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                                                                    EXHIBIT 4.10



                        INTEGRATED SECURITY SYSTEMS, INC.


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


                  CERTIFICATE OF DESIGNATION AND PREFERENCES OF
                 SERIES G CUMULATIVE CONVERTIBLE PREFERRED STOCK


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


                            DATED AS OF MAY 10, 2001



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                        INTEGRATED SECURITY SYSTEMS, INC.

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

                  CERTIFICATE OF DESIGNATION AND PREFERENCES OF
                 SERIES G CUMULATIVE CONVERTIBLE PREFERRED STOCK

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

         INTEGRATED SECURITY SYSTEMS, INC., a Delaware corporation, having its
principal office in Dallas, Texas (the "Corporation"), hereby certifies to the
Secretary of State of the State of Delaware that:

         Pursuant to authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), the Board of Directors has duly adopted
resolutions authorizing the creation and issuance of up to Three Hundred
Thousand (300,000) shares of Series G Cumulative Convertible Preferred Stock,
$.01 par value, with a liquidation preference of Twenty-Five Dollars ($25.00)
per share, and determining the preferences, rights, powers, limitations,
qualifications and restrictions, as follows:

         SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Stock, $.01 par value, shall be designated as Series G Cumulative Convertible
Preferred Stock (the "Series G Preferred Stock"), and the number of shares which
shall constitute such series shall be 300,000 shares.

         SECTION 2. DEFINITIONS. For purposes of the Series G Preferred Stock,
the following terms shall have the meanings indicated below:

         "Act" shall mean the Securities Act of 1933, as amended.

         "Affiliate" of a person means a person that directly, or indirectly
         through one or more intermediaries, controls or is controlled by, or is
         under common control with, the person specified.

         "Board of Directors" shall mean the Board of Directors of the
         Corporation or any committee authorized by such Board of Directors to
         perform any of its responsibilities with respect to the Series G
         Preferred Stock.

         "Business Day" shall mean any day other than a Saturday, Sunday or a
         day on which state or federally chartered banking institutions in New
         York, New York are not required to be open.

         "Common Stock" shall mean the common stock, $.01 par value, of the
         Corporation or such shares of the Corporation's capital stock into
         which such Common Stock shall be reclassified.

         "Current Market Price" of publicly traded shares of Common Stock or any
         other class or series of capital stock or other security of the
         Corporation or of any similar security of any other issuer for any day
         shall mean the last reported sale price, regular way on such day, or,
         if no sale takes place on such day, the reported closing bid price,
         regular way on such day, in either case as reported on the NASDAQ
         National Market of the National Association of Securities Dealers, Inc.
         Automated Quotation System ("NASDAQ") or, if not quoted on NASDAQ, on
         the principal national securities exchange on which such security is
         listed or admitted for trading or, if such security is not listed or
         admitted for trading on a national securities exchange or quoted on the
         NASDAQ National Market, the closing bid price on such day as reported
         on the NASDAQ SmallCap Market, or, if the bid price for such security
         on such day shall not have been reported on the NASDAQ SmallCap Market,
         the


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         bid price on such day as reported on the OTC Electronic Bulletin Board
         or, if the bid price for such security on such day shall not have been
         reported on the OTC Electronic Bulletin Board, the price on such day,
         furnished by any NYSE member firm regularly making a market in such
         security selected for such purpose by the Chief Executive Officer or
         the Board of Directors or if any class or series of securities are not
         publicly traded, the fair value of the shares of such class as
         determined reasonably and in good faith by the Board of Directors of
         the Corporation or other issuer.

         "Dividend Payment Date" shall mean, with respect to each Dividend
         Period, the last day of March, June, September and December, in each
         year, commencing on March 31, 2001; provided, however, that if any
         Dividend Payment Date falls on any day other than a Business Day, the
         dividend payment due on such Dividend Payment Date shall be paid on the
         Business Day immediately following such Dividend Payment Date.

         "Dividend Periods" shall mean quarterly dividend periods commencing on
         January 1, April 1, July 1 and October 1 of each year and ending on and
         including the day preceding the first day of the next succeeding
         Dividend Period (other than the initial Dividend Period, which shall
         commence on the Issue Date and end on and include the day immediately
         preceding the Dividend Payment Date which immediately follows the Issue
         Date.)

         "Fair Market Value" on any date shall mean the average of the daily
         Current Market Price of a share of Common Stock during five (5)
         consecutive Trading Days ending on the day before such date.

