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                                                                    EXHIBIT 4.16

                          REGISTRATION RIGHTS AGREEMENT


         THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of February
22, 1999, is by and between INTEGRATED SECURITY SYSTEMS, INC., a Delaware
corporation (the "Company"), and RENAISSANCE CAPITAL GROWTH & INCOME FUND III,
INC., a Texas corporation , and RENAISSANCE US GROWTH & INCOME TRUST PLC, a
public limited company registered in England and Wales (collectively,
"Renaissance").

                                   WITNESSETH:

         WHEREAS, the Company has issued to Renaissance two (2) Convertible
Promissory Notes in the aggregate principal amount of Six Hundred Thousand
Dollars ($600,000.00) (the "Notes") dated as of the date hereof, convertible at
the option of Renaissance into Common Stock of the Company at the price of
$0.549 per share, subject to adjustment as set forth therein (together with all
other equity securities of the Company owned by Renaissance, hereinafter
referred to as the "Registrable Shares");

         WHEREAS, the Registrable Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and, as an inducement to
Renaissance, the Company has agreed to grant to Renaissance certain registration
rights with respect to the Registrable Shares as set forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

1. DEMAND REGISTRATION.

         (a) The Company hereby agrees to use its best efforts to register all
or any portion of the Registrable Shares on two (2) occasions upon receipt of a
written request from a holder (the "Holder" or "Holders") of record of the
Registrable Shares that the Company file a registration statement under the 1933
Act covering the registration of at least twenty-five (25%) of the Registrable
Shares then outstanding. The Company shall, within twenty (20) days of its
receipt thereof, give written notice of such request to all holders of record of
Registrable Shares. The Holders of said Registrable Shares shall then have
fifteen (15) days from the date of mailing of such notice by the Company to
request that all or a portion of their respective Registrable Shares be included
in said registration.

         (b) If the Holders intend to distribute the Registrable Shares covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Agreement, and the Company
shall include such information in the written notice to the other Holders of
Registrable Shares referred to in Section 1(a) above. In such event, the right
of any Holder to include its Registrable Shares in such registration shall be
conditioned



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upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Shares in the underwriting (unless otherwise mutually
agreed by the Company, the underwriter, the Initiating Holder and such Holder)
is limited to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company as
provided in Section 4(e) below) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by mutual agreement of the Company and the Initiating Holder, which
agreement shall not be unreasonably withheld. Notwithstanding any other
provision of this Section 1, if the underwriter advises the Initiating Holder
and the Company in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holder shall so advise
all Holders of Registrable Shares which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Shares that may be included in
the underwriting shall be allocated on a pro rata basis among all Holders that
have requested to participate in such registration. The rights of the Holders
shall be senior to those of any Persons subsequently granted demand registration
rights.

         (c) Each such registration shall remain effective for a period of one
hundred eighty (180) days, unless the Initiating Holder requests that such
registration be terminated prior to the expiration of such period.
Notwithstanding the foregoing, if the Holders' elect not to sell all or any
portion of the Registrable Shares pursuant to a demand registration which has
become effective, such demand registration right shall nonetheless be deemed
satisfied.

         (d) If, after a registration statement becomes effective, the Company
advises the Holders that the registration statement is required to be amended
under applicable federal securities laws, the Holders shall suspend any further
sales of their Registrable Shares, until the Company advises them that the
registration statements has been amended, but not more than thirty (30) days.
The one hundred eighty (180)_day time period referred to in subsection (c)
during which the registration statement must be kept current after its effective
date shall be extended for an additional number of business days equal to the
number of business days during which the right to sell the Registrable Shares
was suspended pursuant to the preceding sentence.

         (e) the Company shall have the right to exclude an underwriter not
reasonably acceptable to it.

2. "PIGGY-BACK" REGISTRATION.

