<PAGE>

1

                         Integrated Alarm Services, Inc.


                                 PROMISSORY NOTE



THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.


$                                                               February , 2003




FOR VALUE RECEIVED, INTEGRATED ALARM SERVICES, INC., a Delaware corporation
("Company"), with its principal office at Capital Center, 5th Floor, 99 Pine
Street, Albany, New York 12207, promises to pay to the order of ________
_____________________ having an office for the transaction of business
at ___________________________________________________("Holder"), or registered
assigns, on April 30, 2004 ("Maturity Date"), the principal amount of
____________________________ Dollars ($ ______________), in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public or private debts, together with interest
on the unpaid balance of said principal amount from time to time outstanding at
the rate of nine (9%) percent per annum without compounding payable on the
Maturity Date; provided, however, that if this Note is not paid in full, or
redeemed, on or before the Maturity Date, interest shall accrue on the
outstanding principal of and, to the extent permitted by law, interest on the
Note from the Maturity Date up to and including the date of payment at a rate
equal to the lesser of twelve percent (12%) per annum or the maximum interest
rate allowed under applicable law. Interest only at the aforesaid rate of nine
(9%) percent per annum will be paid in quarterly installments commencing on the
first business day of June 2003, and continuing on the first business day of
each third month thereafter to and including the Maturity Date. This Note shall
be paid pro rata with certain additional notes of like tenor (which, together
with this Note, are in the aggregate principal amount of up to $4,300,000
(collectively, the "Notes")) being issued simultaneously herewith. Payments of
principal and interest are to be made at the address of the Holder designated
above or at such other place as the Holder shall have notified the Company in
writing at least ten (10) days before such payment is due.

         1. Events of Default. (a) Upon the occurrence of any of the following
events (herein called "Events of Default"):

                           (i) The Company shall fail to pay the principal of or
         interest on this Note pursuant to the terms of this Note;

                           (ii) (A) The Company shall commence any proceeding or
         other action relating to it in bankruptcy or seek reorganization,
         arrangement, readjustment of its debts, receivership, dissolution,
         liquidation, winding-up, composition or any other relief under any
         bankruptcy law, or under any other insolvency, reorganization,
         liquidation, dissolution, arrangement, composition, readjustment of
         debt or any other similar act or law, of any jurisdiction, domestic or
         foreign, now or hereafter existing; or (B) the Company shall admit the
         material allegations of any petition or pleading in connection with any
         such proceeding; or (C) the Company shall apply for, or consent or
         acquiesce to, the appointment of a receiver, conservator, trustee or
         similar officer for it or for all or a substantial part of its
         property; or (D) the Company shall make a general assignment for the
         benefit of creditors;

<PAGE>

                           (iii) (A) The commencement of any proceedings or the
         taking of any other action against the Company in bankruptcy or seeking
         reorganization, arrangement, readjustment of its debts, liquidation,
         dissolution, arrangement, composition, or any other relief under any
         bankruptcy law or any other similar act or law of any jurisdiction,
         domestic or foreign, now or hereafter existing and the continuance of
         any of such events for forty-five (45) days undismissed, unbonded or
         undischarged; or (B) the appointment of a receiver, conservator,
         trustee or similar officer for the Company for any of its property and
         the continuance of any of such events for forty-five (45) days
         undismissed, unbonded or undischarged; or (C) the issuance of a warrant
         of attachment, execution or similar process against any of the property
         of the Company and the continuance of such event for forty-five (45)
         days undismissed, unbonded and undischarged;

                           (iv) Any breach of any of the Company's
         representations or warranties contained in the Subscription Agreement
         or the Security Agreement; or

                           (v) The Company shall fail to perform any obligation
         of the Company contained in the Subscription Agreement or the Security
         Agreement, after giving effect to any applicable notice provisions and
         cure periods.

then, and in any such event, the Holder may at its option and with written
notice to the Company, declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived. The Events of Default listed herein are solely for the purpose
of protecting the interests of the Holder of this Note. If the Note is not paid
in full upon acceleration, as required above, interest shall accrue on the
outstanding principal of and interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
fifteen (15%) percent per annum or the maximum interest rate permitted by
applicable law.