         "Funds Available for Distribution" shall mean funds from operations
         (net income, computed in accordance with generally accepted accounting
         principles, excluding gains or losses from debt restructuring and sales
         of property, plus depreciation and amortization) minus non-revenue
         generated capital expenditures and debt principal amortization, as
         determined by the Board of Directors on a basis consistent with the
         policies and practices adopted by the Corporation for reporting
         publicly its results of operations and financial condition.

         "Issue Date" shall mean the date upon which shares of Series G
         Preferred Stock are issued.

         "Junior Stock" shall have the mean any class or series of capital stock
         of the Corporation which is junior to the Series G Preferred Stock as
         to the payment of dividends or as to the distribution of assets upon
         liquidation, dissolution or winding up of if the holders of Series G
         Preferred Stock shall be entitled to receipt of dividends or of amounts
         distributable upon liquidation, dissolution or winding up in preference
         or priority to the holders of shares of such class or series.

         "NYSE" shall mean the New York Stock Exchange.

         "Parity Stock" shall mean any class or series of capital stock of the
         Corporation on a parity with the Series G Preferred Stock or any other
         capital stock designated as Parity Stock as to the payment of dividends
         or as to the distribution of assets upon liquidation, dissolution or
         winding up, whether or not the dividend rates, dividend payment dates
         or redemption or liquidation prices per share thereof be different from
         those of the Series G Preferred Stock, if the holders of such class of
         stock or series and the Series G Preferred Stock shall be entitled to
         the receipt of dividends or of amounts distributable upon liquidation,
         dissolution or winding up in proportion to their respective amounts of
         accrued and unpaid dividends per share or liquidation preferences,
         without preference or priority of one over the other, including,
         without limitation, the Series F Preferred Stock.


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         "Permitted Common Stock Cash Distributions" means cash dividends and
         cash distributions paid on Common Stock after December 31, 2000 not in
         excess of the sum of the Corporation's cumulative undistributed net
         earnings at December 31, 2000, plus the cumulative amount of Funds
         Available for Distribution after December 31, 2000, minus the
         cumulative amount of dividends accumulated, accrued or paid on the
         Series G Preferred Stock or any other class of Preferred Stock after
         January 1, 2001.

         "Person" shall mean any individual, partnership, corporation or other
         entity and shall include the successor (by merger or otherwise) of such
         entity.

         "Senior Stock" shall mean any class or series of capital stock of the
         Corporation which is prior or senior to the Series G Preferred Stock,
         as to the payment of dividends and as to distribution of assets upon
         liquidation, dissolution or winding up, if the holders of such class or
         series shall be entitled to the receipt of dividends or of amounts
         distributable upon liquidation, dissolution or winding up in preference
         or priority to the holders of Series G Preferred Stock.

         "Series F Preferred Stock" shall have the meaning set forth in Section
         5(d)(v) hereof.

         "Series G Preferred Stock" shall have the meaning set forth in Section
         1 hereof.

         "Set apart for payment" shall be deemed to include, without any action
         other than the following, the recording by the Corporation in its
         accounting ledgers of any accounting or bookkeeping entry which
         indicates, pursuant to a declaration of dividends or other distribution
         by the Board of Directors, the allocation of funds to be so paid on any
         series or class of capital stock of the Corporation; provided, however,
         that if any funds for any class or series of Junior Stock or any class
         or series of Parity Stock are placed in a separate account of the
         Corporation or delivered to a disbursing, paying or other similar
         agent, then "set apart for payment" with respect to the Series G
         Preferred Stock shall mean placing such funds in a separate account or
         delivering such funds to a disbursing, paying or other similar agent.

         "Trading Day," as to any securities, shall mean any day on which such
         securities are traded on the NYSE or, if such securities are not listed
         or admitted for trading on the NYSE, on the principal national
         securities exchange on which such securities are listed or admitted or,
         if such securities are not listed or admitted for trading on any
         national securities exchange, on the NASDAQ National Market or, if such
         securities are not quoted on the NASDAQ National Market, in the
         securities market in which such securities are traded.

         SECTION 3. DIVIDENDS.