         If the Company proposes to register any of its capital stock under the
1933 Act in connection with the public offering of such securities for its own
account or for the account of its security Holders, other than Holders of
Registrable Shares pursuant hereto (a "Piggy-Back Registration Statement"),
except for (i) a registration relating solely to the sale of securities to
participants in the Company's stock plans or employee benefit plans or (ii) a
registration relating solely to an transaction for which Form S-4 may be used,
then:

         (a) the Company shall give written notice of such determination to each
Holder of Registrable Shares, and each such Holder shall have the right to
request, by written notice given to the Company within fifteen (15) days of the
date that such written notice was mailed by the



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Company to such Holder, that a specific number of Registrable Shares held by
such Holder be included in the Piggy-Back Registration Statement (and related
underwritten offering, if any);

         (b) If the Piggy-Back Registration Statement relates to an underwritten
offering, the notice given to each Holder shall specify the name or names of the
managing underwriter or underwriters for such offering. In addition, such notice
shall also specify the number of securities to be registered for the account of
the Company and for the account of its shareholders (other than the Holders of
Registrable Shares), if any;

         (c) If the Piggy-Back Registration Statement relates to an underwritten
offering, each Holder of Registrable Shares to be included therein must agree
(i) to sell such Holder's Registrable Shares on the same basis as provided in
the underwriting arrangement approved by the Company, and (ii) to timely
complete and execute all questionnaires, powers of attorney, indemnities,
hold-back agreements, underwriting agreements and other documents required under
the terms of such underwriting arrangements or by the SEC or by any state
securities regulatory body;

         (d) If the managing underwriter or underwriters for the underwritten
offering under the Piggy-Back Registration Statement determines that inclusion
of all or any portion of the Registrable Shares in such offering would
materially adversely affect the ability of the underwriters for such offering to
sell all of the securities requested to be included for sale in such offering at
the best price obtainable therefor, the aggregate number of Registrable Shares
that may be sold by the Holders shall be limited to such number of Registrable
Shares, if any, that the managing underwriter or underwriters determine may be
included therein without such adverse effect as provided below. If the number of
securities proposed to be sold in such underwritten offering exceeds the number
of securities that may be sold in such offering, there shall be included in the
offering, first, up to the maximum number of securities to be sold by the
Company for its own account and for the account of other stockholders (other
than Holders of Registrable Shares), as they may agree among themselves, and
second, as to the balance, if any, Registrable Shares requested to be included
therein by the Holders thereof (pro rata as between such Holders based upon the
number of Registrable Shares initially proposed to be registered by each), or in
such other proportions as the managing underwriter or underwriters for the
offering may require; provided, however, that in the event that the number of
securities proposed to be sold in such underwritten offering exceeds the number
of securities that may be sold in such offering pursuant to the terms and
conditions set forth above and the Piggy-Back Registration Statement is a result
of public offering by the Company of its securities for its own account, there
shall be included in the offering, first, up to the maximum number of securities
to be sold by the Company for its own account and second, as to the balance, if
any, securities to be sold for the account of the Company's stockholders (both
the Holders of Registrable Shares requested and such other stockholders of the
Company requested to be included therein) on a pro rata basis;

         (e) Holders of Registrable Shares shall have the right to withdraw
their Registrable Shares from the Piggy-Back Registration Statement, but if the
same relates to an underwritten offering, they may only do so during the time
period and on the terms agreed upon among the underwriters for such underwritten
offering and the Holders of Registrable Shares;



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         (f) The Holders will advise the Company at the time a registration
becomes effective whether the Registrable Shares included in the registration
will be underwritten or sold directly by the Holders;

         (g) All demand and piggy-back registration rights of the Holders shall
terminate when all of the Registrable Shares then outstanding may be sold
pursuant to Rule 144(k).

3. SHELF REGISTRATION.

         The Company shall file a "shelf" registration statement under the 1933
Act (the "Shelf Registration") covering all of the Registrable Shares within 90
days of the date of the Notes, and the Company shall use its best efforts to
cause the Shelf Registration to be declared effective and to keep the Shelf
Registration continuously effective until all of the Registrable Shares
registered therein cease to be Registrable Shares. The securities shall cease to
be Registrable Shares (a) when the Shelf Registration shall have become
effective under the 1933 Act and such securities shall have been disposed of
pursuant to the Shelf Registration, or (b) such securities shall have been sold
as permitted by Rule 144 under the 1933 Act or the date on which the Registrable
Shares may be sold pursuant to Rule 144(k), whichever is the first to occur. The
Holders of the Notes shall utilize Rule 144 in their sole discretion to the
extent it meets their distribution requirements. The Company agrees, if
necessary, to supplement or amend the Shelf Registration, as required by the
registration form utilized by the Company or by the instructions applicable to
such registration form or by the 1933 Act, and the Company agrees to furnish to
the Holders of the Registrable Shares copies of any such supplement or amendment
prior to its being used.

