INTEGRATED SECURITY SYSTEMS INC, PRE 14A, 1999-10-18

INTEGRATED SECURITY SYSTEMS INC
PRE 14A, 1999-10-18
COMMUNICATIONS EQUIPMENT, NEC

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<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

INTEGRATED SECURITY SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

INTEGRATED SECURITY SYSTEMS, INC.
8200 SPRINGWOOD DRIVE, SUITE 230
IRVING, TEXAS 75063

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD DECEMBER 17, 1999

To the Holders of Common Stock of INTEGRATED SECURITY SYSTEMS, INC.:

Notice is hereby given that the 1999 Annual Meeting of Stockholders of
Integrated Security Systems, Inc., a Delaware corporation (the "Company"), will
be held at the Company's executive offices, 8200 Springwood Drive, Suite 230,
Irving, Texas 75063, on Friday, December 17, 1999 at 10:00 A.M., Dallas, Texas
time, for the following purposes:

(1) To elect six persons to serve as directors until the Company's 2000
Annual Meeting of Stockholders or until their successors are duly
elected and qualified;

(2) To consider an act upon a proposal to amend the Company's Amended
and Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 30,000,000 to 35,000,000;

(3) To consider and act upon a proposal to amend the Company's 1997
Omnibus Long-Term Incentive Plan to increase the number of shares which
may be issued pursuant to the provisions of the Plan from 1,500,000 to
2,000,000;

(4) To transact any other business properly brought before the meeting
or any adjournments or postponements thereof.

The Board of Directors has fixed Monday, October 18, 1999, at the close
of business, as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting and any adjournments or postponements
thereof. Only holders of record of the Company's Common Stock on that date are
entitled to vote on matters coming before the meeting and any adjournments or
postponements thereof. A complete list of stockholders entitled to vote at the
meeting will be maintained in the Company's offices at 8200 Springwood Drive,
Suite 230, Irving, Texas 75063, for the ten days prior to the meeting.

Please advise the Company's transfer agent, American Stock Transfer,
6201 15th Avenue, Third Floor, Brooklyn, NY 11218, of any change in your
address.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN
DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH SUCH PROXY CARD SHOULD BE SIGNED
AND RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE PROXY CARD
SHOULD BE SIGNED BY ALL REGISTERED HOLDERS IN THE EXACT NAMES AS THE SHARES ARE
SO REGISTERED. ANY PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME
PRIOR TO ITS EXERCISE AND, IF PRESENT AT THE ANNUAL MEETING, MAY WITHDRAW IT AND
VOTE IN PERSON.

By Order of the Board of Directors,

Gerald K. Beckmann
President and Chief Executive Officer

Irving, Texas
October 28, 1999

<PAGE> 3

INTEGRATED SECURITY SYSTEMS, INC.
8200 Springwood Drive, Suite 230
Irving, Texas 75063

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

PROXY STATEMENT
------------------------------------

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 17, 1999

The accompanying proxy, mailed with this Proxy Statement to
stockholders on or about October 28, 1999, is solicited by Integrated Security
Systems, Inc. (the "Company"), in connection with the Annual Meeting of
Stockholders to be held on December 17, 1999 (the "Annual Meeting").

As stated in the Notice to which this Proxy Statement is attached, matters to be
acted upon at the Annual Meeting include (i) election to the Board of Directors
of six directors to serve as directors until the Company's 2000 Annual Meeting
of Stockholders or until their successors are duly elected and qualified; (ii)
consideration of a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 30,000,000 to 35,000,000; (iii) consideration of a proposal to
amend the Company's 1997 Omnibus Long-Term Incentive Plan (the "Incentive Plan")
to increase the number of shares which may be issued pursuant to the provisions
of the Plan from 1,500,000 to 2,000,000; and (iv) to transact any other proper
business brought before the Annual Meeting or any adjournments or postponements
thereof.

All holders of record of shares of Common Stock at the close of
business on October 18, 1999 (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting. On the Record Date, the Company had outstanding
10,564,145 shares of Common Stock. Each share of Common Stock is entitled to one
vote. The presence, in person or by proxy, of holders of a majority of the
outstanding shares of Common Stock entitled to vote as of the Record Date is
necessary to constitute a quorum at the Annual Meeting.

With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all other proposals and
will be counted as present for purposes of the item on which the abstention is
noted. Abstentions on the proposals to amend the Incentive Plan and to amend the
Certificate of Incorporation, if any, will have the effect of a negative vote
because the plan amendment proposal requires the affirmative vote of holders of
a majority of shares present in person or by proxy and entitled to vote and the
amendment to the Certificate of Incorporation requires the affirmative vote of
holders of a majority of outstanding shares. Brokers who hold shares in street
name for customers and do not receive voting instructions from such customers
are entitled to vote on the election of directors. Under applicable Delaware
law, a broker non-vote resulting from the failure to deliver voting instructions
to a broker will have no effect on the outcome of the election of directors.

Each stockholder has the unconditional right to revoke his or her proxy
at any time before it is voted. Any proxy given may be revoked either by a
written notice duly signed and delivered to the Secretary of the Company prior
to the exercise of the proxy, by execution of a subsequent proxy or by voting in
person at the Annual Meeting (although attending the Annual Meeting without
executing a ballot or executing a subsequent proxy will not constitute
revocation of a proxy). All properly executed, unrevoked proxies received before
the Annual Meeting will be voted in accordance with the directions contained
therein. When no direction has been given by a stockholder returning a proxy,
the proxy will be voted (i) FOR the election as directors of the nominees named
in this Proxy Statement, (ii) FOR the proposal to amend the Certificate of
Incorporation, and (iii) FOR the proposal to amend the Incentive Plan.

<PAGE> 4

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned as of September 30, 1999, by (i) each
director and named executive officer of the Company, (ii) all officers and
directors of the Company as a group, and (iii) all persons who are known by the
Company to be beneficial owners of 5% or more of the Company's outstanding
Common Stock. Unless otherwise noted, each of the persons listed below has sole
voting and investment power with respect to the shares indicated as beneficially
owned by such person.

Number of Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent(1)
- --------------------------------------------------------------------------- ------------------ ----------

<S> <C> <C>
Renaissance Capital Growth & Income Fund III, Inc.(5) 5,561,795 35.4%
Renaissance US Growth & Income Trust PLC(6) 5,282,890 34.3%
I.S.T. Partners, Ltd.(18) 1,768,680 16.0%
Philip R. Thomas(4) 1,451,126 13.7%
Gerald K. Beckmann(2)(3)(7) 976,177 8.9%
C.A. Rundell, Jr. (2)(3)(14) 868,418 7.8%
ProFutures Bridge Capital Fund LP(8) 585,000 5.6%
Lehman Brothers Holdings, Inc.(9) 579,000 5.5%
Frank R. Marlow(2)(3)(10) 118,608 1.1%
Donald A. Riemer(2)(3)(15) 107,259 1.0%
Holly J. Burlage(2)(3)(11) 71,119 0.7%
Jack G. Caldwell(2)(3)(16) 55,895 0.5%
James E. Jack(2)(3)(12) 27,004 0.3%
Robert C. Pearson(2)(3)(17) 19,200 0.2%
Robert M. Galecke(2)(3)(13) 7,005 0.1%
All current directors and executive officers as a group (9 persons) 2,250,776 20.5%
</TABLE>

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

(1) Pursuant to the rules of the Securities and Exchange Commission, shares
of Common Stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person shown in the table.

(2) The address for this person is 8200 Springwood Drive, Suite 230,
Irving, Texas 75063.

(3) Mr. Beckmann is a Director, the President and the Chief Executive
Officer of the Company. Mr. Rundell is a Director and Chairman of the
Board of the Company. Mr. Marlow, Mr. Galecke, Mr. Pearson and Mr. Jack
are Directors of the Company. Mr. Caldwell and Mr. Riemer are
Presidents of the subsidiaries of the Company. Ms. Burlage is Vice
President, Chief Financial Officer and Secretary of the Company.