                  (a) The holders of Series G Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Series G Preferred Stock equal to $1.25 per annum. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly on the Dividend Payment Dates, commencing on the ninth
Dividend Payment Date after the Issue Date. Each such dividend shall be payable
to the holders of record of the Series G Preferred Stock, as they appear on the
stock records of the Corporation at the close of business on a record date which
shall be not more than sixty (60) days prior to the applicable Dividend Payment
Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to holders of record on such


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date, which date shall not precede by more than forty-five (45) days the payment
date thereof, as may be fixed by the Board of Directors. The amount of
accumulated, accrued and unpaid dividends on any share of Series G Preferred
Stock, or fraction thereof, at any date shall be the amount of any dividends
thereon calculated at the applicable rate to and including such date, whether or
not earned or declared, which have not been paid in cash.

                  (b) The amount of dividends payable per share of Series G
Preferred Stock for each Dividend Period shall be computed by dividing the
annual dividend by four (4). The amount of dividends payable per share of Series
G Preferred Stock for the initial Dividend Period, or any other period shorter
or longer than a full Dividend Period, shall be computed ratably on the basis of
twelve (12) 30-day months and a 360-day year. Holders of Series G Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of cumulative dividends, as herein provided on the Series G
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series G Preferred
Stock that may be in arrears.

                  (c) So long as any of the shares of Series G Preferred Stock
are outstanding, no dividends, except as described in the immediately following
sentence, shall be declared or paid or set apart for payment by the Corporation,
or other distribution of cash or other property declared or made directly or
indirectly by the Corporation or any affiliate or any person acting on behalf of
the Corporation or any of its affiliates with respect to any class or series of
Parity Stock for any period, unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof have
been or contemporaneously are set apart for such payment on the Series G
Preferred Stock for all Dividend Periods terminating on or prior to the Dividend
Payment Date with respect to such class or series of Parity Stock. When
dividends are not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends declared upon the Series G Preferred Stock
and all dividends declared upon any other class or series of Parity Stock shall
be declared ratably in proportion to the respective amounts of dividends
accumulated, accrued and unpaid on the Series G Preferred Stock and accumulated,
accrued and unpaid on such Parity Stock.

                  (d) So long as any of the shares of Series G Preferred Stock
are outstanding, no dividends (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Stock) shall be declared or paid or set apart for payment by the
Corporation, or other distribution of cash or other property declared or made
directly or indirectly by the Corporation or any affiliate or any person acting
on behalf of the Corporation or any of its affiliates with respect to any shares
of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
Common Stock made for purposes of an employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking-fund for the redemption of any shares of any
such stock) directly or indirectly by the Corporation or any affiliate or any
person acting on behalf of the Corporation or any of its affiliates (except by
conversion into or exchange for Junior Stock), nor shall any other cash or other
property otherwise be paid or distributed to or for the benefit of any holder of
shares of Junior Stock in respect thereof, directly or indirectly, by the
Corporation or any affiliate or any person acting on behalf of the Corporation
or any of its affiliates, unless in each case (i) the full cumulative dividends
(including all accumulated, accrued and unpaid dividends) on all outstanding
shares of Series G Preferred Stock and any other Parity Stock of the Corporation
shall have been paid or such dividends have been declared and set apart for
payment for all past Dividend Periods with respect to the Series G Preferred
Stock and all past Dividend Periods with respect to such Parity Stock, and (ii)
sufficient funds shall have been paid or set apart for the payment of the full
dividend for the current Dividend Period with respect to the Series G Preferred
Stock and the current Dividend Period with respect to such Parity Stock.


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         SECTION 4. LIQUIDATION PREFERENCE.

                  (a) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the holders of shares
of Series G Preferred Stock shall be entitled to receive Twenty-Five Dollars
($25.00) per share of Series G Preferred Stock, plus an amount equal to all
dividends (whether or not earned or declared) accumulated, accrued and unpaid
thereon to the date of final distribution to such holders. Until the holders of
the Series G Preferred Stock have been paid the liquidation preference in full,
no payment will be made to any holder of Junior Stock upon the liquidation,
dissolution or winding up of the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of Series G Preferred Stock
shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any other shares of any class or series of Parity Stock,
then such assets, or the proceeds thereof, shall be distributed among the
holders of Series G Preferred Stock and any such other Parity Stock ratably in
the same proportion as the respective amounts that would be payable on such
Series G Preferred Stock and any such other Parity Stock if all amounts payable
thereon were paid in full.

                  (b) Subject to the rights of the holders of any shares of
Parity Stock, upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of Series
G Preferred Stock and any Parity Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to the respective
terms thereof, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series G Preferred Stock and any Parity
Stock shall not be entitled to share therein.