4. OBLIGATIONS OF THE COMPANY.

         Whenever required to effect the registration of any Registrable Shares
pursuant to this Agreement, the Company shall, as expeditiously as reasonably
possible:

         (a) Prepare and file with the SEC a registration statement with respect
to such Registrable Shares and use all reasonable efforts to cause such
registration statement to become effective, and keep such registration statement
effective until the sooner of all such Registrable Shares having been
distributed, or until one hundred twenty (120) days have elapsed since such
registration statement became effective (subject to extension of this period as
provided below);

         (b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement, or one hundred twenty (120) days have elapsed since such
registration statement became effective (subject to the extension of this period
as provided below);

         (c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other



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documents as they may reasonably request in order to facilitate the disposition
of Registrable Shares owned by them;

         (d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify as a broker-dealer in any states or jurisdictions
or to do business or to file a general consent to service of process in any such
states or jurisdictions;

         (e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to the Company and the Holders of a majority of the Registrable
Shares to be included in such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;

         (f) Notify each Holder of Registrable Shares covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; and

         (g) In the event of the notification provided for in Section 4(f)
above, the Company shall use its best efforts to prepare and file with the SEC
(and to provide copies thereof to the Holders) as soon as reasonably possible an
amended prospectus complying with the 1933 Act, and the period during which the
prospectus referred to in the notice provided for in Section 4(f) above cannot
be used and the time period prior to the use of the amended prospectus referred
to in this Section 4(g) shall not be counted in the one hundred twenty (120)-day
period of this Section 4.

5. FURNISH INFORMATION.

         (a) It shall be a condition precedent to the obligations of the Company
that the selling Holders shall furnish to the Company any and all information
reasonably requested by the Company, its officers, directors, employees,
counsel, agents or representatives, the underwriter or underwriters, if any, and
the SEC or any other Governmental Authority, including, but not limited to: (i)
such information regarding themselves, the Registrable Shares held by them, and
the intended method of disposition of such securities, as shall be required to
effect the registration of their Registrable Shares; and (ii) the identity of
and compensation to be paid to any proposed underwriter or broker-dealer to be
employed in connection therewith.

         (b) In connection with the preparation and filing of each registration
statement registering Registrable Shares under the 1933 Act, the Company shall
give the Holders of Registrable Shares on whose behalf such Registrable Shares
are to be registered and their




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underwriters, if any, and their respective counsel and accountants, at such
Holders' sole cost and expense (except as otherwise set forth herein), such
access to copies of the Company's records and documents and such opportunities
to discuss the business of the Company with its officers and the independent
public accountants who have certified its financial statements as shall be
reasonably necessary in the opinion of such Holders and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the 1933 Act.

6. EXPENSES OF REGISTRATION.

         All expenses, other than underwriting discounts and commissions
applicable to the Registrable Shares sold by selling Holders, incurred in
connection with the registration of the Registrable Shares pursuant to this
section, including, without limitation, all registration, filing and
qualification fees, printer's expenses, accounting and legal fees and expenses
of the Company and Holder, shall be borne by the Company.

7. INDEMNIFICATION REGARDING REGISTRATION RIGHTS.

         If any Registrable Shares are included in a registration statement
pursuant to this Agreement:

         (a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers and directors of each Holder, any underwriter
(as defined in the 1933 Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, liabilities (joint or several) or any legal or other
costs and expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action to which they may
become subject under the 1933 Act, the 1934 Act or state law, insofar as such
losses, claims, damages, costs, expenses or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (each a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact with respect to the Company or its
securities contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements therein; (ii) the omission or alleged omission to state therein a
material fact with respect to the Company or its securities required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under
the 1933 Act, the 1934 Act or any state securities law. Notwithstanding the
foregoing, the indemnity agreement contained in this Section 7(a) shall not
apply and the Company shall not be liable (i) in any such case for any such
loss, claim, damage, costs, expenses, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person,
(ii) for amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld, or (iii) if the
statement or omission was corrected in a subsequent



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preliminary or final prospectus or amendment or supplement thereto, and the
Holder failed to deliver such document to the purchaser of its securities.