(4) Includes 54,850 shares of Common Stock owned by Thomas Group Holding
Company, a company owned by Mr. Thomas, and 61,801 shares of Common
Stock issuable upon the exercise of warrants within 60 days. The
address for Mr. Thomas is 3510 Turtle Creek Boulevard, Ph-A, Dallas, TX
75219-5542.

(5) Based on a 13(g) filing dated September 14, 1999, Renaissance Capital
Growth & Income Fund III, Inc. is deemed the beneficial owner of
5,561,795 shares of Common Stock. The address for this company is 8080
N. Central Expressway, Suite 210, Dallas, TX 75206.

(6) Based on a 13(g) filing dated September 14, 1999, Renaissance US Growth
& Income Trust PLC is deemed the beneficial owner of 5,282,890 shares
of Common Stock. The address for this company is 8080 N. Central
Expressway, Suite 210, Dallas, TX 75206.

2
<PAGE> 5

(7) Includes 284,473 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; and 146,021 shares of
Common Stock issuable upon the exercise of warrants within 60 days.

(8) Based on a 13(d) filing dated July 17, 1997, ProFutures Bridge Capital
Fund, LP is deemed the beneficial owner of 585,000 shares of Common
Stock. The address for this company is 1720 South Bellaire Street,
Suite 500, Denver, CO 80222.

(9) Based on a 13(g) filing dated May 7, 1998, Lehman Brothers Holdings,
Inc. is deemed the beneficial owner of 579,000 shares of Common Stock.
The address for this company is 3 World Financial Center, New York, NY
10285.

(10) Includes 61,649 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days and 14,344 shares of
Common Stock issuable upon the exercise of warrants within 60 days.

(11) Includes 60,625 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days and 1,240 shares of
Common Stock issuable upon the exercise of warrants within 60 days.

(12) Includes 7,005 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days.

(13) Includes 7,005 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days.

(14) Includes 100,000 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days and 485,133 shares of
Common Stock issuable upon the exercise of warrants within 60 days.

(15) Includes 107,259 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days.

(16) Includes 55,895 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days.

(17) Includes 19,200 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days.

(18) Includes 518,680 shares of Common Stock issuable upon the exercise of
warrants exercisable within 60 days. The address for I.S.T. Partners is
2602 McKinney Avenue, Suite 220, Dallas, TX 75201.

ELECTION OF DIRECTORS

The nominees for director listed below will stand for election at this
Annual Meeting for a one-year term of office expiring at the 2000 Annual Meeting
of Stockholders or until their successors are duly elected and qualified.

3
<PAGE> 6

The following table sets forth certain information as to the nominees
for director of the Company:

Name and Age Positions and Offices With the Company Director Since
------------ -------------------------------------- --------------

<S> <C> <C>
C. A. Rundell, Jr., 67 Director, Chairman of the Board 1999

Gerald K. Beckmann, 56 Director, President and Chief Executive Officer 1991

Robert M. Galecke, 57 Director 1996

James E. Jack, 58 Director 1998

Frank R. Marlow, 61 Director 1995

Robert C. Pearson, 63 Director 1999
</TABLE>

While it is not anticipated that any of the nominees will be unable to
serve, if any nominee should decline or become unable to serve as a director for
any reason, votes will be cast instead for a substitute nominee designated by
the Board of Directors or, if none is so designated, will be cast according to
the judgment of the person or persons voting the proxy.

DIRECTORS AND EXECUTIVE OFFICERS

C. A. RUNDELL, 67, Director and Chairman of the Board, has been a
director of the Company since March 1999. Mr. Rundell is also a director and
Chairman of the Board of NCI Building Systems, since 1988. Also since 1989, Mr.
Rundell has owned and operated Rundell Enterprises, a sole proprietorship
engaged in providing acquisitions and financial consulting services to various
business enterprises. Mr. Rundell is a director and member of the executive
committee of Tyler Technologies, Inc., a provider of information management
systems and services for county governments and other enterprises. Mr. Rundell
was the President and Chief Executive Officer of Tyler from 1997 to 1998,
Chairman of the Board from 1996 to 1997, and temporary Chief Executive Officer
from 1996 to 1997. Mr. Rundell is also a director of Dain Rauscher Corporation,
a holding company for a full-service regional brokerage and investment banking
company, Tandy Brands Accessories, Inc., a manufacturer of accessories for men,
women and boys, and Renaissance Capital Growth and Income Fund III, Inc. and
Renaissance U.S. Growth and Income Trust, PLC. Mr. Rundell earned an M.B.A. with
Distinction from Harvard University and a B.S. in Chemical Engineering from The
University of Texas at Austin.

GERALD K. BECKMANN, 56, Director, President and Chief Executive
Officer, has served as a director of the Company since its inception in 1991.
Mr. Beckmann was Chief Technical Officer of the Company from 1991 to May 1995
and Chairman of the Board of Directors since February 1993. On May 1, 1995, Mr.
Beckmann became President and Chief Executive Officer of the Company. From 1991
to 1994 Mr. Beckmann was President and Chief Operating Officer of Thomas Group
Holding Company, a private investment company. In 1985, Mr. Beckmann joined
Thomas Group, Inc., a publicly-held management consulting firm. Mr. Beckmann
also serves as a director on the board of CTC Holdings, an electronic funds
transfer systems supplier. Mr. Beckmann is also a manager in Celerity Partners,
L.L.C., the general partner of two acquisition limited partnerships, Celerity
Partners I and II, L.P. Mr. Beckmann holds a B.S.E.E. from Virginia Polytechnic
Institute and University.

HOLLY J. BURLAGE, 36, Vice President, Chief Financial Officer,
Secretary and Treasurer, joined the Company in February 1994 as Accounting
Manager, became Controller in 1995, became Vice President, Secretary and
Treasurer in May 1997, and became Chief Financial Officer in July 1999. Prior to
joining the Company, Ms. Burlage was Controller of Signature Home Care Group,
Inc., a home health care company, from 1993 to 1994, and Controller and Chief
Accounting Officer of National Heritage, Inc., a publicly-traded long-term care
company, from 1989 to 1993. Ms. Burlage holds a B.B.A. from Baylor University.

4
<PAGE> 7

JACK G. CALDWELL, 62, President, B&B Electromatic, Inc., joined the
Company in January 1998. He has an extensive background in the manufacture and
design of industrial equipment. Prior to joining the Company, Mr. Caldwell was a
Results Manager for Thomas Group, Inc. from 1992 to 1998. From 1986 to 1992, Mr.
Caldwell served as the European Operations Manager for E-Systems and was
Director of Sales and Marketing from 1978 to 1986 for Cooper Industries. Mr.
Caldwell earned an M.B.A and B.S. degrees from East Texas State University.

ROBERT M. GALECKE, 56, Director, has been a director of the Company
since May 1996. Mr. Galecke is currently Vice President of Finance and
Administration for the University of Dallas. Prior to that he was a principal in
the corporate consulting firm of Pate, Winters & Stone, Inc. from 1993 to May
1996. He also served as Executive Vice President, Chief Operating Officer and
Chief Financial Officer of Southmark Corporation, a financial services insurance
and real estate holding company, from 1986 to 1992. From 1989 to 1995, Mr.
Galecke served as Chairman of the Board, President and Chief Executive Officer
of National Heritage, Inc. Mr. Galecke received a graduate degree from the
School of Banking at the University of Wisconsin, Madison, and a BS in Economics
from the University of Wisconsin Stevens Point.

JAMES E. JACK, 57, Director, has been director of the Company since
1997. Mr. Jack is currently Executive Vice President and Chief Financial Officer
of Coachman Industries, Inc. From 1996 to 1999, Mr. Jack was Director, Global
Financial Services Product for TowersPerrin. From 1991 to 1996 Mr. Jack was
Senior Executive Vice President and Chief Financial Officer of Associates First
Capital Corporation, a publicly traded consumer and commercial finance
organization. Prior to that, Mr. Jack was Director, Executive Vice President and
Chief Financial Officer from 1981 to 1993 of the same company. Mr. Jack received
a graduate degree from the Southern Methodist University School of Business and
a B.B.A. from the University of Notre Dame.