                  (c) For purposes of this Section 4, a merger, consolidation,
sale of voting control or sale of all or substantially all of the assets of the
Corporation in which the holders of Common Stock of the Corporation immediately
before such event do not own a majority of the outstanding shares or voting
power of the surviving corporation shall be deemed to be a liquidation and
dissolution of the Corporation.

         SECTION 5. CONVERSION RIGHTS. The holders of shares of Series G
Preferred Stock shall have the right, at their option, to convert such shares
into shares of Common Stock of the Corporation at any time on and subject to the
following terms and conditions:

                  (a) The shares of Series G Preferred Stock shall be
convertible at the office of the transfer agent for the Common Stock or the
principal executive office of the Corporation, into fully paid and
non-assessable shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock of the Corporation, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion, each
share of Series G Preferred Stock being taken at $25.00 for the purpose of such
conversion. The price at which shares of Common Stock shall be delivered upon
conversion (the "Conversion Price") shall initially be $.20 per share of Common
Stock, and the number of shares initially issuable upon conversion of each share
of Series G Preferred Stock is 125. The conversion price shall be adjusted in
certain instances as provided below.

                  (b) In order to convert shares of Series G Preferred Stock
into Common Stock, the holder thereof shall surrender at the office or offices
herein above mentioned the certificate or certificates therefor, duly endorsed
or assigned to the Corporation or in blank, and give written notice to the
Corporation at said office or offices that such holder elects to convert such
shares. Shares of Series G Preferred Stock surrendered for conversion during the
period from the close of business on any record date for the payment


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of a dividend on the shares of Series G Preferred Stock to the opening of
business on the date for payment of such dividend shall be accompanied by a
payment of an amount equal to the dividend declared and payable on such dividend
payment date on the shares of Series G Preferred Stock being surrendered for
conversion. Except as provided in the preceding sentence, no payment or
adjustment shall be made upon any conversion on account of any unpaid or accrued
dividends on the shares of Series G Preferred Stock surrendered for conversion
or on account of any dividends on the Common Stock issued upon conversion.

                  Shares of Series G Preferred Stock shall be deemed to have
been converted immediately prior to the close of business on the day of the
surrender of the certificates for such shares for conversion in accordance with
the foregoing provisions, and the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
shall deliver at such office a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion, together with payment
in lieu of any fraction of a share, as hereinafter provided, to the person or
persons entitled to receive the same. In case shares of Series G Preferred Stock
are called for redemption, the right to convert such shares shall cease and
terminate at the close of business on the date fixed for redemption, unless
default shall be made in payment of the redemption price.

                  (c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series G Preferred Stock, but, instead of any fraction
of a share which would otherwise be issuable, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Closing Price (as hereinafter defined) on the date on which the
certificate or certificates for such shares were duly surrendered for
conversion, or, if such date is not a Trading Day (as hereinafter defined), on
the next Trading Day.

                  (d) The Conversion Price shall be adjusted from time to time
as follows:

                           (i) Adjustment for Issuance of Shares at Less Than
         the Conversion Price. If at any time after the date of the first
         issuance of Series G Preferred Stock, the Corporation shall issue any
         shares of Common Stock, Convertible Securities (as hereinafter
         defined), Rights (as hereinafter defined) or Related Rights (as
         hereinafter defined; any such shares, Convertible Securities, Rights or
         Related Rights, "Securities") without consideration or for a
         consideration per share or unit less than the Conversion Price in
         effect immediately prior to the issuance of such Securities, then the
         Conversion Price in effect immediately prior to each such issuance
         shall forthwith be reduced to the quotient obtained by dividing:

                                    (A) an amount equal to the sum of (1) the
                  total number of shares of Common Stock outstanding immediately
                  prior to such issuance (including for this purpose the number
                  of shares of Common Stock into which the shares of Series G
                  Preferred Stock outstanding immediately prior to such issuance
                  are convertible on the date of such issuance in accordance
                  with Subsection 5(a) (without regard to Subsection 5(c)),
                  without giving effect to such issuance) multiplied by the
                  Conversion Price in effect immediately prior to such issuance,
                  and (2) the amount of consideration, if any, received by the
                  Corporation upon such issuance, by

                                    (B) the total number of shares of Common
                  Stock (1) outstanding immediately after such issuance
                  (including the number of shares of Common Stock into which the
                  shares of Series G Preferred Stock outstanding immediately
                  prior to such issuance are convertible on the date of such
                  issuance in accordance with Subsection 5(a) (without regard to
                  Subsection 5(c)), without giving effect to such issuance) or
                  (2) into or for which


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                  any such newly issued Convertible Securities are then
                  convertible or exchangeable or (3) issuable upon the exercise
                  of any such Rights or Related Rights).