         (b) To the extent permitted by law, each Holder who participates in a
registration pursuant to the terms and conditions of this Agreement shall
indemnify and hold harmless the Company, each of its directors and officers who
have signed the registration statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or
any state securities law, each of the Company's employees, agents, counsel and
representatives, any underwriter and any other Holder selling securities in such
registration statement, or any of its directors or officers, or any person who
controls such Holder, against any losses, claims, damages, costs, expenses,
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, employee, agent, representative, underwriter, or
other such Holder, or director, officer or controlling person thereof, may
become subject, under the 1933 Act, the 1934 Act or other federal or state law,
only insofar as such losses, claims, damages, costs, expenses or liabilities or
actions in respect thereto arise out of or are based upon any Violation, in each
case to the extent and only to the extent that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such. Each such Holder will indemnify any
legal or other expenses reasonably incurred by the Company or any such director,
officer, employee, agent representative, controlling person, underwriter or
other Holder, or officer, director or of any controlling person thereof, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 7(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, costs, expenses, liability or action if such settlement is
effected without the prior written consent of the Holder, which consent shall
not be unreasonably withheld.

         (c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 7, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonable fees and expenses of such counsel to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve the indemnifying party of its
obligations under this Section 7, except to the extent that the failure results
in a failure of actual notice to the indemnifying party and such indemnifying
party is materially prejudiced in its ability to defend such action solely as a
result of the failure to give such notice.



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         (d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under this Section 7 in respect of any
losses, claims, damages, costs, expenses, liabilities or actions referred to
herein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, costs, expenses, liabilities or
actions in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand and of the Holder, on the other, in connection with
the Violation that resulted in such losses, claims, damages, costs, expenses,
liabilities or actions. The relative fault of the Company, on the one hand, and
of the Holder, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of the material fact or
the omission to state a material fact relates to information supplied by the
Company or by the Holder, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

         (e) the Company, on the one hand, and the Holders, on the other, agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by a pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of losses, claims, damages, costs, expenses, liabilities and
actions referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any reasonable legal or
other expenses incurred by such indemnified party in connection with defending
any such action or claim. Notwithstanding the provisions of this Section 7,
neither the Company nor the Holders shall be required to contribute any amount
in excess of the amount by which the total price at which the securities were
offered to the public exceeds the amount of any damages which the Company or
each such Holder has otherwise been required to pay by reason of such Violation.
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.

8. REPORTS UNDER THE 1934 ACT.

         So long as the Company has a class of securities registered pursuant to
Section 12 of the 1934 Act, with a view to making available to the Holders the
benefits of Rule 144 promulgated under the 1933 Act ("Rule 144") and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, if applicable, the Company agrees to use its
reasonable efforts to:

         (a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;

         (b) File with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act;

         (c) Use its best efforts to include all Common Stock covered by such
registration statement on NASDAQ if the Common Stock is then quoted on NASDAQ;
or list all Common Stock covered by such registration statement on such
securities exchange on which any of the




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Common Stock is then listed; or, if the Common Stock is not then quoted on
NASDAQ or listed on any national securities exchange, use its best efforts to
have such Common Stock covered by such registration statement quoted on NASDAQ
or, at the option of the Company, listed on a national securities exchange; and

         (d) Furnish to any Holder, so long as the Holder owns any Registrable
Shares, (i) forthwith upon request a copy of the most recent annual or quarterly
report of the Company and such other SEC reports and documents so filed by the
Company, and (ii) such other information (but not any opinion of counsel) as may
be reasonably requested by any Holder seeking to avail himself of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.

9. ASSIGNMENT OF REGISTRATION RIGHTS.

          Subject to the terms and conditions of this Agreement, and the Notes,
the right to cause the Company to register Registrable Shares pursuant to this
Agreement may be assigned by Holder to any transferee or assignee of such
securities; provided that said transferee or assignee is a transferee or
assignee of at least ten percent (10%) of the Registrable Shares and provided
that the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act; it being the
intention that so long as Holder holds any Registrable Shares hereunder, either
Holder or its transferee or assignee of at least ten percent may exercise the
registration rights hereunder. Other than as set forth above, the parties hereto
hereby agree that the registration rights hereunder shall not be transferable or
assigned and any contemplated transfer or assignment in contravention of this
Agreement shall be deemed null and void and of no effect whatsoever.

10. OTHER MATTERS.

         (a) Each Holder of Registrable Shares hereby agrees by acquisition of
such Registrable Shares that, with respect to each offering of the Registrable
Shares, whether each Holder is offering such Registrable Shares in an
underwritten or nonunderwritten offering, such Holder will comply with
Regulation M or such other or additional anti-manipulation rules then in effect
until such offering has been completed, and in respect of any nonunderwritten
offering, in writing will inform the Company, any other Holders who are selling
shareholders, and any national securities exchange upon which the securities of
the Company are listed, that the Registrable Shares have been sold and will,
upon the Company's request, furnish the distribution list of the Registrable
Shares. In addition, upon the request of the Company, each Holder will supply
the Company with such documents and information as the Company may reasonably
request with respect to the subject matter set forth and described in this
Section 10.