FRANK R. MARLOW, 60, Director, has been a director of the Company since
May 1995. Mr. Marlow served as Vice President, Sales and Marketing for the
Company from October 1993 to February 1995. Mr. Marlow is currently Vice
President of Sales for Money Star, a technology company based in Austin, Texas.
From 1995 until 1998, Mr. Marlow was vice president of Hogan Systems, a
publicly-traded company subsequently purchased by Computer Sciences Corp.
Previously, Mr. Marlow was with IBM, Docutel Corporation, UCCEL Corporation and
Syntelligence Corporation in executive sales and training positions.

ROBERT C. PEARSON, 63, Director, has been affiliated with the Company
in a non-voting capacity since January 1997 and became a director in April 1999.
Mr. Pearson is currently Senior Vice President of Renaissance Capital Group,
Inc. From 1994 to 1997, Mr. Pearson was an independent financial management
consultant. From 1990 to 1994, Mr. Pearson served as Chief Financial Officer and
Executive Vice President of Thomas Group, Inc., a management consulting firm,
where he was instrumental in moving the company from a small privately held
company to a public company with over $40 million in revenue. Prior to 1990, Mr.
Pearson was responsible for all administrative activities for the
Superconducting Super Collider Laboratory. In addition, from 1960 to 1985, Mr.
Pearson served in a variety of positions at Texas Instruments in financial
planning and analysis. Mr. Pearson earned an M.B.A. from the University of
Michigan and a B.S. in Business from the University of Maryland, where he was a
W. A. Paton Scholar.

DONALD A. RIEMER, 52, President, Intelli-Site, Inc., initially joined
the Company under a consulting contract in June 1998 and became President of
Intelli-Site, Inc. in August 1999. Prior to joining the Company, Mr. Riemer was
Vice President of North American Operations for Teklogix Corporation. During his
tenure, Teklogix grew into a leading provider of wireless data communications
network solutions by implementing multi-channel sales and marketing programs
that increased revenue to over $100 million in eight years. Prior to Teklogix,
Mr. Riemer was with MSI Data Corporation and National Semiconductor Corporation
in sales and marketing capacities. Mr. Riemer holds a B.A. degree from Baldwin
Wallace College.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors has established two committees: a Compensation
and Stock Option Committee, and an Audit Committee. The Company's Board of
Directors acts as the nominating committee to nominate persons for election to
the Board of Directors.

5
<PAGE> 8

The Compensation and Stock Option Committee is currently composed of
Messrs. Rundell, Jack and Marlow. The Compensation and Stock Option Committee
did not meet during the fiscal year ended June 30, 1999. The Compensation and
Stock Option Committee determines the amount and form of compensation and
benefits payable to all officers and employees, and advises and consults with
management regarding the benefit plans and compensation policies of the Company.
The Compensation and Stock Option Committee also reviews and approves stock
option grants to directors, executive officers and employees of the Company.

The Audit Committee is currently composed of Messrs. Rundell, Galecke,
and Marlow. The Audit Committee met two times during the fiscal year ended June
30, 1999. This committee recommends to the Board of Directors the appointment of
independent auditors, reviews the plan and scope of audits, reviews the
Company's significant accounting policies and internal controls, and has general
responsibility for related matters. Prior to the mailing of this Proxy Statement
to the stockholders of the Company, this committee met with the Company's
independent auditors to review the fiscal 1999 audit and the significant
accounting policies and internal controls.

The Board of Directors held eight meetings during the fiscal year ended
June 30, 1999. None of the directors attended fewer than 75% of the meetings of
the Board of Directors and its committees on which they served.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION AWARDS
-------------------------------------- ---------------------------------------------------
Restricted
Name and Principal Other Annual Stock Option/
Position Year Salary Bonus Compensation Awards SARS
- -----------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Gerald K. Beckmann 1999 $ 296,393 -- -- -- --
President and CEO 1998 $ 289,425 -- -- -- 200,000
1997 $ 143,169 $ 125,000 -- -- --

Holly J. Burlage 1999 $ 105,011 -- -- -- 60,000
Vice President and CFO 1998 $ 90,368 $ 15,000 -- -- 17,500
1997 $ 41,348 -- -- -- 22,500

Jack C. Caldwell 1999 $ 140,510 -- -- -- 100,000
President 1998 $ 58,333 -- -- -- 61,790
B&B Electromatic, Inc. 1997 -- -- -- --

Donald A. Riemer 1999 $ 152,116 -- 120,000(2) -- 229,307
President 1998 -- -- -- -- --
Intelli-Site, Inc. 1997 -- -- -- -- --
</TABLE>

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

(1) Fiscal years 1999 and 1998 pertains to the twelve months ended June 30,
1999 and June 30, 1998, fiscal year 1997 pertains to the six months ended
June 30, 1997.

(2) Relocation expenses.

No other executive officer's salary and bonus exceed $100,000 annually
and no executive had any form of long-term incentive plan compensation
arrangement with the company during any of the indicated periods.

6
<PAGE> 9

STOCK OPTION GRANTS

The following table provides information concerning the grant of stock
options during the twelve months ended June 30, 1999 to the named executive
officers:

Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise Expiration
Granted(1) in Fiscal Year Price Date
--------------------- ------------------- -------- ----------

For the twelve months ended 6/30/99

<S> <C> <C> <C> <C>
Holly J. Burlage 60,000 5.8% $0.719 01/20/09
Jack G. Caldwell 100,000 9.7% $0.719 01/20/09
Donald A. Riemer 200,000 19.4% $1.094 08/01/08
Donald A. Riemer 29,307 2.9% $0.563 01/01/09
</TABLE>

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

(1) The options for all listed vest with respect to 25% of the shares
issuable thereunder six months after the date of grant and with respect
to cumulative increments of 25% of the shares issuable thereunder on
each anniversary of the date of grant.

OPTION EXERCISES AND HOLDINGS

The following table provides information related to the number of
shares received upon exercise of options, the aggregate dollar value realized
upon exercise, and the number and value of options held by the named executive
officers of the Company at June 30, 1999.

Number of Unexercised Value of Unexercised
Options/ SARS at In-The-Money Options/SARS
Fiscal Year End at Fiscal Year End
----------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------

<S> <C> <C> <C> <C>
For the twelve months ended 6/30/99

Gerald K. Beckmann 284,473 100,000 $ -- $ --
Holly J. Burlage 60,625 59,375 -- --
Jack G. Caldwell 55,895 105,895 -- --
Donald A. Riemer 100,000 129,307 -- --
</TABLE>

INTEGRATED SECURITY SYSTEMS, INC.
1997 LONG-TERM INCENTIVE PLAN

I. PURPOSE

The purpose of the Integrated Security Systems Incorporated. 1997
Long-Term Incentive Plan (the "Plan") is to provide a means whereby Integrated
Security Systems Incorporated, a Delaware corporation (the "Company"), and its
Subsidiaries may attract able persons to enter the employ of the Company and to
provide a means whereby those key employees upon whom the responsibilities of
the successful administration and management of the Company rest, and whose
present and potential contributions to the welfare of the Company are of
importance, can acquire and maintain stock ownership, thereby strengthening
their concern for the long-term welfare of the Company and their desire to
remain in its employ. A further purpose of the Plan is to provide such key
employees with additional incentive and reward opportunities designed to enhance
the profitable growth of the Company over the long term. Accordingly, the Plan
provides for granting Incentive Stock Options, options which do not constitute
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Performance Share Awards, Stock Value Equivalent Awards, or any combination of
the foregoing, is as best suited to the circumstances of the particular
employees as provided herein.

7
<PAGE> 10

II. DEFINITIONS

The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:

(a) "Award" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, or Performance Share Award
or Stock Value Equivalent Award.

(b) "Board" means the board of directors of Integrated Security
Systems Incorporated.

