<PAGE>


                           SECOND AMENDED AND RESTATED

                                 PROMISSORY NOTE


$12,500,000                                                  Original Issue Date
                                                             December 1, 1999

         FOR VALUE RECEIVED, DUALSTAR TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Company"), hereby promises to pay to MADELEINE, L.L.C., a New
York limited liability company (the "Holder"), at 450 Park Avenue, 28th Floor,
New York, New York 10022 or at such other place as the Holder may in writing
designate, the principal sum of Twelve Million Five Hundred Thousand Dollars
($12,500,000) with interest (computed on the basis of a 360 day year and the
actual number of days elapsed), from November 8, 2000, at the rate of eleven
percent (11%) per annum on the balance of the principal from time to time
remaining unpaid, all on the terms and conditions set forth herein (the "Note").

         1. Maturity, Interest and Amortization. Unless accelerated pursuant to
the terms of this Note, the unpaid principal balance of this Note together with
all unpaid interest accrued thereon shall be due and payable on September 30,
2007 (the "Maturity Date", with the period of time from the date hereof until
the Maturity Date being referred to herein as the "Term"). Interest on the Note
shall accrue at a rate of eleven percent (11%) per annum and shall be payable
quarterly in arrears on each March 15, June 15, September 15, and December 15,
in cash. Principal and interest are payable in lawful money of the United
States. All payments received by Holder under this Note shall be credited first
to any charges or other expenses for which Holder is entitled to payment
hereunder, next to accrued but unpaid interest, and third to unpaid principal.
The Company shall have the right at any time, on at least thirty (30) days'
notice, to prepay any portion of the outstanding principal of this Note without
penalty.

         Notwithstanding any contrary provision contained herein, (i)
immediately upon any Disposition (as such term is hereinafter defined) by the
Company or any of its subsidiaries, the Company shall prepay the unpaid
principal balance of this Note together with all unpaid interest accrued thereon
in an amount equal to 100% of the Net Cash Proceeds (as such term is hereinafter
defined) received by the Company or any of its subsidiaries or affiliates in
connection with such Disposition; provided, that the Company shall in any event
give the Holder thirty (30) business days written notice prior to the occurrence
of any event giving rise to a prepayment obligation under this clause (i); (ii)
immediately upon the incurrence by the Company or any of its subsidiaries of any
Indebtedness or the issuance or sale by the Company or any of its subsidiaries
of any capital stock (other than upon exercise of the Company's Class C
Warrants, Class D Warrants or Class E Warrants or other warrants or options
outstanding as of the date hereof, or upon the issuance of common stock, par
value $.01 per share, of the Company (the "Common Stock"), warrants, options or
other securities convertible into Common Stock issued or granted in exchange
for, or related to the Company obtaining, access rights to provide
telecommunications and related services (including video, voice and data
services) to any properties and permitted to be issued under the Securities
Purchase Agreement (as hereinafter defined)), the Company shall prepay the
unpaid principal balance of this Note together with all


<PAGE>

unpaid interest accrued thereon in an amount equal to 100% of the Net Cash
Proceeds received by the Company or any of its subsidiaries in connection
therewith; provided, that the Company shall in any event give the Holder thirty
(30) business days written notice prior to the occurrence of any event giving
rise to a prepayment obligation under this clause (ii); provided, further, that
any amount of unpaid principal balance together with unpaid interest which is
not prepaid by the Company pursuant to clause (i) and/or (ii) shall remain an
obligation of the Company on such terms and conditions set forth herein.

         "Disposition" for purposes hereof shall mean any transaction, or series
of transactions, pursuant to which the Company or any of its subsidiaries either
(i) sells, assigns, transfers or otherwise disposes of any property or assets
(whether now owned or hereafter acquired) to any other Person, in each case
whether or not the consideration therefor consists of cash, securities or other
assets owned by the acquiring Person, excluding any sales of inventory in the
ordinary course of business on customary business terms or (ii) issues any
capital stock of the Company or such subsidiary including issuance of warrants,
options or convertible securities convertible into capital stock.

         "Unrestricted Subsidiary" for the purposes hereof shall mean any
subsidiary of the Company other than OT, CMA, CA, MA, PC, BMS or IC.

         "Indebtedness" for purposes hereof shall mean indebtedness for borrowed
money, but shall not include accounts payable to trade creditors created or
assumed in the ordinary course of business in connection with obtaining
materials or services or amounts owed to employees of the Company in the
ordinary course of business.

