigns.

         19. Collection Costs. If this Note is collected by legal proceeding or
through a probate or bankruptcy court, or is placed in the hands of an attorney
for collection after default (whether or not suit is filed), Maker agrees to pay
all costs of collection and/or suit, including but not limited to reasonable
attorney's fees incurred by Payee.

         20. Unenforceability. The invalidity or unenforceability in particular
circumstances of any provision of this Note shall not extend beyond such
provision or such circumstances, and no other provision of this Note shall be
affected thereby.

         21. Headings. The paragraph headings of the sections of this Note are
inserted for convenience of reference only and shall not affect the meaning or
interpretation of this Note.

         IN WITNESS WHEREOF, Maker has duly executed this Note as of the day and
year first above written.

                                       INTEGRATED SECURITY SYSTEMS, INC.

                                       BY:  /s/ C.A. Rundell, Jr.
                                          ------------------------------------
                                          C. A. Rundell, Jr.
                                          Chairman and Chief Executive Officer

                                        5<PAGE>   1
                                                                     EXHIBIT 4.3

                                                           Warrant Number: 01-01

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Void after 5:00 p.m., Dallas, Texas time, on February 27, 2006

                       WARRANT TO PURCHASE COMMON STOCK OF
                        INTEGRATED SECURITY SYSTEMS, INC.

         FOR VALUE RECEIVED, INTEGRATED SECURITY SYSTEMS, INC. (the "Company") a
Delaware corporation, hereby certifies that HBW Capital Fund, L.P. or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing February 27, 2001, and prior to 5:00 p.m., Dallas, Texas
time, on February 27, 2006, a total of 118,772 fully paid and non-assessable
shares of the Common Stock, par value $.01 per share, of the Company for the Per
Share Warrant Price of $0.20. (Hereinafter, (i) said Common stock, together with
any other equity securities which may be issued by the Company with respect
thereto or in substitution therefore, is referred to as the "Common Stock," (ii)
the shares of the Common Stock purchasable hereunder are referred to as the
"Warrant Shares," (iii) the aggregate purchase price payable hereunder for the
Warrant Shares is referred to as the "Aggregate Warrant Price," (iv) the price
payable hereunder for each of the Warrant Shares is referred to as the "Per
Share Warrant Price," (v) this Warrant, and all warrants hereafter issued in
exchange or substitution for this Warrant are referred to as the "Warrant" and
(vi) the holder of this Warrant is referred to as the "Holder.") The Per Share
Warrant Price is subject to adjustment as hereinafter provided; in the event of
any such adjustment, the number of Warrant Shares shall be adjusted by dividing
the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.

         1.       Exercise or Conversion of Warrant.

                  (a) This Warrant may be exercised, in whole at any time or in
part from time to time, commencing February 27, 2001, and prior to 5:00 p.m.,
Dallas, Texas time, on February 27, 2006 by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 10(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part. Payment for Warrant Shares shall be made
by certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, this Warrant must be exercised for a minimum of
100 shares of the Common Stock, and the Holder is entitled to receive a new
Warrant covering the number of Warrant Shares in respect of which this Warrant
has not been exercised and setting forth the proportionate part of the Aggregate
Warrant Price applicable to such Warrant Shares. Upon such surrender of this
Warrant, the Company will (a) issue a certificate or certificates in the name of
the Holder for the largest number of whole shares of the Common Stock to which
the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu
of any fractional share of the Common Stock to which the Holder shall be
entitled, cash equal to the fair value of such fractional share (determined in
such reasonable manner as the Board of

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Directors of the Company shall determine), and (b) deliver the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant.

                  No Warrant granted herein shall be exercisable after 5:00
p.m., Dallas, Texas time on February 27, 2006.

                  (b) In addition to and without limiting the rights of the
Holder under the terms of this Warrant, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any portion thereof into Warrant
Shares as provided in this Section 1(b) at any time or from time to time prior
to its expiration.