(c) "Change of Control" means, for the purposes of Clause (B) of
Paragraph (e) of Article XII and Clause (B) of Paragraph (f) of Article
XII, the amount determined in Clause (i), (ii) or (iii), whichever is
applicable, as follows: (i) the per share price offered to stockholders
of the Company in any merger, consolidation, sale of assets or
dissolution transaction, (ii) the price per share offered to
stockholders of the Company in any tender offer or exchange offer
whereby a Corporate Change takes place or (iii) if a Corporate Change
occurs other than as described in Clause (i) or Clause (ii), the fair
market value per share determined by the Committee as of the date
determined by the Committee to be the date of cancellation and surrender
of an Option or Stock Appreciation Right. If the consideration offered
to stockholders of the Company in any transaction described in this
Paragraph or Paragraphs (d) and (e) of Article XII consists of anything
other than cash, the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is other than cash.

(d) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any Section of the Code shall be deemed to
include any amendments or successor provisions to such Section and any
regulations under such Section.

(e) "Committee" means the committee selected by the Board to
administer the Plan in accordance with Paragraph (a) of Article IV of
the Plan.

(f) "Common Stock" means the common stock, par value $.01 per
share, of Integrated Security Systems Incorporated.

(g) "Company" means Integrated Security Systems Incorporated.

(h) "Corporate Change" means one of the following events: (i) the
merger, consolidation or other reorganization of the Company in which
the outstanding Common Stock is converted into or exchanged for a
different class of securities of the Company, a class of securities of
any other issuer (except a direct or indirect wholly-owned subsidiary of
the Company), cash or other property; (ii) the sale, lease or exchange
of all or substantially all of the assets of the Company to any other
corporation or entity (except a direct or indirect wholly-owned
subsidiary of the Company); (iii) the adoption by the stockholders of
the Company of a plan of liquidation and dissolution; (iv) the
acquisition (other than acquisition pursuant to any other clause of this
definition) by any person or entity, including without limitation a
"group" as contemplated by Section 13(d)(3) of the Exchange Act, of
beneficial ownership, as contemplated by such Section, of more than
twenty percent (based on voting power) of the Company's outstanding
capital stock; or (v) as a result of or in connection with a contested
election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board.

(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(j) "Fair Market Value" means, as of any specified date, the
closing price of the Common Stock on the NASDAQ Stock Exchange (or, if
the Common Stock is not listed on such exchange, such other national
securities exchange on which the Common Stock is then listed) on that
date, or if no prices are reported on that date, on the last preceding
date on which such prices of the Common Stock are so reported. If the
Common Stock is not then listed on any national securities

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<PAGE> 11

exchange but is traded over the counter at the time a determination of
its Fair Market Value is required to be made hereunder, its Fair Market
Value shall be deemed to be equal to the average between the reported
high and low sales prices of Common Stock on the most recent date on
which Common Stock was publicly traded. If the Common Stock is not
publicly traded at the time a determination of its value is required to
be made hereunder, the determination of its Fair Market Value shall be
made by the Committee in such manner as it deems appropriate.

(k) "Holder" means an employee of the Company who has been granted
an Award.

(l) "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.

(m) "Option" means an Award granted under Article VII of the Plan
and includes both Incentive Stock Options to purchase Common Stock and
Options which do not constitute Incentive Stock Options to purchase
Common Stock.

(n) "Option Agreement" means a written agreement between the
Company and an employee with respect to an Option.

(o) "Optionee" means an employee who has been granted an option.

(p) "Parent Corporation" shall have the meaning set forth in
Section 424(e) of the Code.

(q) "Performance Share Award" means an Award granted under Article
X of the Plan.

(r) "Plan" means the Integrated Security Systems Incorporated 1997
Long-Term Incentive Plan.

(s) "Restricted Stock Award" means an Award granted under Article
IX of the Plan.

(t) "Rule 16b-3" means Rule 16b-3 of the general Rules and
Regulations of the Securities and Exchange Commission under the Exchange
Act, as such rule is currently in effect or as hereafter modified or
amended.

(u) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share
of Common Stock on the date such right is exercised over the exercise
price of such Stock Appreciation Right.

(v) "Stock Appreciation Right" means an Award granted under
Article VIII of the Plan.

(w) "Stock Appreciation Rights Agreement" means a written
agreement between the Company and an employee with respect to an Award
of Stock Appreciation Rights.

(x) "Stock Value Equivalent Award" means an Award granted under
Article XI of the Plan.

(y) "Subsidiary" means a company (whether a corporation,
partnership, joint venture or other form of entity) in which the
Company, or a corporation in which the Company owns a majority of the
shares of capital stock, directly or indirectly, owns a greater than
twenty percent equity interest, except with respect to the issuance of
Incentive Stock Options the term "Subsidiary" shall have the same
meaning as the term "subsidiary corporation" as defined in Section
424(f) of the Code.

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<PAGE> 12

III. EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within twelve
months thereafter and on or prior to the date of the first annual meeting of
stockholders of the Company held subsequent to the acquisition of an equity
security by a Holder hereunder for which exemption is claimed under Rule 16b-3.
Notwithstanding any provision of the Plan or in any Option Agreement or Stock
Appreciation Rights Agreement, no Option or Stock Appreciation Right shall be
exercisable prior to such stockholder approval. No further Awards may be granted
under the Plan after ten years from the date the Plan is adopted by the Board.
Subject to the provisions of Article XIII, the Plan shall remain in effect until
all Options and Stock Appreciation Rights granted under the Plan have been
exercised or expired by reason of lapse of time, all restrictions imposed upon
Restricted Stock Awards have lapsed and all Performance Share Awards and Stock
Value Equivalent Awards have been satisfied.

IV. ADMINISTRATION

(a) Composition of Committee. The Plan shall be administered by a
committee which shall be (i) appointed by the Board and (ii) constituted
so as to permit the Plan to comply with Rule 16b-3.

(b) Powers. The Committee shall have sole authority, in its
discretion, to determine which employees of the Company and its
subsidiaries shall receive an Award, the time or times when such Award
shall be made, whether an Incentive Stock Option, nonqualified Option or
Stock Appreciation Right shall be granted, the number of shares of
Common Stock which may be issued under each Option, Stock Appreciation
Right and Restricted Stock Award, and the value of each Performance
Share Award and Stock Value Equivalent Award. In making such
determinations the Committee may take into account the nature of the
services rendered by the respective employees, their present and
potential contribution to the Company's success and such other factors
as the Committee in its discretion shall deem relevant.

(c) Additional Powers. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan.
Subject to this express provisions of the Plan, the Committee is
authorized to construe the Plan and the respective agreements executed
thereunder, to prescribe such rules and regulations relating to the Plan
as it may deem advisable to carry out the Plan, and to determine the
terms, restrictions and provisions of each Award, including such terms,
restrictions and provisions as shall be requisite in the judgment of the
Committee to cause designated Options to qualify as Incentive Stock
Options, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in any agreement relating to
an Award in the manner and to the extent it shall deem expedient to
carry it into effect. The determinations of the Committee on the matters
referred to in this Article IV shall be conclusive.

V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE SHARE AWARDS AND
STOCK VALUE EQUIVALENT AWARDS, SHARES SUBJECT TO THE PLAN

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<PAGE> 13

available for the grant of an Award. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the
same manner as provided in Article XII with respect to shares of Common
Stock subject to Options then outstanding. Separate stock certificates
shall be issued by the Company for those shares acquired pursuant to the
exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of any Option which does not constitute an
Incentive Stock Option.

(b) Stock Offered. The stock to be offered pursuant to the grant
of an Award may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.

VI. ELIGIBILITY

Awards made pursuant to the Plan may be granted only to individuals who,
at the time of grant, are key employees of the Company or any Subsidiary of the
Company. Awards may not be granted to any director of the Company who is not an
employee of the Company or to any member of the Committee. An Award made
pursuant to the Plan may be granted on more than one occasion to the same
person, and such Award may include an Incentive Stock Option, an Option which is
not an Incentive Stock Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Share Award, a Stock Value Equivalent
Award or any combination thereof. Each Award shall be evidenced by a written
instrument duly executed by or on behalf of the Company.

