<PAGE>

                                                                    EXHIBIT 10.4

                      INTEGRATED ALARM SERVICES GROUP, INC.

                              EMPLOYMENT AGREEMENT


         EMPLOYMENT AGREEMENT made as of this 1st day of October, 2002 by and
between INTEGRATED ALARM SERVICES GROUP, INC., a Delaware corporation, having an
office at One Capital Center, 99 Pine Street, Albany, New York 12207
(hereinafter referred to as "Employer") and Curtis Quady, an individual residing
at 2704 Wren Court, Burnsville, Minnesota 55306-5250 (hereinafter referred to as
"Employee");


                              W I T N E S S E T H:


         WHEREAS, Employer desires to employ Employee as the Executive Vice
President of Employer; and

         WHEREAS, Employee is willing to be employed as the Executive Vice
President of Employer in the manner provided for herein, and to perform the
duties of the Executive Vice President of Employer upon the terms and conditions
herein set forth;

         NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:

         1. Employment of Executive Vice President of Employer hereby employs
Employee as the Executive Vice President of Employer.

         2. Term.

            a. Subject to Section 9 and Section 10 below, the term of this
Agreement shall be for a period of thirty-six (36) months commencing on October
1, 2002. The Term of this Agreement shall be automatically extended for
additional one (1) year periods, unless either party notifies the other in
writing at least ninety (90) days prior to the expiration of the then existing
Term of its intention not to extend the Term. During the Term, Employee shall
devote substantially all of his business time and efforts to Employer and its
subsidiaries and affiliates.


         3. Duties. The Employee shall perform those functions generally
performed by persons of such title and position, shall attend all meetings of
the stockholders and the Board, shall perform any and all related duties and
shall have any and all powers as may be prescribed by resolution of the Board,
and shall be available to confer and consult with and advise the officers and
directors of Employer at such times that may be required by Employer. Employee
shall report directly to the Employer's Chief Executive Officers.


                                      -1-
<PAGE>

         4. Compensation.

            a. (i) Employee shall be paid a minimum of $200,000 per year during
the Term of this Agreement. Employee shall be paid periodically in accordance
with the policies of the Employer during the term of this Agreement, but not
less than monthly.

               (ii) Employee is eligible for an annual bonus, if any, which
will be determined and paid in accordance with policies set from time to time by
the Board.

            b. Employee shall receive a leased car of his choice paid for by the
Employer, at a cost not to exceed $1,000 per month.

            c. Employer shall include Employee in its health insurance program
available to Employer's executive officers and shall pay 100% of the premiums
for such program.

            d. Employee shall have the right to participate in any other
employee benefit plans established by Employer.

            e. (i) In the event of a "Change of Control" whereby:

         (A) A person (other than a person who is an officer or a Director of
Employer on the effective date hereof), including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, becomes, or obtains the
right to become, the beneficial owner of Employer securities having 50% or more
of the combined voting power of then outstanding securities of the Employer that
may be cast for the election of directors of the Employer;

         (B) At any time, a majority of the Board-nominated slate of candidates
for the Board is not elected;

         (C) Employer consummates a merger in which it is not the surviving
entity;

         (D) Substantially all Employer's assets are sold; or


                                      -2-
<PAGE>

         (E) Employer's stockholders approve the dissolution or liquidation of
Employer; then


         (ii)      (A) All stock options and warrants ("Rights") granted by
Employer to Employee under any plan or otherwise prior to the effective date of
the Change of Control, shall become vested, accelerate and become immediately
exercisable.

                   (B) If at any time within two years of the said Change of
Control, Employee is not retained by Employer or the surviving entity, as
applicable, under terms and conditions substantially similar to those herein, or
if Employee's duties require employee to move to a location not acceptable to
Employee, then in addition, Employee shall be eligible to receive a one-time
cash bonus, equal on an after-tax basis to two times his average compensation
for the three previous fiscal years. Such compensation shall include salary,
bonus, and any other compensation pursuant hereto. Said bonus shall be paid
within thirty(30) days of the change of Employee's employment conditions.

         5. Expenses. Employee shall be reimbursed for all of his actual
out-of-pocket expenses incurred in the performance of his duties hereunder,
provided such expenses are acceptable to Employer, which approval shall not be
unreasonably withheld, for business related travel and entertainment expenses,
and that Employee shall submit to Employer reasonably detailed receipts with
respect thereto.