                      (i) Upon exercise of the Conversion Right with respect to
a particular number of Warrant Shares (the "Converted Shares"), the Company
shall deliver to the Holder, without payment by the Holder of any Per Share
Warrant Price or any cash or other consideration, that number of Warrant Shares
equal to the quotient obtained by dividing the Net Value (as hereinafter defined
in this paragraph 1(b)(i)) of the Converted Shares by the fair market value (as
defined in paragraph 1(b)(iii) below) of a single Warrant Share, determined in
each case as of the close of business on the Conversion Date (as hereinafter
defined). The "Net Value" of the Converted Shares shall be determined by
subtracting the aggregate Warrant Price of the Converted Shares from the
aggregate fair market value of the Converted Shares. No fractional securities
shall be issuable upon exercise of the Conversion Right, and if the number of
securities to be issued in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the Holder an amount in cash equal to the
fair market value of the resulting fractional Warrant Share.

                      (ii) The Conversion Right may be exercised by the Holder
by the surrender of this Warrant at the principal office of the Company or at
the office of the Company's stock transfer agent, if any, together with a
written statement specifying the Holder thereby intends to exercise the
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement, or on such later
date as is specified therein (the "Conversion Date"), but not later than the
expiration date of the Warrant. Certificates for the Converted Shares issuable
upon exercise of the Conversion Right, together with a check in payment of any
fractional Warrant Share and, in the case of a partial exercise a new warrant
evidencing the Warrant Shares remaining subject to the Warrant, shall be issued
as of the Conversion Date and shall be delivered to the Holder within seven (7)
days following the Conversion Date.

                      (iii) For purposes of this Section 1, the "fair market
value" of a Warrant Share of as of a particular date shall be its "market
price," which, for purposes of this Section 1 shall mean, if the Warrant Shares
are traded on a securities exchange or on the Nasdaq National Market System, or,
if the Warrant Shares are otherwise traded in the over-the-counter market, the
average of the closing bid and ask price, in each case averaged over a period of
five consecutive trading days prior to the date as of which "market price" is
being determined. If at any time the Warrant Shares are not traded on an
exchange or the Nasdaq National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be higher of (i)
the shareholders' equity thereof as of the last day of any month ending within
sixty (60) days preceding the date as of which the determination is to be made
as determined by the Board of Directors of the Company, or (ii) the fair value
thereof determined in good faith by the Board of Directors of the Company as of
a date which is within fifteen (15) days of the date as of which the
determination is to be made.

         2.       Reservation of Warrant Shares. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times have
authorized and in reserve, and will keep available, solely for

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issuance or delivery upon the exercise of this Warrant, the shares of the Common
Stock as from time to time shall be receivable upon the exercise of this
Warrant.

         3.       Anti-Dilution Provisions.

                  (a) If, at any time or from time to time after the date of
this Warrant, the Company shall distribute to the holders of the Common Stock
(i) securities, other than shares of the Common Stock, or (ii) property, other
than cash, without payment therefore, with respect to the Common Stock, then,
and in each such case, the Holder, upon the exercise of this Warrant, shall be
entitled to receive the securities and properties which the Holder would hold on
the date of such exercise if, on the date of this Warrant, the Holder had been
the holder of record of the number of shares of the Common Stock subscribed for
upon such exercise and, during the period from the date of this Warrant to and
including the date of such exercise, had retained such shares and the securities
and properties receivable by the Holder during such period. Notice of each such
distribution shall be forthwith mailed to the Holder.

                  (b) In case the Company shall thereafter (i) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price in effect
immediately prior to such action shall be adjusted so that if the Holder
surrendered this Warrant for exercise immediately thereafter the Holder would be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this subsection (b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.

                  (c) In case of any consolidation or merger to which the
Company is a party other than a merger or consolidation in which the Company is
the continuing corporation, or in case of any sale or conveyance to another
entity of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the Holder shall be obligated to convert
this Warrant into the kind and amount of securities, cash or other property
which he would have owned or have been entitled to receive immediately after
such consolidation, merger, statutory exchange, sale or conveyance had such
Warrant been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section 3 with respect to the rights and
interests thereafter of the Holder to the end that the provisions set forth in
this Section 3 shall thereafter correspondingly be made applicable, as nearly as
may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of this Warrant. The above
provisions of this subsection (c) shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyance. Notice of any
such consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holder not less than
30 days prior to such event. A sale of all or substantially all of the assets of
the Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.

                  (d) Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of the Holder
of this Warrant in accordance with this Section 3, the Company shall promptly
prepare a certificate of an officer of the Company, setting forth the Per Share

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Warrant Price and the number of Warrant Shares after such adjustment or
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause a copy of such
certificate to be mailed to the Holder.