VII. STOCK OPTIONS

(a) Stock Option Agreement. Each Option shall be evidenced by an
Option Agreement between the Company and the Optionee which shall
contain such terms and conditions as may be approved by the Committee.
The terms and conditions of the respective Option Agreements need not be
identical. Specifically, an Option Agreement may provide for the payment
of the option price, in whole or in part, by the delivery of a number of
shares of Common Stock (plus cash if necessary) having a Fair Market
Value equal to such option price. Each Option Agreement shall provide
that the Option may not be exercised earlier than six months from the
date of grant and shall specify the effect of termination of employment
of the exercisability of the Option.

(b) Option Period. The term of each Option shall be as specified
by the Committee at the date of grant.

(c) Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as
determined by the Committee.

(d) Special Limitations on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options are exercisable for the first
time by an individual during any calendar year under all incentive stock
option plans of the Company and its Parent Corporation and Subsidiaries
exceeds $100,000, such excess Incentive Stock Options shall be treated
as Options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of
the Code, Treasury Regulations and other administrative pronouncements,
which of an Optionee's Incentive Stock Options will not constitute
Incentive Stock Options because of such limitation and shall notify the
Optionee of such determination as soon as practicable after such
determination. No Incentive Stock Option shall be granted to an
individual if, at the time the Option is granted, such individual owns
stock possessing more than 10% of the total combined voting power of the
total combined voting power of all classes of stock of the Company or of
its Parent Corporation or a Subsidiary, within the meaning of Section
422(b)(6) of the Code, unless (i) at the time such Option is granted the
Option price is at least 110% of the Fair Market Value of the Common
Stock subject to the Option and (ii) such Option by its terms is not
exercisable after the expiration of five years from the date of grant.

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<PAGE> 14

(e) Option Price. The purchase price of Common Stock issued under
each Option shall be determined by the Committee, but such purchase
price shall, in the case of Incentive Stock Options, not be less than
the Fair Market Value of Common Stock subject to the Option on the date
the Option is granted.

(f) Options and Rights in Substitution for Stock Options Granted
by Other Corporations. Options and Stock Appreciation Rights may be
granted under the Plan from time to time in substitution for stock
options held by employees of corporations who become, or who became
prior to the effective date of the Plan, key employees of the Company or
of any Subsidiary as a result of a merger or consolidation of the
employing corporation with the Company or such Subsidiary, or the
acquisition by the Company or a Subsidiary of all or a portion of the
assets of the employing corporation, or the acquisition by the Company
or a Subsidiary of stock of the employing corporation with the result
that such employing corporation becomes a Subsidiary.

VIII. STOCK APPRECIATION RIGHTS

(a) Stock Appreciation Rights. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share
of Common Stock upon the exercise of such Stock Appreciation Right.
Stock Appreciation Rights may be granted in connection with the grant of
an Option, in which case the Option Agreement will provide that exercise
of Stock Appreciation Rights will result in the surrender of the right
to purchase the shares under the Option as to which the Stock
Appreciation Rights were exercised. Alternatively, Stock Appreciation
Rights may be granted independently of Options in which case each Award
of Stock Appreciation Rights shall be evidenced by a Stock Appreciation
Rights Agreement between the Company and the Holder which shall contain
such terms and conditions as may be approved by the Committee. The terms
and conditions of the respective Stock Appreciation Rights Agreements
need not be identical. The Spread with respect to a Stock Appreciation
Right may be payable either in cash, shares of Common Stock with a Fair
Market Value equal to the Spread or in a combination of cash and shares
of Common Stock. With respect to Stock Appreciation Rights that are
subject to Section 16 of the Exchange Act, however, the Committee shall,
except as provided in Paragraphs (e) and (f) of Article XII, retain sole
discretion (i) to determine the form in which payment of the Stock
Appreciation Right will be made (i.e., cash, securities or any
combination thereof) or (ii) to approve an election by a Holder to
receive cash in full or partial settlement of Stock Appreciation Rights.
Upon the exercise of any Stock Appreciation Rights. Upon the exercise of
any Stock Appreciation Rights granted hereunder, the number of shares
reserved for issuance under the Plan shall be reduced only to the extent
that shares of Common Stock are actually issued in connection with the
exercise of such Right. Each Stock Appreciation Rights Agreement shall
provide that the Stock Appreciation Rights may not be exercised earlier
than six months from the date of grant and shall specify the effect of
termination of employment on the exercisability of the Stock
Appreciation Rights.

(b) Exercise Price. The exercise price of each Stock Appreciation
Right shall be determined by the Committee, but such exercise price
shall not be less than the Fair Market Value of a share of Common Stock
on the date the Stock Appreciation Right is granted.

(c) Exercise Period. The term of each Stock Appreciation Right
shall be as specified by the Committee at the date of grant.

(d) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments
and at such times as determined by the Committee.

IX. RESTRICTED STOCK AWARDS

(a) Restricted Period to be Established by the Committee. At the
time a Restricted Stock Award is made, the Committee shall establish a
period of time (the "Restriction Period")

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<PAGE> 15

applicable to such Award. Each Restricted Stock Award may have a
different Restriction Period, in the discretion of the Committee. The
Restriction Period applicable to a particular Restricted Stock Award
shall not be changed except as permitted by Paragraph (b) of this
Article or by Article XII.

(b) Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Restricted Stock Award or,
at the option of the Company, in the name of a nominee of the Company.
The Holder shall have the right to receive dividends during the
Restriction Period, to vote the Common Stock subject thereto and to
enjoy all other stockholder rights, except that (i) the Holder shall not
be entitled to possession of the stock certificate until the Restriction
period shall have expired, (ii) the Company shall retain custody of the
stock during the Restriction Period, (iii) the Holder may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the
stock during the Restriction Period and (iv) a breach of the terms and
conditions established by the Committee pursuant to the Restricted Stock
Award shall cause a forfeiture of the Restricted Stock Award. At the
time of such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to Restricted
Stock Awards, including, but not limited to, rules pertaining to the
termination of employment (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Restriction Period.

(c) Payment for Restricted Stock. A Holder shall not be required
to make any payment for Common Stock received pursuant to a Restricted
Stock Award, except to the extent otherwise required by law and except
that the Committee may, in its discretion, charge the Holder an amount
in cash not in excess of the par value of the shares of Common Stock
issued under the Plan to the Holder.

(d) Miscellaneous. Nothing in this Article shall prohibit the
exchange of shares issued under the Plan (whether or not then subject to
a Restricted Stock Award) pursuant to a plan of reorganization for stock
or securities in the Company or another corporation a party to the
reorganization, but the stock or securities so received for shares then
subject to the restrictions of a Restricted Stock Award shall become
subject to the restrictions of such Restricted Stock Award. Any shares
of stock received as a result of a stock split or stock dividend with
respect to shares then subject to a Restricted Stock Award shall also
become subject to the restrictions of the Restricted Stock Award.

X. PERFORMANCE SHARE AWARDS

(a) Performance Period. The Committee shall establish, with
respect to and at the time of each Performance Share Award, a
performance period over which the performance applicable to the
Performance Share Award of the Holder shall be measured.

(b) Performance Share Awards. Each Performance Share Award may
have a maximum value established by the Committee at the time of such
Award.

(c) Performance Measures. A Performance Share Award may be awarded
to an employee contingent upon future performance of the employee, the
Company or any Subsidiary, division or department thereof by or in which
he is employed during the performance period, the Fair Market Value of
Common Stock or the increase thereof during the performance period,
combinations thereof, or such other provisions are the Committee may
determine to be appropriate. The Committee shall establish the
performance measures applicable to such performance prior to the
beginning of the performance period but subject to such later revisions
as the Committee shall deem appropriate to reflect significant,
unforeseen events or changes.

(d) Awards Criteria. In determining the value of Performance Share
Awards, the Committee may take into account an employee's responsibility
level, performance, potential, other Awards and such other
considerations as it deems appropriate.