                                    (C) For the purpose of this Subsection 5(d),
                  the following definitions and procedures shall be applicable:

                                            (1) In the case of the issuance of
                           options, warrants or other rights to purchase or
                           otherwise acquire Common Stock, whether or not at the
                           time exercisable ("Rights"), the total number of
                           shares of Common Stock issuable upon exercise of such
                           Rights shall be deemed to have been issued at the
                           time such Rights are issued, for a consideration
                           equal to the sum of the consideration, if any,
                           received by the Corporation upon the issuance of such
                           rights and the minimum purchase or exercise price
                           payable upon the exercise of such Rights for the
                           Common Stock to be issued upon the exercise thereof.

                                            (2) In the case of the issuance of
                           any class or series of stock or any bonds,
                           debentures, notes or other securities or obligations
                           convertible into or exchangeable for Common Stock,
                           whether or not then convertible or exchangeable
                           ("Convertible Securities"), or options, warrants or
                           other rights to purchase or otherwise acquire
                           Convertible Securities ("Related Rights"), the total
                           number of shares of Common Stock issuable upon the
                           conversion or exchange of such Convertible Securities
                           or exercise of such Related Rights shall be deemed to
                           have been issued at the time such Convertible
                           Securities or Related Rights are issued, for a
                           consideration equal to the sum of (I) the
                           consideration, if any, received by the Corporation
                           upon issuance of such Convertible Securities or
                           Related Rights (excluding any cash received on
                           account of accrued interest or dividends) and (II)
                           (A) in the case of Convertible Securities, the
                           minimum additional consideration, if any, to be
                           received by the Corporation upon the conversion or
                           exchange of such Convertible Securities or (B) in the
                           case of Related Rights, the sum of (x) the minimum
                           purchase or exercise price payable upon the exercise
                           of such Related Rights for Convertible Securities and
                           (y) the minimum additional consideration, if any, to
                           be received by the Corporation upon the conversion or
                           exchange of the Convertible Securities issued upon
                           the exercise of such Related Rights.

                                            (3) On any change in the number of
                           shares of Common Stock issuable upon the exercise of
                           Rights or Related Rights or upon the conversion or
                           exchange of Convertible Securities or on any change
                           in the minimum purchase or exercise price of Rights,
                           Related Rights or Convertible Securities, including,
                           but not limited to, a change resulting from the
                           anti-dilution provisions of such Rights, Related
                           Rights or Convertible Securities, the Conversion
                           Price to the extent in any way affected by such
                           Rights, Related Rights or Convertible Securities
                           shall forthwith be readjusted to be thereafter the
                           Conversion Price that would have been obtained had
                           the adjustment which was made upon the issuance of
                           such Rights, Related Rights or Convertible Securities
                           been made after giving effect to such change. No
                           further adjustment shall be made in respect of such
                           change upon the actual issuance of Common Stock or
                           any payment of consideration upon the exercise of any
                           such Rights or Related Rights or the conversion or
                           exchange of such Convertible Securities.


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                                            (4) On the expiration or
                           cancellation of any such Rights, Related Rights or
                           Convertible Securities, if the Conversion Price shall
                           have been adjusted upon the issuance thereof, the
                           Conversion Price shall forthwith be readjusted to
                           such Conversion Price as would have been obtained had
                           the adjustment made upon the issuance of such Rights,
                           Related Rights or Convertible Securities been made
                           upon the basis of the issuance of only the number of
                           shares of Common Stock actually issued upon the
                           exercise of such Rights or Related Rights or the
                           conversion or exchange of such Convertible
                           Securities.

                           (ii) Sale of Shares. In case of the issuance of
         Securities for a consideration part or all of which shall be cash, the
         amount of the cash consideration therefor shall be deemed to be the
         gross amount of the cash paid to Corporation 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 or for any expenses incurred in connection
         therewith. In case of the issuance of any Securities for a
         consideration part or all of which shall be other than cash, the amount
         of the consideration therefor, other than cash, shall be deemed to be
         the then fair market value of the property received.

                           (iii) Reclassification of Shares. In case of the
         reclassification of securities into shares of Common Stock, the shares
         of Common Stock issued in such reclassification shall be deemed to have
         been issued for a consideration other than cash. Securities issued by
         way of dividend or other distribution on any class of stock of
         Corporation shall be deemed to have been issued without consideration.