         "Market Price" for the purposes hereof shall mean (i) the average
closing bid price for the twenty (20) consecutive trading days prior to the
measuring date, of the Common Stock as reported by the National Association of
Securities Dealers, Inc. Automatic Quotation System or (ii) the average last
reported sale price, for the twenty (20) consecutive trading days prior to the
measuring date, on the primary exchange on which the Common Stock is traded, if
the Common Stock is traded on a national securities exchange.

         "Net Cash Proceeds" for purposes hereof shall mean (i) with respect to
any Disposition by the Company or any of its subsidiaries, the amount of cash
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of the Company or any of its subsidiaries, in connection therewith after
deducting therefrom only (A) the principal amount of any indebtedness secured by
any lien on any asset (other than indebtedness assumed by the purchaser of such
asset) which is required to be, and is, repaid in connection with such
Disposition (other than indebtedness under this Note), (B) reasonable expenses
related thereto reasonably incurred by the Company or any of its subsidiaries in
connection therewith, (C) transfer taxes paid by the Company or any of its
subsidiaries in connection therewith and (D) net income taxes to be paid in
connection with such Disposition (after taking into account any tax credits or
deductions and any tax sharing arrangements and (ii) with respect to the
issuance or incurrence of any indebtedness by the Company or any of its
subsidiaries, or the sale or issuance by the Company or any of its subsidiaries
of any shares of its capital stock, the aggregate amount of cash received
(directly or


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<PAGE>


indirectly) from time to time (whether as initial consideration or through the
payment of deferred consideration) by or on behalf of the Company or any of its
subsidiaries in connection therewith after deducting therefrom only reasonable
brokerage commissions, underwriting fees and discounts, legal fees and similar
fees and commissions.

         1A. Use of Proceeds. The Company shall use the principal received
pursuant to this Note for working capital and general corporate purposes
including lending funds to its wholly-owned subsidiary OnTera, Inc., formerly
known as DualStar Communications Inc. ("OT") to finance the development of its
telecommunications business.

         2. Event of Default/Remedies.

            a.   Any of the following events shall constitute an Event of
     Default:

              (i) (A) any failure to pay when due (whether at stated maturity,
         by reason of acceleration of the maturity hereof, in connection with a
         mandatory redemption pursuant to Section 6(b), or otherwise) any
         principal hereof or any interest hereon or fail to make the Change of
         Control Offer specified in Section 6(b); (B) any material breach by
         the Company of any of its other obligations or covenants under this
         Note, the Guaranties, the Security Agreements or the Pledge and
         Security Agreements (as such terms are hereinafter defined), provided
         that such breach is not cured by the Company within ten (10) days from
         the date of receipt of any notice from Holder of such breach; or (C)
         any material breach by OT, Centrifugal/Mechanical Associates, Inc.
         ("CMA"), Centrifugal Associates, Inc. ("CA"), Mechanical Associates,
         Inc. ("MA"), ParaComm, Inc. ("PC"), BMS Electric, Inc. ("BMS") or
         Integrated Controls Enterprises, Inc. ("IC") of its obligations or
         covenants under their respective guaranties (the "Guaranties") of this
         Note, the Security Agreements (as herein defined), or the Pledge and
         Security Agreements (as herein defined); or

              (ii) the Company or any subsidiary (other than an Unrestricted
         Subsidiary) thereof (A) becomes insolvent or admits in writing its
         inability to pay its debts as they mature, (B) makes any assignment
         for the benefit of creditors, or (C) applies for or consents to the
         appointment of a receiver or trustee for the Company or such
         subsidiary or for a substantial part of the Company's or such
         subsidiary's property or business, or a receiver or trustee otherwise
         is appointed and is not discharged within 45 days after such
         appointment (for purposes of this subsection, the Company or such
         subsidiary shall be deemed "insolvent" if, as of the Company's or such
         subsidiary's most recent balance sheet, the sum of its debts exceed
         the sum of its assets, at a fair valuation, or it is unable to pay its
         debts as they come due); or

              (iii) any bankruptcy, insolvency, reorganization or liquidation
         proceeding or other proceeding for relief under any bankruptcy law or
         any law for the relief of debtors is instituted by or against the
         Company or any


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<PAGE>

         subsidiary (other than an Unrestricted Subsidiary), and if against the
         Company or any subsidiary (other than an Unrestricted Subsidiary) such
         proceeding is not vacated within 45 days; or