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<PAGE> 16

(e) Payment. Following the end of the performance period, the
Holder of a Performance Share Award shall be entitled to receive payment
of an amount, not exceeding the maximum value of the Performance Share
Award, if any, based on the achievement of the performance measures for
such performance period, as determined by the Committee in its sole
discretion. Payment of a Performance Share Award (i) may be made in
cash, Common Stock or a combination thereof, as determined by the
Committee in its sole discretion, (ii) shall be made in a lump sum or in
installments as prescribed by the Committee in its sole discretion and
(iii) to the extent applicable, shall be based on the Fair Market Value
of the Common Stock on the payment date. If a payment of cash is to be
made on a deferred basis, the Committee shall establish whether interest
shall be credited, the rate thereof and any other terms and conditions
applicable thereto.

(f) Termination of Employment. The Committee shall determine the
effect of termination of employment during the performance period on an
employee's Performance Share Award.

XI. STOCK VALUE EQUIVALENT AWARD

(a) Stock Value Equivalent Awards. Stock Value Equivalent Awards
are rights to receive an amount equal to the Fair Market Value of shares
of Common Stock or rights to receive an amount equal to any appreciation
or increase in the Fair Market Value of Common Stock over a specified
period of time, which vest over a period of time as established by the
Committee, without payment of any amounts by the Holder thereof (except
to the extent otherwise required by law) or satisfaction of any
performance criteria or objectives. Each Stock Value Equivalent Award
may have a maximum value established by the Committee at the time of
such Award.

(b) Award Period. The Committee shall establish, with respect to
and at the time of each Stock Value Equivalent Award, a period over
which the Award shall vest with respect to the Holder.

(c) Awards Criteria. In determining the value of Stock Value
Equivalent Awards, the Committee may take into account an employee's
responsibility level, performance, potential, other Awards and such
other considerations as it deems appropriate.

(d) Payment. Following the end of the determined period for a
Stock Value Equivalent Award, the Holder of a Stock Value Equivalent
Award shall be entitled to receive payment of an amount, not exceeding
the maximum value of the Stock Value Equivalent Award, if any, based on
the then vested value of the Award. Payment of a Stock Value Equivalent
Award (i) shall be made in cash, (ii) shall be made in a lump sum or in
installments as prescribed by the Committee in its sole discretion and
(iii) shall be based on the Fair Market Value of the Common Stock on the
payment date. Cash dividend equivalents may be paid during, or may be
accumulated and paid at the end of, the determined period with respect
to a Stock Value Equivalent Award, as determined by the Committee. If
payment of cash is to be made on a deferred basis, the Committee shall
establish whether interest shall be credited, the rate thereof and any
other terms and conditions applicable thereto.

(e) Termination of Employment. The Committee shall determine the
effect of termination of employment during the applicable vesting period
of an employee's Stock Value Equivalent Award.

XII. RECAPITALIZATION OR REORGANIZATION

(a) Except as hereinafter otherwise provided, Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Share Awards,
Stock Value Equivalent Awards and any agreements evidencing such Awards
shall be subject to adjustment by the Committee at its discretion as to
the number and price of shares of Common Stock or other consideration
subject to such Awards in the event of changes in the outstanding Common
Stock by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or
other relevant changes in capitalization occurring after the date of the
grant of any such Options or Awards.

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<PAGE> 17

(b) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of debt or equity securities having any priority or
preference with respect to or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding.

(c) The shares with respect to which Options may be granted are
shares of Common Stock as presently constituted but if, and whenever,
prior to the expiration of an Option theretofore granted, the Company
shall effect a subdivision or consolidation of shares of Common Stock or
the payment of a stock dividend on Common Stock without receipt of
consideration by the Company, the number of shares of Common Stock with
respect to which such Option may thereafter be exercised (i) in the
event of an increase in the number of outstanding shares shall be
proportionately reduced, and (ii) in the event of a reduction in the
number of outstanding shares shall be proportionately reduced, and the
purchase price per share shall be proportionately increased.

(d) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted
the Optionee shall be entitled to purchase under such Option, in lieu of
the number of shares of Common Stock as to which such Option shall then
be exercisable, the number and class of shares of stock and securities,
and the cash and other property to which the Optionee would have been
entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the Optionee had been the holder of such
record of the number of shares of Common Stock then covered by such
Option.

(e) In the event of a Corporate Change, then no later than (i) two
business days prior to any Corporate Change referenced in Clause (i),
(ii), (iii) or (v) of the definition thereof or (ii) ten business days
after any Corporate Change referenced in Clause (iv) of the definition
thereof, the Committee, acting in its sole discretion without the
consent or approval of any Optionee, shall act to effect one or more of
the following alternatives with respect to outstanding Options which
acts may vary among individual Optionees and, with respect to acts taken
pursuant to Clause (i) above, may be contingent upon effectuation of the
Corporate change: (A) accelerate the time at which Options then
outstanding may be exercised so that such Options may be exercised in
full for a limited period of item on or before a specified date (before
or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Optionees
thereunder shall terminate, (B) require the mandatory surrender to the
Company by selected Optionees of some or all of the outstanding Options
held by such Optionees (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date (before or
after such Corporate Change) specified by the Committee, in which event
the Committee shall thereupon cancel such Options and pay to each
Optionee an amount of cash per share equal to the excess, if any, of the
Change of Control Value of the shares subject to such Option over the
exercise price(s) under such Options for such shares, (C) make such
adjustments to Options then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided, however, that
the Committee may determine in its sole discretion that no adjustment is
necessary to Options then outstanding) or (D) provide that thereafter
upon any exercise of an Option theretofore granted the Optionee shall be
entitled to purchase under such Option, in lieu of the number of shares
of Common Stock as to which such Option shall then be exercisable, the
number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Optionee would have
been entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets or plan of liquidation and dissolution
if, immediately prior to such merger, consolidation or sale of assets or
any distribution in liquidation and dissolution of the Company, the
Optionee had been the holder of record of the number of shares of Common
Stock then covered by such Option.

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<PAGE> 18

(f) In the event of a Corporate Change, then no later than (i) two
business days prior to any Corporate Change referenced in Clause (i),
(ii), (iii) or (v) of the definition thereof or (ii) ten business days
after any Corporate Change referenced in Clause (iv) of the definition
thereof, the Committee, acting in its sole discretion without the
consent or approval of any Holder of a Stock Appreciation Right, shall
effect one or more of the following alternatives with respect to
outstanding Stock Appreciation Rights which acts may vary among
individual Holders, may vary among Stock Appreciation Rights held by
individual Holders and, with respect to acts taken pursuant to Clause
(ii) above, may be contingent upon effectuation of the Corporate Change:
(A) accelerate the time at which Stock Appreciation Rights then
outstanding may be exercised so that such Stock Appreciation Rights may
be exercised in full for a limited period of time on or before a
specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all unexercised Stock Appreciation
Rights and all rights of Holders thereunder shall terminate, (B) require
the mandatory surrender to the Company by selected Holders of Stock
Appreciation Rights of some or all of the outstanding Stock Appreciation
Rights held by such Holders (irrespective of whether such Stock
Appreciation Rights are then exercisable under the provisions of the
Plan) as of a date (before or after such Corporate Change) specified by
the Committee, in which event the Committee shall thereupon cancel such
Stock Appreciation Rights and pay to each Holder an amount of cash equal
to the Spread with respect to such Stock Appreciation Rights with the
Fair Market Value of the Common Stock at such time to be deemed to be
the Change of Control Value or (C) make such adjustments to Stock
Appreciation Rights then outstanding as the Committee deems appropriate
to reflect such Corporate Change (provided, however, that the Committee
may determine in its sole discretion that no adjustment is necessary to
Stock Appreciation Rights then outstanding).

(g) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into
shares of stock of any class, for cash, property, labor or services,
upon direct sale, upon the exercise of rights or warrants to subscribe
therefore, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of
Common Stock subject to Options or Stock Appreciation Rights theretofore
granted, the purchase price per share of Common Stock subject to Options
or the calculation of the Spread with respect to Stock Appreciation
Rights.