         (b) Each Holder of Registrable Shares hereby agrees by acquisition of
such Registrable Shares that, upon receipt of any notice from the Company of the
happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by reference,
untrue in any material respect or which requires the making of any changes in
the registration statement, the prospectus or any




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document incorporated therein by reference, in order to make the statements
therein not misleading in any material respect, such Holder will forthwith
discontinue disposition of Registrable Shares under the prospectus related to
the applicable registration statement until such Holder's receipt of the copies
of the supplemented or amended prospectus, or until it is advised in writing by
the Company that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus.

11. WAIVERS AND MODIFICATIONS.

         All modifications, consents, amendments or waivers (herein "Waivers")
of any provision of this Agreement shall be effective only if the same shall be
in writing by Renaissance and then shall be effective only in the specific
instance and for the purpose for which given. No notice or demand given in any
case shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand. No failure to
exercise, and no delay in exercising, on the part of Renaissance, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
any other right. The rights of Renaissance hereunder shall be in addition to all
other rights provided by law.

12. CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION.

         Any suit, action or proceeding against the Company with respect to this
Agreement or any judgment entered by any court in respect thereof, may be
brought in the courts of the State of Texas, County of Dallas, or in the United
States federal courts located in the State of Texas, as Renaissance in its sole
discretion may elect, and the Company hereby submits to the nonexclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding. The Company hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State of Texas
may be brought upon, and the Company hereby irrevocably appoints, the CT
Corporation System, Dallas, Texas, as its true and lawful attorney-in-fact in
the name, place and stead of the Company to accept such service of any and all
such writs, process and summonses. The Company hereby irrevocably waives any
objections which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or any
Note brought in such courts, and hereby further irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in any inconvenient forum.

13. ARBITRATION.

         (a) Upon the demand of Renaissance or the Company (collectively the
"parties"), made before the institution of any judicial proceeding or not more
than sixty (60) days after service of a complaint, third party complaint,
cross-claim or counterclaim or any answer thereto or any amendment to any of the
above, any Dispute (as defined below) shall be resolved by binding arbitration
in accordance with the terms of this arbitration clause. A "Dispute" shall
include any action, dispute, claim, or controversy of any kind, whether founded
in contract, tort,



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statutory or common law, equity, or otherwise, now existing or hereafter
occurring between the parties arising out of, pertaining to or in connection
with this Agreement, any document evidencing, creating, governing, or securing
any indebtedness guaranteed pursuant to the terms hereof, or any related
agreements, documents, or instruments (the "Documents"). The parties understand
that by this Agreement they have decided that the Disputes may be submitted to
arbitration rather that being decided through litigation in court before a judge
or jury and that once decided by an arbitrator the claims involved cannot later
be brought, filed, or pursued in court. If the Company shall fail to pay (or
shall state in writing an intention not to pay or its inability to pay) not
later than three (3) days after the due date, any installment of interest on or
principal of, any Note or any fee, expense or other payment required hereunder,
Renaissance may, at its option, enforce its rights outside the arbitration
provision found in this Section 13 or any Note.

         (b) Arbitrations conducted pursuant to this Agreement, including
selection of arbitrators, shall be administered by the American Arbitration
Association ("Administrator") pursuant to the Commercial Arbitration Rules of
the Administrator. Arbitrations conducted pursuant to the terms hereof shall be
governed by the provisions of the Federal Arbitration Act (Title 9 of the United
States Code), and to the extent the foregoing are inapplicable, unenforceable or
invalid, the laws of the State of Texas. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction; provided, however,
that nothing contained herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12 U.S.C. 91 or similar
governing state law. Any party who fails to submit to binding arbitration
following a lawful demand by the opposing party shall bear all costs and
expenses, including reasonable attorneys' fees, incurred by the opposing party
in compelling arbitration of any Dispute.

         (c) No provision of, nor the exercise of any rights under, this
arbitration clause shall limit the right of any party to (i) foreclose against
any real or personal property collateral or other security, (ii) exercise
self-help remedies (including repossession and set off rights) or (iii) obtain
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver from a court
having jurisdiction. Such rights can be exercised at any time except to the
extent such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action as described above
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the Dispute to arbitration, nor render inapplicable the
compulsory arbitration provisions hereof. Any claim or Dispute related to
exercise of any self-help, auxiliary or other exercise of rights under this
Section 13 shall be a Dispute hereunder.