                  (b) Non-Waiver and Other Remedies. No course of dealing or
delay on the part of the Holder of this Note in exercising any right hereunder
shall operate as a waiver or otherwise prejudice the right of the Holder of this
Note. No remedy conferred hereby shall be exclusive of any other remedy referred
to herein or now or hereafter available at law, in equity, by statute or
otherwise.

                  (c) Collection Costs; Attorney's Fees. In the event this Note
is turned over to an attorney for collection, or Holder otherwise seeks advice
of an attorney in connection with the exercise or enforcement of Holder's rights
hereunder, the Company agrees to pay all reasonable costs of collection,
including reasonable attorney's fees and expenses and all out-of-pocket expenses
incurred by the Holder in connection with such collection efforts, which amounts
may, at the Holder's option, be added to the principal hereof.

         2. Obligation to Pay Principal and Interest; Covenants. No provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
place, at the respective times, at the rates, and in the currency herein
prescribed.


                                       2
<PAGE>

         3. Affirmative Covenants. The Company covenants and agrees that, while
this Note is outstanding, it shall:

                  (a) Pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income and profits, or upon any
properties belonging to it before the same shall be in default; provided,
however, that the Company shall not be required to pay any such tax, assessment,
charge or levy which is being contested in good faith by proper proceedings and
adequate reserves for the accrual of same are maintained if required by
generally accepted accounting principles;

                  (b) Preserve its corporate existence and continue to engage in
business of the same general type as conducted as of the date hereof;

                  (c) Comply in all respects with all statutes, laws,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations and requirements ("Requirement(s)") of all
governmental bodies, departments, commissions, boards, companies or associates
insuring the premises, courts, authorities, officials, or officers, which are
applicable to the Company or its property; except wherein the failure to comply
would not have a material adverse effect on the Company or its property;
provided that nothing contained herein shall prevent the Company from contesting
the validity or the application of any Requirements.

         4. Required Consent. The Company may not modify any of the terms of
this Note without the prior written consent of the Holder.

         5. Lost Documents. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in the case of loss, theft or destruction) of indemnity
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Company will make and deliver in lieu of such Note a new Note
of like tenor and unpaid principal amount and dated as of the original date of
the Note.

         6. Miscellaneous.

                  6.1. Benefit. This Note shall be binding upon and inure to the
benefit of the parties hereto and their legal representatives, successors and
assigns.

                  6.2. Notices and Addresses. All notices, offers, acceptances
and any other acts under this Note (except payment) shall be in writing, and
shall be sufficiently given if delivered to the addressee in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:



                                       3
<PAGE>




         To Holder:               To Holder's address on page 1 of this Note

         To The Company:          Integrated Alarm Services, Inc.
                                  Capital Center, 5th Floor
                                  99 Pine Street
                                  Albany, New York 12207
                                  Telephone Number:  (518) 449-5131
                                  Facsimile Number:  (518) 449-4864

or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or five (5) business days after mailing.

                  (a) Governing Law. This Note and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed and interpreted according to the law of the State of New York
and agrees that service of process upon it mailed by certified mail to its
address shall be deemed in every respect effective service of process upon it in
any such suit, action or proceeding.

                  (b) Jurisdiction and Venue. The Company (i) agrees that any
legal suit, action or proceeding arising out of or relating to this Note shall
be instituted exclusively in New York State Supreme Court, County of Albany or
in the United States District Court for the Northern District of New York, (ii)
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of
Albany, and the United States District Court for the Northern District of New
York in any such suit, action or proceeding, and the Company further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in New York State Supreme Court, County of
Albany, or in the United States District Court for the Northern District of New
York and agrees that service of process upon it mailed by certified mail to its
address shall be deemed in every respect effective service of process upon it in
any such suit, action or proceeding.

                  (c) Section Headings. Section headings herein have been
inserted for reference only and shall not be deemed to limit or otherwise
affect, in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Note.

                  (d) Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements contained herein shall survive
the delivery of this Note.

                  IN WITNESS WHEREOF, this Note has been executed and delivered
on the date specified above by the duly authorized representative of the
Company.


                                    Integrated Alarm Services, Inc.


                                By: _____________________________________
                                    Name:
                                    Title:

                                       4