(h) Plan provisions to the contrary notwithstanding, with respect
to any Stock Value Equivalent Awards which have been approved but which
are unpaid at the time a Corporate Change occurs, the Committee may, in
its sole discretion, provide (i) for full vesting of such Awards as of
the date of such Corporate Change and (ii) for payment of the then value
of such Awards as soon as administratively feasible following the
Corporate Change with the value of such Awards to be based on the Change
of Control Value of the Common Stock.

(i) Plan provisions to the contrary notwithstanding, with respect
to any Performance Share Awards which have been approved but which are
unpaid at the time a Corporate Change occurs, the Committee may, in its
sole discretion, provide (i) for full vesting of such Awards as of the
date of such Corporate Change, (ii) for payment of the then value of
such Awards as soon as administratively feasible following the Corporate
Change, with the value of such Awards to be based, to the extent
applicable, on the Change of Control Value of the Common Stock, (iii)
that any provisions in Awards regarding forfeiture of unpaid Awards
shall not be applicable from and after a Corporate Change with respect
to Awards made prior to such Corporate Change and (iv) that all
performance measures applicable to unpaid Awards at the time of a
Corporate Change shall be deemed to have been satisfied in full during
the performance period upon the occurrence of such Corporate Change.

(j) Plan provisions to the contrary notwithstanding, with respect
to any Restricted Stock Awards outstanding at the time a Corporate
Change occurs, the Committee may, in its sole discretion, provide (i)
for full vesting of all Common Stock awarded to the Holders pursuant to
such Restricted Stock Awards as of the date of such Corporate Change and
(ii) that all restrictions applicable to such Restricted Stock Award
shall terminate as of such date.

<PAGE> 19

XIII. AMENDMENT OR TERMINATION OF THE PLAN

The Board in its discretion may terminate the Plan or alter or amend the
Plan or any part thereof from time to time; provided that no change in any Award
therefore granted may be made which would impair the rights of the Holder
without the consent of the Holder, and provided further, that the Board may not,
without approval of the Stockholders, amend the Plan:

(a) to increase the aggregate number of shares which may be
issued pursuant to the provisions of the Plan on exercise or
surrender of Options or Stock Appreciation Rights or
pursuant to Restricted Stock Awards or Performance Share
Awards, except as provided in Article XII;

(b) to change the minimum Option price;

(c) to change the class of employees eligible to receive Awards
or increase materially the benefits accruing to employees
under the Plan;

(d) to extend the maximum period during which Awards may be
granted under the Plan;

(e) to modify materially the requirements as to eligibility for
participation in the Plan; or

(f) to decrease any authority granted to the Committee hereunder
in contravention of Rule 16b-3.

XIV. OTHER

(a) No Right to an Award. Neither the adoption of the Plan nor any
action of the Board or of the Committee shall be deemed to give an
employee any right to be granted an Option to purchase Common Stock, a
Stock Appreciation Right, a right to a Restricted Stock Award or a right
to a Performance Share Award or Stock Value Equivalent Award or any
other rights hereunder except as may be evidenced by an Award or by an
Option Agreement duly executed on behalf of the Company, and then only
to the extent of and on the terms and conditions expressly set forth
therein. The Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund or to make any other
segregation of funds or assets to assure the payment of any Award.

(b) No Employment Rights Conferred. Nothing contained in the Plan
or in any Award made hereunder shall (i) confer upon any employee any
right with respect to continuation of employment with the Company or any
Subsidiary or (ii) interfere in any way with the right of the Company or
any Subsidiary to terminate his or her employment at any time.

(c) Other Laws; Withholding. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at
any time when the offering of the shares covered by such Award has not
been registered under the Securities Act of 1933 and such other state
and federal laws, rules or regulations as the Company or the Committee
deems applicable and, in the opinion of legal counsel for the Company,
there is no exemption from the registration requirements of such laws,
rules or regulations available for the issuance and sale of such shares.
No fractional shares of Common Stock shall be delivered, nor shall any
cash in lieu of fractional shares be paid. The Company shall have the
right to deduct in connection with all Awards any taxes required by law
to be withheld and to require any payments necessary to enable it to
satisfy its withholding obligations. The Committee may permit the Holder
of an Award to elect to surrender, or authorize the Company to withhold,
shares of Common Stock (valued at their Fair Market Value on the date of
surrender or withholding of such shares) in satisfaction of the
Company's withholding obligation, subject to such restrictions as the
Committee deems necessary to satisfy the requirements of Rule 16b-3.

17
<PAGE> 20

(d) No Restriction of Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company or any Subsidiary from
taking any corporate action which is deemed by the Company or such
Subsidiary to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the Plan or any Award made
under the Plan. No employee, beneficiary or other person shall have any
claim against the Company or any Subsidiary as a result of such action.

(e) Restrictions on Transfer. An Award shall not be transferable
otherwise than by will or the laws of the descent and distribution and
shall be exercisable during the lifetime of the Holder only by such
Holder or the Holder's guardian or legal representative. The Option
Agreement, Stock Appreciation Rights Agreement or other written
instrument evidencing an Award shall specify the effect of the death of
the Holder on the Award.

(f) Rule 16b-3. It is intended that the Plan and any grant of an
Award made to a person subject to Section 16 of the Exchange Act meet
all of the requirements of Rule 16b-3. If any provisions of the Plan or
any such Award would disqualify the Plan or such Award under, or would
otherwise not comply with Rule 16b-3, such provision or Award shall be
construed or deemed amended to conform to Rule 16b-3.

(g) Governing Law. This Plan shall be construed in accordance with
the laws of the State of Delaware, except to the extent that it
implicates matters which are the subject of the General Corporation Law
of the State Delaware which matters shall be governed by the latter law.

DIRECTOR COMPENSATION

Currently, directors are compensated annually $7,500 for serving on the
Board in addition to $1,250 for each Committee on which they serve. All
directors are reimbursed for their out-of-pocket expenses incurred in connection
with their attendance at Board meetings.

CERTAIN TRANSACTIONS

During 1999, Mr. Rundell loaned the Company approximately $200,000 and
received 364,299 warrants exercisable at $0.549 for five years. This loan was
repaid in May 1999.

The Company believes that the terms of the foregoing transactions were
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION

BACKGROUND

Currently, the Company's Certificate of Incorporation authorizes the
issuance of up to 30,000,000 shares of Common Stock. On the Record Date,
10,564,145 shares of Common Stock were outstanding and 18,070,208 shares were
subject to future issuance pursuant to outstanding convertible debentures,
Convertible Preferred Stock, warrants and options. Therefore, as of the Record
Date, only 1,415,640 shares of Common Stock were available for future issuance.

The Board by unanimous written consent has adopted resolutions
approving and recommending that the stockholders adopt an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 35,000,000.

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<PAGE> 21

DESCRIPTION OF NEWLY AUTHORIZED SHARES

If the proposed amendment to the Certificate of Incorporation is
approved by the Company's stockholders, the additional shares of authorized
Common Stock will have the same terms and rights as the currently authorized
shares of Common Stock. Holders of Common Stock do not have pre-emptive rights
to purchase shares of Common Stock or Preferred Stock issued by the Company.

REASONS FOR AND EFFECT OF THE AMENDMENT

The increase in the number of shares of Common Stock has been
recommended by the Board to assure that an adequate supply of authorized
unissued shares is available for issuance in connection with private equity
financing and for other general corporate purposes. The Common Stock will be
available for issuance without further action of the stockholders, unless
required by the Company's Certificate of Incorporation or Bylaws, applicable
laws, or the policy of any stock exchange or registered securities association
on which the shares of stock of the company are listed, if any.

The Company is currently raising private equity financing. The Company
currently does not have enough shares of Common Stock authorized and unissued to
cover the equity financing conversion.

PROPOSED AMENDMENTS TO 1997 STOCK OPTION PLAN

SUMMARY OF STOCK OPTION PLAN

For a description of the Plan, see "Executive Compensation - 1997
Omnibus Long-Term Incentive Plan.

PARTICIPANTS

At September 30, 1999, the Company had 64 employees and non-employee
directors eligible to participate in the Plan.