                           (iv) Stock Dividends, Stock Splits, Subdivisions or
         Combinations. In the event of a stock dividend, 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.

                           (v) Exceptions. The adjustments provided in
         Subsection 5(d)(i) shall not apply to any (A) Common Stock issued upon
         the conversion of any of the Series G Preferred Stock or the Series F
         Cumulative Convertible Preferred Stock, $.01 par value (the "Series F
         Preferred Stock"); (B) Common Stock issued upon exercise of any
         outstanding warrants; (C) Common Stock issued upon exercise of
         outstanding employee stock options; and (D) up to 1,500,000 shares of
         Common Stock issuable upon exercise of employee stock options to be
         granted subsequent to the date hereof.

                           (vi) Adjustment for Mergers and Consolidations.

                                    (A) In the event of distribution to all
                  Common Stock holders of any stock, indebtedness of the
                  Corporation or assets (excluding cash dividends or
                  distributions from retained earnings) or other rights to
                  purchase securities or assets, then, after such event, the
                  shares of Series G Preferred Stock will be convertible into
                  the kind and amount of securities, cash and other property
                  which the holder of the shares of Series G Preferred Stock
                  would have been entitled to receive if the holder owned the
                  Common Stock issuable upon conversion of the shares of Series
                  G Preferred Stock immediately prior to the occurrence of such
                  event.


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                                    (B) In case of any capital reorganization,
                  reclassification of the stock of the Corporation (other than a
                  change in par value or as a result of a stock dividend,
                  subdivision, split up or combination of shares), the shares of
                  Series G Preferred Stock shall be convertible into the kind
                  and number of shares of stock or other securities or property
                  of the Corporation to which the holder of the shares of Series
                  G Preferred Stock would have been entitled to receive if the
                  holder owned the Common Stock issuable upon conversion of the
                  shares of Series G Preferred Stock immediately prior to the
                  occurrence of such event. The provisions of the immediately
                  foregoing sentence shall similarly apply to successive
                  reorganizations, reclassifications, consolidations, exchanges,
                  leases, transfers or other dispositions or other share
                  exchanges.

                                    (C) The term "Fair Market Value," as used
                  herein, is the value ascribed to consideration other than cash
                  as determined by the Board of Directors of the Corporation in
                  good faith, which determination shall be final, conclusive and
                  binding. If the Board of Directors shall be unable to agree as
                  to such fair market value, then the issue of fair market value
                  shall be submitted to arbitration under and pursuant to the
                  rules and regulations of the American Arbitration Association,
                  and the decision of the arbitrators shall be final, conclusive
                  and binding, and a final judgment may be entered thereon;
                  provided, however, that such arbitration shall be limited to
                  determination of the fair market value of assets tendered in
                  consideration for the issue of Common Stock.

                  (e) Whenever the conversion price is adjusted as herein
         provided:

                           (i) The Corporation shall compute the adjusted
         conversion price in accordance with this Section 5 and shall cause to
         be prepared a certificate signed by the Corporation's treasurer setting
         forth the adjusted conversion price and showing in reasonable detail
         the fact upon which such adjustment is based; and

                           (ii) A notice stating that the conversion price has
         been adjusted and setting forth the adjusted conversion price shall, as
         soon as practicable, be mailed to the holders of record of outstanding
         shares of Series G Preferred Stock.

                  (f) In case:

                           (i) The Corporation shall declare a dividend or other
         distribution on its Common Stock payable otherwise than in cash out of
         retained earnings;

                           (ii) The Corporation shall authorize the issuance to
         the holders of its Common Stock of rights or warrants entitling them to
         subscribe for or purchase any shares of capital stock of any class or
         any other subscription rights or warrants; or

                           (iii) Of any reclassification of the capital stock of
         the Corporation (other than a subdivision or combination of its
         outstanding shares of Common Stock), or of any consolidation or merger
         to which the Corporation is a party and for which approval of any
         stockholders of the Corporation is required, or of the sale, transfer
         or other disposition of all or substantially all of the assets of the
         Corporation; or

                           (iv) Of the voluntary or involuntary liquidation,
         dissolution or winding up of the Corporation;


                                       10
<PAGE>


                  then the Corporation shall cause to be mailed to the holders
of record of the outstanding shares of Series G Preferred Stock, at least 20
days (or 10 days in any case specified in clause (i) or (ii) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date as of which the holders of record of Common Stock to be entitled to
such dividend, distribution, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
Common Stock shall be entitled to exchange their shares for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, disposition, liquidation, dissolution or winding up, or the vote
on any action authorizing such.