         6. Vacation. Employee shall be entitled to receive four (4) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used shall be paid at the salary rate of Employee in effect at the time of
employment separation.

         7. Secrecy. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning the internal affairs, business operations,
and trade secrets of Employer.

         8. Covenant Not to Compete.

            (a) Subject to, and limited by, Section 10(b), Employee will not,
at any time, during the term of this Agreement, and for one (1) year thereafter,
either directly or indirectly, engage in, with or for any enterprise,
institution, whether or not for profit, business, or company, competitive with
the business (as identified herein) of Employer as such business may be
conducted on the date thereof, as a creditor, guarantor, or financial backer,
stockholder, director, officer, consultant, advisor, employee, member, or
otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by Employee, his
spouse or his children is permitted if such investment is not more than four
percent (4%) of the total debt or equity capital of any such competitive
enterprise or business and further provided that said competitive enterprise or
business is a publicly held entity whose stock is listed and traded on a
national stock exchange, the NASDAQ Stock Market, or the over-the-counter
bulletin board or any successor thereto. As used in this Agreement, the business
of Employer shall be deemed to include wholesale monitoring and related support
services, and financing solutions and products, within the security alarm
industry.


                                      -3-
<PAGE>

            (b) For a period one year from the date of termination of this
agreement Employee shall not contact or solicit any of the Employer's dealers,
customers, employees or suppliers.

         9. Termination.

            a. Termination by Employer

               (i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) Employee's misconduct as
could reasonably be expected to have a material adverse effect on the business
and affairs of Employer, (B) the Employee's disregard of lawful instructions of
Employer's Board of Directors consistent with Employee's position relating to
the business of Employer or neglect of duties or failure to act, which, in each
case, could reasonably be expected to have a material adverse effect on the
business and affairs of Employer,(C) engaging by the Employee in conduct that
constitutes activity in competition with Employer; (D) the conviction of
Employee for the commission of a felony; and/or (E) the habitual abuse of
alcohol or controlled substances. Notwithstanding anything to the contrary in
this Section 9(a)(i), Employer may not terminate Employee's employment under
this Agreement for Cause unless Employee shall have first received notice from
the Board advising Employee of the specific acts or omissions alleged to
constitute Cause, and such acts or omissions continue after Employee shall have
had a reasonable opportunity (at least 10 days from the date Employee receives
the notice from the Board) to correct the acts or omissions so complained of. In
no event shall alleged incompetence of Employee in the performance of Employee's
duties be deemed grounds for termination for Cause.


                                      -4-
<PAGE>

               (ii) This agreement automatically shall terminate upon the death
of Employee, except that Employee's estate shall be entitled to receive any
amount accrued under Section 4(a).

            b. Termination by Employee

               (i) Employee shall have the right to terminate his employment
under this Agreement upon 30 days' notice to Employer given within 90 days
following the occurrence of any of the following events (A) through (G):

                   (A) Employee is not elected or retained as President of KC
Acquisition Corp.


                   (B) Employer acts to materially reduce Employee's duties and
responsibilities hereunder. Employee's duties and responsibilities shall not be
deemed materially reduced for purposes hereof solely by virtue of the fact that
Employer is (or substantially all of its assets are) sold to, or is combined
with, another entity, provided that Employee shall continue to have the same
duties and responsibilities with respect to Employer's business, and Employee
shall report directly to the chief executive officer and/or board of directors
of the entity (or individual) that acquires Employer or its assets.

                   (C) Employer acts to change the geographic location of the
performance of Employee's duties from the Albany, New York area. For purposes of
this Agreement, the Albany, New York area shall be deemed to be the area within
30 miles of the current address of the Employer as set forth above.

                   (D) A Material Reduction (as hereinafter defined) in
Employee's rate of base compensation, or Employee's other benefits. "Material
Reduction" shall mean a ten percent (10%) differential;

                   (E) A failure by Employer to obtain the assumption of this
Agreement by any successor;

                   (F) A material breach of this Agreement by Employer, which is
not cured within thirty (30) days of written notice of such breach by Employer;

                   (G) A Change of Control.

               (ii) Anything herein to the contrary notwithstanding, Employee
may terminate this Agreement upon thirty (30) days written notice.