PLAN BENEFITS OUTSTANDING

Of the total 1,500,000 shares for which options may be granted under
the Plan, options to purchase 1,442,285 shares of Common Stock were outstanding
as of September 30, 1999. As of September 30, 1999, the market value of all
shares of Common Stock subject to outstanding options was $1,427,042 (based upon
the closing sale price of the company's common Stock as reported on the Nasdaq
Over-the-Counter Bulletin Board on such date).

AMENDMENTS TO INCREASE OPTIONS UNDER PLAN

The Board of Directors is seeking stockholder approval of an amendment
to the Plan that would increase the number of shares which may be issued
pursuant to the Plan. Pursuant to the amendment, the number of shares of Common
Stock authorized to be issued under the Plan will be increased from 1,500,000
shares to 2,000,000 subject to adjustments to reflect possible future stock
splits, stock dividends, combinations or exchange of shares, or similar
transactions.

The Board of Directors is seeking stockholder approval of the amendment
to the Plan because it believes that the company will require additional options
to attract and retain persons of ability as officers, directors and employees.
The Board of directors believes that it is prudent to seek stockholder approval
of the increase at the present time in order to assure that in the future the
Company has sufficient options available for issuance under the Plan to avoid
granting options that are subject to subsequent stockholder approval.

It is proposed that Article V of the Plan be amended to read as
follows:

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<PAGE> 22

"V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE SHARE AWARDS AND
STOCK VALUE EQUIVALENT AWARDS, SHARES SUBJECT TO THE PLAN

(a) Award Limits. The Committee may from time to time grant
Awards to one or more employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Article
VI. The aggregate number of shares of Common Stock that may be issued
under the Plan shall not exceed 2,000,000 shares. Any of such shares
which remain unissued and which are not subject to outstanding Options
or Awards at the termination of the Plan shall cease to be subject to
the Plan but, until termination of the Plan, the Company shall at all
times reserve a sufficient number of shares to meet the requirements of
the Plan. Shares shall be deemed to have been issued under the Plan
only to the extent actually issued and delivered pursuant to an Award.
To the extent that an Award lapses or the rights of its Holder
terminate or the Award is paid in cash, any shares of Common Stock
subject to such Award shall again be available for the grant of an
Award. The aggregate number of shares which may be issued under the
Plan shall be subject to adjustment in the same manner as provided in
Article XII with respect to shares of Common Stock subject to Options
then outstanding. Separate stock certificates shall be issued by the
Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the
exercise of any Option which does not constitute an Incentive Stock
Option.

(b) Stock Offered. The stock to be offered pursuant to the
grant of an Award may be authorized but unissued Common Stock or Common
Stock previously issued and outstanding and reacquired by the Company."

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors, executive officers and persons who own more
than ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Such persons are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file. Based solely upon a review of Forms 3, 4
and 5 and amendments thereto provided to the Company pursuant to Rule 16a-3(e),
Mr. Galecke, Mr. Jack and Mr. Marlow each had one late filing during the fiscal
year ending June 30, 1999.

INDEPENDENT ACCOUNTANTS

The Board of Directors, upon recommendation of the Audit Committee, has
appointed Grant Thornton LLP as the independent accountants of the Company for
the fiscal year ending June 30, 2000.

Representatives of Grant Thornton are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and to be available to respond to appropriate questions.

BOARD OF DIRECTORS' RECOMMENDATIONS; VOTE REQUIRED

The Board of Directors unanimously recommends a vote FOR the election
as directors of the nominees named in this Proxy Statement, FOR the amendment to
the Company's Certificate of Incorporation, and FOR the amendment to the
Company's 1997 Omnibus Long-Term Incentive Plan.

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<PAGE> 23

The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is required to approve the amendment to the Certificate of
Incorporation and the amendment of the Omnibus Plan.

STOCKHOLDER PROPOSALS

In order for stockholder proposals to receive consideration for
inclusion in the Proxy Statement for the Company's 2000 Annual Meeting of the
Stockholders, such proposals must be received by October 1, 2000, at the
Company's offices at 8200 Springwood Drive, Suite 230, Irving, Texas 75063,
Attention: Secretary.

The Company's by-laws contain a provision which requires that a
stockholder may nominate a person for election as a director only if written
notice of such stockholder's intention to make such nomination has been given to
the Secretary of the Company not earlier than 60 days nor later than 30 days
prior to a meeting of stockholders. However, in the event that notice or public
disclosure of a meeting of stockholders is first given or made to the
stockholders less than 40 days prior to such meeting, then notice of a
stockholder's intention to nominate a person for election as a director will be
timely if given in writing to the Secretary before the close of business on the
tenth day following the date on which the notice of the meeting was mailed or
the public disclosure of the meeting was made. The by-laws also require that the
notice set forth, among other things, a description of all arrangements or
understandings between the nominating stockholder and the nominee pursuant to
which the nomination is to be made or the nominee is to be elected and such
other information regarding the nominee as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated by the Company's Board. This provision
is intended to give the Company the opportunity to obtain all relevant
information regarding persons nominated for director. The Board may disqualify
any nominee who fails to provide the Company with complete and accurate
information as required by this provision.

SOLICITATION OF PROXIES

The Company will pay the expenses of this proxy solicitation. In
addition to solicitation by mail, some of the officers and regular employees of
the Company may solicit proxies personally or by telephone, if deemed necessary.
The Company will request brokers and other fiduciaries to forward proxy
soliciting material to the beneficial owners of shares which are held of record
by the brokers and fiduciaries, and the Company may reimburse them for
reasonable out-of-pocket expenses incurred by them in connection therewith.

OTHER MATTERS

The Board is not aware of any matter, other than the matters described
above, to be presented for action at the Annual Meeting. However, if any other
proper items of business should come before the Annual Meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.

The Annual Report on Form 10-KSB for the year ended June 30, 1999 is
enclosed herewith.

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<PAGE> 24

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED POSTAGE PAID RETURN ENVELOPE. A PROMPT RETURN OF
YOUR PROXY CARD WILL BE APPRECIATED, AS IT WILL SAVE THE EXPENSE OF FURTHER
MAILINGS.

By Order of the Board of Directors,

Gerald K. Beckmann
President and Chief Executive Officer

Irving, Texas
October 28, 1999

<PAGE> 25
FRONT OF PROXY CARD

Integrated Security Systems, Inc.
8200 Springwood Drive, Suite 230, Irving, TX 75063

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned shareholder of Integrated Security Systems, Inc. (the
"Company") hereby appoints Gerald K. Beckmann and Holly J. Burlage, as Proxies,
each with the power to appoint his substitute, and hereby authorizes them, to
represent and vote, as designated on the reverse, all shares of Common Stock of
Integrated Security Systems, Inc. (the "Company") held of record by the
undersigned on October 18, 1999, at the Annual Meeting of Stockholders to be
held on December 17, 1999 or any adjournment thereof.

BACK OF PROXY CARD

FOR all nominees WITHHOLD
listed to right Authority to vote
(Except as marked for nominees
to the contrary) listed

1. Election of
Directors [ ] [ ] Nominees: Gerald K. Beckmann
Robert M. Galecke
James E. Jack
Frank R. Marlow
Robert C. Pearson
C. A. Rundell

For, except votes withheld from this following nominee:

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

2. To approve the amendment to the For Against Abstain
Company's Certificate of Incorporation to [ ] [ ] [ ]
increase the number of authorized shares
of Common Stock.

3. To approve the amendment of the Company's For Against Abstain
1997 Omnibus Long-Term Incentive Plan to [ ] [ ] [ ]
increase the number of shares.

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED NOMINEES
AS DIRECTORS, FOR THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION, AND FOR THE
AMENDMENT TO THE 1997 OMNIBUS LONG-TERM INCENTIVE PLAN.

<PAGE> 26

PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS ON
DECEMBER 17, 1999. [ ]

SIGNATURE DATE
-------------------------------- --------------------
SIGNATURE DATE
-------------------------------- --------------------
Signature if held jointly

Note: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.