         (d) Arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law of the State of Texas. Arbitrator(s) may make an
award of attorneys' fees and expenses if permitted by law or the agreement of
the parties. All statutes of limitation applicable to any Dispute shall apply to
any proceeding in accordance with this arbitration clause. Any arbitrator
selected to act as the only arbitrator in a Dispute shall be required to be a
practicing attorney with not less than five (5) years practice in commercial law
in the State of Texas. With respect to a Dispute in which the claims or amounts
in controversy do not exceed five hundred thousand dollars ($500,000), a single
arbitrator shall be chosen and shall resolve the Dispute. In



                                       11
<PAGE>   12


such case the arbitrator shall have authority to render an award up to but not
to exceed five hundred thousand dollars ($500,000), including all damages of any
kind whatsoever, costs, fees and expenses. Submission to a single arbitrator
shall be a waiver of all parties' claims to recover more than five hundred
thousand dollars ($500,000). A Dispute involving claims or amounts in
controversy exceeding five hundred thousand dollars ($500,000) shall be decided
by a majority vote of a panel of three arbitrators ("Arbitration Panel"), one of
whom must possess the qualifications to sit as a single arbitrator in a Dispute
decided by one arbitrator. If the arbitration is consolidated with one conducted
pursuant to the terms of a guaranty of the Indebtedness, then the Arbitration
Panel shall be one which meets the criteria set forth between Renaissance and
the Company. Arbitrator(s) may, in the exercise of their discretion, at the
written request of a party, (i) consolidate in a single proceeding any multiple
party claims that are substantially identical and all claims arising out of a
single loan or series of loans, including claims by or against borrower(s),
guarantors, sureties and/or owners of collateral if different from the Company,
and (ii) administer multiple arbitration claims as class actions in accordance
with Rule 23 of the Federal Rules of Civil Procedure. The arbitrator(s) shall be
empowered to resolve any dispute regarding the terms of this Agreement or any
Dispute or any claim that all or any part (including this provision) is void or
voidable but shall have no power to change or alter the terms of this Agreement.
The award of the arbitrator(s) shall be in writing and shall specify the factual
and legal basis for the award.

         (e) To the maximum extent practicable, the Administrator, the
arbitrator(s) and the parties shall take any action reasonably necessary to
require that an arbitration proceeding hereunder be concluded within one hundred
eighty (180) days of the filing of the Dispute with the Administrator. The
arbitrator(s) shall be empowered to impose sanctions for any party's failure to
proceed within the times established herein. Arbitration proceedings hereunder
shall be conducted in Texas at a location determined by the Administrator. In
any such proceeding, a party shall state as a counterclaim any claim which
arises out of the transaction or occurrence or is in any way related to this
Agreement which does not require the presence of a third party which could not
be joined as a party in the proceeding, The provisions of this arbitration
clause shall survive any termination, amendment or expiration of this Agreement
and repayment in full of sums owed to Renaissance by the Company unless the
parties otherwise expressly agree in writing. Each party agrees to keep all
Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
parties or as required by applicable law or regulation.

14. INVALID PROVISIONS.

         If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws during the term of this Agreement,
such provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable
provision shall be added as part of this Agreement a provision mutually
agreeable to the Company and Renaissance as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable. In the




                                       12
<PAGE>   13


event the Company and Renaissance are unable to agree upon a provision to be
added to this Agreement within a period of ten (10) business days after a
provision of this Agreement is held to be illegal, invalid or unenforceable,
then a provision acceptable to independent arbitrators, such to be selected in
accordance with the provisions of the American Arbitration Association, as
similar in terms to the illegal, invalid or unenforceable provision as is
possible and be legal, valid and enforceable shall be added automatically to
this Agreement. In either case, the effective date of the added provision shall
be the date upon which the prior provision was held to be illegal, invalid or
unenforceable.

15. BINDING EFFECT.

         This Agreement shall be binding upon and inure to the benefit of the
Company and Renaissance and their respective successors, assigns and legal
representatives; provided, however, that the Company may not, without the prior
written consent of Renaissance, assign any rights, powers, duties or obligations
thereunder.