                  (e) If the Board of Directors of the Company shall declare any
dividend or other distribution in cash with respect to the Common Stock, the
Company shall mail notice thereof to the Holder not less than 15 days prior to
the record date fixed for determining shareholders entitled to participate in
such dividend or other distribution.

         4.       Fully Paid Stock; Taxes. The Company agrees that the shares of
the Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive rights, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all Federal and state stamp or similar taxes that may
be payable in respect of the issue of any Warrant Share of certificate
therefore.

         5.       Transfer.

                  (a) Securities Laws. This Warrant has not been registered
under the Securities Act of 1933, as amended (the "Securities Act") or under any
state securities laws and unless so registered may not be transferred, sold
pledged, hypothecated or otherwise disposed of unless an exemption from such
registration is available. In the event Holder desires to transfer this Warrant,
the Holder must give the Company prior written notice of such proposed transfer
including the name and address of the proposed transferee. Such transfer may be
made only (i) upon receipt by the Company of an opinion of counsel to the
Company or other counsel to the Holder, which other counsel is reasonably
satisfactory to the Company to the effect that the proposed transfer will not
violate the provisions of the Securities Act, the Securities Exchange Act of
1934, as amended, or the rules and regulations promulgated under either such
act; or (ii) if the Warrant has been registered under the Securities Act and
there is in effect a current prospectus meeting the requirements of Subsection
10(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Warrant to be sold or transferred.

                  (b) Conditions to Transfer. Prior to any proposed transfer
referred to in subparagraph (a) above, and as a condition thereto, if such
transfer is not made pursuant to an effective registration statement under the
Securities Act, the Holder will, if requested by the Company, deliver to the
Company (i) an investment covenant signed by the proposed transferee, (ii) an
agreement by such transferee to the impression of the restrictive investment
legend set forth herein on the certificate or certificates representing the
securities acquired by such transferee, (iii) an agreement by such transferee
that the Company may place a "stop transfer order" with its transfer agent or
registrar, and (iv) an agreement by the transferee to indemnify the Company to
the same extent as set forth in the next succeeding paragraph.

                  (c) Indemnity. The Holder acknowledges that the Holder
understands the meaning and legal consequences of this Section 5, and the Holder
hereby agrees to indemnify and hold harmless the Company, its representatives
and each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach of this Warrant, (b) any transfer of any of the Warrant or the
Warrant Shares in violation of the Securities Act, the Securities Exchange Act
of 1934, as amended, or the

<PAGE>   5

rules and regulations promulgated under either of such acts, (c) any transfer of
the Warrant or any of the Warrant Shares not in accordance with this Warrant or
(d) any untrue statement or omission to state any material fact in connection
with the investment representations or with respect to the facts and
representations supplied by the Holder to counsel to the Company upon which its
opinion as to a proposed transfer shall have been based.

                  (d) Transfer. Subject to the restrictions contained herein,
this Warrant and the Warrant Shares issued may be transferred by the Holder in
whole or in part at any time or from time to time. Upon surrender of this
Warrant to the Company or at the office of its stock transfer agent, if any,
with assignment documentation duly executed and funds sufficient to pay any
transfer tax, and upon compliance with the foregoing provisions, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment, and this Warrant shall promptly
be canceled. Any assignment, transfer, pledge, hypothecation or other
disposition of this Warrant attempted contrary to the provisions of this
Warrant, or any levy of execution, attachment or other process attempted upon
the Warrant, shall be null and void and without effect.

                  (e) Legend and Stop Transfer Orders. The Company shall
instruct its transfer agent to enter stop transfer orders with respect to the
shares of Common Stock issuable upon exercise of the Warrants, and all
certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend:

                  "The shares of common stock represented by this
                  certificate have not been registered under the
                  Securities Act of 1933, as amended, and may not be
                  sold, offered for sale, assigned, transferred or
                  otherwise disposed of unless registered pursuant to
                  the provisions of that Act or an opinion of counsel
                  to the Company is obtained stating that such
                  disposition is in compliance with an available
                  exemption from such registration."

         6.       Registration Rights. If holders of at least 51% of the Series
F Preferred Stock (or Common Stock issued upon conversion of the Series F
Preferred Stock, or a combination of such Common Stock and the Series F
Preferred Stock) request that the Company file a registration statement under
the Securities Act of 1933 covering such shares, the Company will use its best
efforts to cause such shares to be registered. The Company will not be obligated
to affect more than one registration of such shares.