                                      -5-
<PAGE>

               (iii) If Employee shall terminate this Agreement under Section
9(b)(i), Employee shall be entitled to receive 12 months salary. Other than the
payment of 12 months salary to Employee, Employer shall have no further
obligation to compensate Employee pursuant to Section 4 above. If Employee shall
terminate this Agreement pursuant to Section 9(b)(ii), Employee shall only be
entitled to any accrued and unpaid compensation as of the date of termination as
provided in Section 4(a)(i).

         10. Consequences of Breach by Employer;
             Employment Termination

             a. If this Agreement is terminated pursuant to Section 9(b)(i)
hereof, or if Employer shall terminate Employee's employment under this
Agreement in any way that is a breach of this Agreement by Employer, the
following shall apply:


                (i) Employee shall be entitled to payment of 24 months salary;
and

                (ii) Employee shall be entitled to payment of any previously
declared bonus as provided in Section 4(a) above.

             b. In the event of termination of Employee's employment pursuant to
Section 9(b)(i) of this Agreement, the provisions of Section 8 shall not apply
to Employee.

         11. Remedies

         Employer recognizes that because of Employee's special talents, stature
and opportunities in the computer industry, and because of the special creative
nature of and compensation practices of said industry and the material impact
that individual projects can have on the Company's results of operations, in the
event of termination by Employer hereunder (except under Section 9(a)(i) or
(iii), or in the event of termination by Employee under Section 9(b)(i) before
the end of the agreed term, the Employer acknowledges and agrees that the
provisions of this Agreement regarding further payments of base salary, bonuses
and the exercisability of Rights constitute fair and reasonable provisions for
the consequences of such termination, do not constitute a penalty, and such
payments and benefits shall not be limited or reduced by amounts' Employee might
earn or be able to earn from any other employment or ventures during the
remainder of the agreed term of this Agreement.

         12. Excise Tax. In the event that any payment or benefit received or to
be received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.


                                      -6-
<PAGE>

         13. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.


         14. Entire Agreement; Survival. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and supersedes, effective as of the date hereof any prior agreement or
understanding between Employer and Employee with respect to Employee's
employment by Employer. The unenforceability of any provision of this Agreement
shall not effect the enforceability of any other provision. This Agreement may
not be amended except by an agreement in writing signed by the Employee and the
Employer, or any waiver, change, discharge or modification as sought. Waiver of
or failure to exercise any rights provided by this Agreement and in any respect
shall not be deemed a waiver of any further or future rights.

             b. The provisions of Sections 4, 7, 8, 9(a)(ii), 9(c), 10, 11, 12,
14, 16, 17 and 18 shall survive the termination of this Agreement.

         15. Assignment. This Agreement shall not be assigned to other parties.

         16. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the State of New York, without regard to the conflicts of laws principles
thereof.

         17. Notices. All notices, responses, demands or other communications
under this Agreement shall be in writing and shall be deemed to have been given
when

             a. delivered by hand;

             b. sent be telex or telefax, (with receipt confirmed), provided
that a copy is mailed by registered or certified mail, return receipt requested;
or


                                      -7-
<PAGE>

             c. received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as the party may designate to itself by notice to the other
parties:

                (i) if to the Employer:

                    Integrated Alarm Services Group, Inc.
                    99 Pine Street, 5th Floor
                    Albany, New York
                    Attention: Mary Ann McGinn

                    Telefax: (518) 449-4894
                    Telephone: (518) 449-5131

                    Gersten, Savage, Kaplowitz,
                    Wolf & Marcus LLP
                    101 East 52nd Street
                    9th Floor
                    New York, New York 10022

                    Attention: Arthur S. Marcus, Esq.

                    Telefax: (212) 980-5192
                    Telephone: (212) 752-9700

               (ii) if to the Employee:

                    Curtis Quady
                    2704 Wren Court
                    Burnsville, Minnesota 55306-5250


         18. Severability of Agreement. Should any part of this Agreement for
any reason be declared invalid by a court of competent jurisdiction, such
decision shall not affect the validity of any remaining portion, which remaining
provisions shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties that they would have executed the remaining
portions of this Agreement without including any such part, parts or portions
which may, for any reason, be hereafter declared invalid.


                                      -8-
<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this agreement as of
the day and year first above written.

                                     INTEGRATED ALARM SERVICES GROUP, INC.

                                             By: /s/ Timothy M. McGinn
                                                ----------------------------
                                                 Timothy M. McGinn
                                                 Chief Executive Officer

                                                 /s/ Curtis Quady
                                                ----------------------------
                                                 Curtis Quady


                                      -9-