                  (g) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of issuance upon conversion of shares of Series G
Preferred Stock, the full number of shares of Common Stock then deliverable upon
the conversion of all shares of Series G Preferred Stock then outstanding.

                  (h) The Corporation will pay any and all taxes that may be
payable in respect of the issuance of delivery of shares of Common Stock on
conversion of shares of Series G Preferred Stock pursuant thereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of Series G Preferred
Stock so converted were registered, and no such issuance or delivery shall be
made unless and until the person requesting such issuance has paid to the
Corporation the amount of any such tax or has established to the satisfaction of
the Corporation that such tax has been paid.

                  (i) The certificate of any independent firm of public
accountants of nationally recognized standing selected by the Board of Directors
shall be presumptive evidence of the correctness of any computation made under
this Section 5.

         SECTION 6. SERIES G PREFERRED STOCK TO BE RETIRED. All shares of Series
G Preferred Stock which shall have been issued and reacquired in any manner by
the Corporation shall be restored to the status of authorized, but unissued
shares of Preferred Stock, without designation as to series. The Corporation may
also retire any unissued shares of Series G Preferred Stock, and such shares
shall then be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series.

         SECTION 7. RANKING. No class or series of capital stock of the
Corporation shall rank senior to the Series G Preferred Stock, and the Series F
Preferred Stock shall be Parity Stock.

         SECTION 8. VOTING.

                  (a) The holders of Series G Preferred Stock shall be entitled
to a number of votes equal to the number of shares of Common Stock into which
the shares of Series G Preferred Stock are convertible on the record date of the
determination of stockholders entitled to receive notice of and to vote on any
matter submitted to a vote of stockholders of the Corporation. The holders of
Series G Preferred Stock will vote together with holders of the Common Stock,
the Series F Preferred Stock and any other class of equity securities which may
vote with the holders of Common Stock as a single class on all matters upon
which stockholders are entitled to vote, including the election of directors,
except as specifically provided herein or as otherwise required by law.

                  (b) The affirmative vote or consent of the holders of 80% of
the votes entitled to be cast by holders of the Series G Preferred Stock then
outstanding, voting as a single class, in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the purpose, will be
required in order


                                       11
<PAGE>


to amend the Certificate of Incorporation or Bylaws to affect materially and
adversely the rights, preferences or voting power of the holders of the Series G
Preferred Stock. The affirmative vote or consent of the holders of 80% of the
votes entitled to be cast by holders of the Series G Preferred Stock and Series
F Preferred Stock then outstanding, voting as a single class, in person or by
proxy, either in writing without a meeting or by vote at any meeting called for
the purpose, will be required in order to authorize, create or increase the
authorized amount of any class of Senior Stock or Parity Stock (other than the
Series F Preferred Stock or securities to evidence bank debt or asset
securitizations) or the merger, consolidation or sale of assets (other than in
the ordinary course) of the Corporation, including the capital stock of its
subsidiaries. However, the Corporation may create classes or series of Junior
Stock or increase the authorized number of shares of Junior Stock, without the
consent of any holder of Series G Preferred Stock.

                  (c) The holders of shares of Series G Preferred Stock and
Series F Preferred Stock shall be entitled to designate or elect two (2)
directors to serve on the Board of Directors, by the vote of a plurality of the
votes cast by the holders of the Series G Preferred Stock and Series F Preferred
Stock, voting together as a single class, at an annual meeting of stockholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series G Preferred Stock and Series F Preferred Stock called from time to
time for the election of directors. If the Board of Directors fails to appoint
the two designees of the holders of the Series G Preferred Stock and Series F
Preferred Stock, as herein above provided, the Secretary of the Corporation
shall, upon the written request of any holder of Series G Preferred Stock and
Series F Preferred Stock (addressed to the Secretary at the principal office of
the Corporation), call a special meeting of the holders of the Series G
Preferred Stock and Series F Preferred Stock for the election of the two (2)
directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the stockholders or as required by law. If any such special meeting
required to be called, as above provided, shall not be called by the Secretary
within twenty (20) days after receipt of any such request, then any holder of
Series G Preferred Stock and Series F Preferred Stock may call such meeting,
upon the notice above provided, and for that purpose shall have access to the
stock books of the Corporation. The directors elected at any such special
meeting shall hold office until the next annual meeting of the stockholders or
special meeting held in lieu thereof if such office shall not have previously
terminated as above provided. If any vacancy shall occur among the directors
elected by the holders of the Series G Preferred Stock and Series F Preferred
Stock, a successor shall be elected by the Board of Directors, upon the
nomination of the then remaining directors elected by the holders of the Series
G Preferred Stock and Series F Preferred Stock or the successors of such
remaining directors, to serve until the next annual meeting of the stockholders
or special meeting held in place thereof if such office shall not have
previously terminated as above provided.