                  If the Company proposes to file a registration statement for
its Common Stock, the holders of the warrants related to the Series F Preferred
Stock will be entitles to include their shares in such registration statement.
This right is not limited to any particular number of registration statements.

         7.       Expenses. For purposes of this Section 7, "Registration
Expenses" shall mean any and all expenses, except Selling Expenses as defined
below, incurred by the Company in complying with this warrant, including without
limitation, (a) all Securities and Exchange Commission and stock exchange or
National Association of Securities Dealers registration and filing fees, (b) all
fees and expenses of complying with securities or blue sky laws (including
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the registered securities), (c) all printing,
messenger and delivery expenses, (d) the fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses of
any special audits and/or "cold comfort" letters required by or incident to such
performance and compliance and (e) any reasonable fees and expenses of any
special experts retained in connection with the registration, but excluding
underwriting discounts and commissions and transfer taxes, if any. "Selling
Expenses" shall mean all underwriting discounts, selling commissions and stock
transfer taxes applicable to the securities registered by the Holders and,
except as

<PAGE>   6

set forth in the definition of Registration Expenses, all reasonable fees and
disbursements of one counsel for Holders, as chosen by a simple majority of such
Holders.

         All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Warrant shall be borne by the
Company. All Selling Expenses relating to securities registered on behalf of
Holders in any registration, qualification or compliance pursuant to this
Warrant shall be borne by the Holders pro rata based on the number of shares to
be registered.

         8.       Loss, etc. of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.

         9.       Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof.

         10.      Communication. No notice or other communication under this
Warrant shall be effective unless the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:

                  (a) the Company at 8200 Springwood Drive, Suite 230, Irving,
Texas 75063, or such other address as the Company has designated in writing to
the Holder, or

                  (b) the Holder at 13355 Noel Road, Suite 1650, Dallas, Texas
75240 or such other address as the Holder has designated in writing to the
Company.

         11.      Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.

         12.      Applicable Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Texas.

         IN WITNESS WHEREOF, INTEGRATED SECURITY SYSTEMS, INC., has caused this
Warrant to be signed by its President and its corporate seal to be hereunto
affixed and attested by its Secretary this 27th day of February, 2001.

                                      INTEGRATED SECURITY SYSTEMS, INC.

                                      By: /s/ C.A. Rundell, Jr.
                                         -------------------------------------
                                         C. A. Rundell, Jr.
                                         Chairman and Chief Executive Officer

ATTEST:

-----------------------------------

[Corporate Seal]

<PAGE>   7

                        WARRANT CONVERSION EXERCISE FORM

TO:      INTEGRATED SECURITY SYSTEMS, INC.

         Pursuant to Section 1(b) of the Warrant Certificate Number 01-01 from
Integrated Security Systems, Inc. (the "Company") to the undersigned Holder, the
Holder hereby irrevocably elects to convert Warrants with respect to Shares of
the Company into 118,772 Shares of the Company.

         The undersigned requests that certificate(s) for such Shares be issued
as follows:

                  Name:             HBW Capital Fund, L.P.
                  Address:          13355 Noel Road, Suite 1650
                                    Dallas, Texas  75240

                  Deliver to:       William D. Breedlove, Sole Member
                                    Breedlove HBW Investments, LLC

and that a new Warrant Certificate for the balance remaining of the Warrants, if
any, subject to the Warrant be registered in the name of, and deliver to, the
undersigned at the address stated above.

         Dated:  February 27, 2001

                                           HBW Capital Fund, L.P.

                                           -----------------------------------
                                           William D. Breedlove, Sole Member
                                           Breedlove HBW Investments, LLC

                             * * * * * * * * * * * *

                        CALCULATION OF WARRANT CONVERSION

<TABLE>

<S>                              <C> <C>
      Converted Securities   =   Net Value
                                 ---------
                                    fmv
                       fmv   =   $
                                  --------

                 Net Value   =   aggregate fmv - aggregate Exercise Price

                             =   $             - $
                                  ------------    ------------
                             =   $
                                  ------------
          Converted Shares   =                   (to be issued)
                                 ----------------

         Fractional Shares                        (value to be paid in cash)
                                 ----------------
</TABLE>

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