16. NO THIRD PARTY BENEFICIARY.

         The parties do not intend the benefits of this Agreement to inure to
any third party, nor shall this Agreement be construed to make or render
Renaissance liable to any materialman, supplier, contractor, subcontractor,
purchaser or lessee of any property owned by the Company, or for debts or claims
accruing to any such persons against the Company. Notwithstanding anything
contained herein, no conduct by any or all of the parties hereto, before or
after signing this Agreement, shall be construed as creating any right, claim or
cause of action against Renaissance, or any of its officers, directors, agents
or employees, in favor of any materialman, supplier, contractor, subcontractor,
purchaser or lessee of any property owned by the Company, nor to any other
person or entity other than the Company.

17. ENTIRETY.

         This Agreement and any other documents or instruments issued or entered
into pursuant hereto and thereto contain the entire agreement between the
parties and supersede all prior agreements and understandings, written or oral
(if any), relating to the subject matter hereof and thereof.

18. HEADINGS.

         Section headings are for convenience of reference only and, except as a
means of identification of reference, shall in no way affect the interpretation
of this Agreement.

19. SURVIVAL.

         All representations and warranties made by the Company herein shall
survive delivery of the Notes and the making of the Loan.



                                       13
<PAGE>   14


20. MULTIPLE COUNTERPARTS.

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.

21. NOTICES.

         (a) Any notices or other communications required or permitted to be
given by this Agreement or any other documents and instruments referred to
herein must be (i) given in writing and personally delivered, mailed by prepaid
certified or registered mail or sent by overnight service, such as FedEx, or
(ii) made by telex or facsimile transmission delivered or transmitted to the
party to whom such notice or communication is directed, with confirmation
thereupon given in writing and personally delivered or mailed by prepaid
certified or registered mail.

         (b) Any notice to be mailed, sent or personally delivered shall be
mailed or delivered to the principal offices of the party to whom such notice is
addressed, as that address is specified herein below. Any such notice or other
communication shall be deemed to have been given (whether actually received or
not) on the day it is mailed, postage prepaid, or sent by overnight service or
personally delivered or, if transmitted by telex or facsimile transmission, on
the day that such notice is transmitted; provided, however, that any notice by
telex or facsimile transmission, received by any the Company or Renaissance
after 4:00 p.m., Dallas, Texas time, at the recipient's address, on any day,
shall be deemed to have been given on the next succeeding business day. Any
party may change its address for purposes of this Agreement by giving notice of
such change to the other parties.

         If to the Company to:

         Integrated Security Systems, Inc.
         8200 Springwood Drive, Suite 230
         Irving, Texas  75063
         (972) 444-8280
         (972) 869-3843 (fax)

         with a copy to:

         David H. Oden, Esq.
         Haynes and Boone, LLP
         901 Main Street, Suite 3100
         Dallas, Texas  75202
         (214) 651-5000
         (214) 651-5940 (fax)




                                       14
<PAGE>   15


         If to Renaissance to:

         Renaissance Capital Growth & Income Fund III, Inc.
         Renaissance US Growth & Income Trust PLC
         8080 North Central Expressway, Suite 210, LB59
         Dallas, Texas 75206
         (214) 891-8294
         (214) 891-8291 (fax)

         with a copy to:

         Norman R. Miller, Esq.
         Wolin, Ridley & Miller LLP
         1717 Main Street, Suite 3100
         Dallas, Texas 75201
         (214) 939-4906
         (214) 939-4949 (fax)

         Any notice delivered personally in the manner provided herein will be
deemed given to the party to whom it is directed upon the party's (or its
agent's) actual receipt. Any notice addressed and mailed in the manner provided
here will be deemed given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail, or, if earlier, the time of actual receipt.

22. GOVERNING LAW.

         THIS AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND DELIVERED, AND
IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS OF
SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA SHALL
GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT.



                                       15
<PAGE>   16


         IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed and delivered, as of the date and year first above written.

                                    COMPANY:

                                    INTEGRATED SECURITY SYSTEMS, INC.


                                    By:
                                       -----------------------------------------
                                       Gerald K. Beckmann
                                       President and Chief Executive Officer


                                    RENAISSANCE:

                                    RENAISSANCE CAPITAL GROWTH &
                                    INCOME FUND III, INC.


                                    By:
                                       -----------------------------------------


                                    RENAISSANCE US GROWTH & INCOME
                                    TRUST PLC

                                    By:      Renaissance Capital Group, Inc.,
                                             Investment Manager


                                             By:
                                                --------------------------------