                  So long as any shares of Series G Preferred Stock and Series F
Preferred Stock are outstanding, the number of directors of the Corporation
shall at all times be such that the exercise by the holders of shares of Series
G Preferred Stock and Series F Preferred Stock of the right to designate or
elect directors under the circumstance provided in this Section 8(c) will not
contravene any provisions of the Corporation's Certificate of Incorporation or
Bylaws.

SECTION 9. REDEMPTION.

                  (a) The Corporation shall redeem, from any source of funds
legally available therefor, shares of the Series G Preferred Stock upon the
earlier of (i) the sale of B & B Electromatic, Inc., to the extent of the net
proceeds to the Corporation, and/or (ii) in quarterly installments (each a
"Series G Redemption Date") of $250,000 each beginning on the second anniversary
of the date the Series G Preferred Stock was originally issued (the "Original
Issue Date"), $500,000 each beginning on the third anniversary of the Original
Issue Date, and, beginning on the fourth anniversary of the Original Issue Date,
in quarterly installments, the remaining Series G Preferred Stock outstanding.
The Corporation shall effect such


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<PAGE>


redemptions on the applicable Series G Redemption Dates by paying in cash in
exchange for the shares of Series G Preferred Stock to be redeemed a sum equal
to $25.00 per share of Series G Preferred Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus, on each
Series G Redemption Date (as defined below), any accrued and unpaid dividends
from the Original Issue Date (the "Series G Redemption Price").

                  (b) As used herein and in Section 9(c) and Section 9(d) below,
the term "Redemption Date" shall refer to each "Series G Redemption Date" and
the term "Redemption Price" shall refer to each "Series G Redemption Price." At
least 15 but no more than 30 days prior to each Redemption Date, written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series G Preferred Stock to be redeemed, at the address last shown
on the records of the Corporation for such holder, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, the certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section 9(b), on or after the Redemption Date, each holder
of Series G Preferred Stock to be redeemed shall surrender to the Corporation
the certificate or certificates representing such shares, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price of such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.

                  (c) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares of Series G Preferred Stock designated for redemption in the
Redemption Notice as holders of Series G Preferred Stock (except the right to
receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Series G Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series G Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed based
upon their holdings of Series G Preferred Stock. The shares of Series G
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences proved herein. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
Series G Preferred Stock such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date, but which it has not redeemed.

                  (d) On or prior to each Redemption Date, the Corporation shall
deposit the Redemption Price of all shares of Series G Preferred Stock
designated for redemption in the Redemption Notice and not yet redeemed with a
bank or trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or after the
Redemption Date upon receipt of notification from the Corporation that such
holder has surrendered his share certificate to the Corporation pursuant to
Section 9(b) above. As of the Redemption Date, the deposit shall constitute full
payment of the shares to their holders, and from and after the Redemption Date
the shares so called for redemption shall be redeemed and shall be deemed to be
no longer outstanding, and the holders thereof shall cease to be stockholders
with respect to such shares and shall have no rights with respect thereto except
the right to receive from the bank


                                       13
<PAGE>


or trust corporation payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor. Such instructions shall
also provide that any moneys deposited by the Corporation pursuant to this
Section 9(d) for the redemption of shares thereafter converted into shares of
the Corporation's Common Stock pursuant to Section 5.2 hereof prior to the
Redemption Date shall be returned to the Corporation forthwith upon such
conversion. The balance of any moneys deposited by the Corporation pursuant to
this Section 9(d) remaining unclaimed at the expiration of two (2) years
following the Redemption Date shall thereafter be returned to the Corporation
upon its request expressed in a resolution of its Board of Directors.

         SECTION 10. RECORD HOLDERS. The Corporation may deem and treat the
record holder of any share of Series G Preferred Stock as the true and lawful
owner thereof for all purposes, and neither the Corporation nor the Transfer
Agent shall be affected by any notice to the contrary.






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signature page to follow.]


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<PAGE>



         IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed as of May 10, 2001.

                                        INTEGRATED SECURITY SYSTEMS, INC.



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



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