              (iv) any money judgment, lien, writ or warrant of attachment, or
         similar process is entered of filed against the Company or any
         subsidiary (other than an Unrestricted Subsidiary) or any of the
         assets of the Company or any subsidiary (other than an Unrestricted
         Subsidiary) and remains unvacated, unbonded, unstayed, undismissed or
         undischarged for a period of 45 days or in any event later than 10
         days before the date of any proposed sale thereunder, provided that
         such a lien (singly or, if more than one, cumulatively) of less than
         $250,000 arising in the ordinary course of the Company's or any
         subsidiary's business, even if it remains unbonded, unstayed or
         undismissed for 45 days, shall not be deemed an Event of Default if
         the Company has been advised by counsel in writing and thus believes
         in good faith that it has a valid defense to the claim giving rise to
         such lien and promptly so advises Holder in writing and timely
         contests such claim; or

              (v) the Company or any subsidiary (A) defaults on or breaches in
         any material respect any material contract with or obligation when due
         to a third party or (B) defaults in the performance of any material
         obligation to a third party or Holder incurred for money borrowed of
         $500,000 or more; or

              (vi) the common stock is delisted from the NASDAQ National Market
         System ("NASDAQ"), unless such delisting occurs in connection with the
         common stock being traded on either the American Stock Exchange or the
         New York Stock Exchange; or

              (vii) the Company shall fail to comply with the provisions of
         Section 1A hereof;

              (viii) the Company shall fail to perform in a timely manner, in
         any material respect, its obligations (or disclaim any obligations)
         pursuant to that certain Securities Purchase Agreement dated November
         8, 2000 (as the same may be amended from time to time, the "Securities
         Purchase Agreement") by and among the Company, the Holder and DSTR
         Warrant Co., LLC ("DSTRW") or the Class E Warrant Agreement dated
         November 8, 2000 (as the same may be amended from time to time, the
         "Warrant Agreement") by and between the Company and DSTRW; or

              (ix) an event, development or circumstance resulting in a Company
         Material Adverse Effect (as defined in the Securities Purchase
         Agreement) shall have occurred.

            b. Remedies. Upon the occurrence and during the continuance of an
     Event of Default described in subsections 2(a)(i)(A), 2(a)(ii), 2(a)(iii),
     2(a)(x), or 2(a)(xi) above, all indebtedness under this Note shall
     automatically be immediately due and


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<PAGE>

     payable. Upon the occurrence and during the continuance of any other Event
     of Default, Holder at its option and, unless otherwise specified below,
     upon no less than five (5) business days' written notice to the Company (or
     such other notice as is required by law), may do any one or more of the
     following:

              (i) declare all indebtedness under this Note immediately due and
         payable and credit any sums received thereafter to such indebtedness
         in whatever priority it shall elect; provided, however, that
         application of sums so received shall not serve to waive or cure any
         default existing under this Note nor to invalidate any notice of
         default or any act done pursuant to such notice and shall not
         prejudice any rights of Holder; and

              (ii) exercise any or all rights provided or permitted by law or
         granted pursuant to this Note, the Securities Purchase Agreement, the
         Guaranties or that certain Pledge Agreement, dated November 30, 1999,
         by and between the Company and Holder relating to all of the common
         stock of CA, MA ,PC, IC and High-Rise, the Pledge and Security
         Agreements, dated as of November 30, 1999, by and between CA and MA
         and the Holder relating to all of the common stock of CMA, and the
         Pledge and Security Agreement, dated as of November 8, 2000 by and
         between IC and the Holder relating to all of the common stock of BMS
         (collectively, the "Pledge and Security Agreements") and those certain
         Security Agreements, dated as of November 30, 1999, by and between CMA
         and the Holder and dated November 8, 2000 by and between OT, PC, BMS,
         IC and the Holder (collectively, the "Security Agreements"), in such
         order and in such manner as Holder may, in its sole judgment,
         determine.

         3. Default Rate. Any amounts not paid when due shall thereafter bear
interest at a rate per annum equal to the 18.0%. If such default rate would but
for this sentence, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Holder in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to the Company.

         4. Waiver. The Company hereby waives any right of offset it may now or
hereafter have against Holder, and the Company hereby also waives diligence,
presentment, protest and demand, notice of protest, dishonor and nonpayment of
this Note and expressly agrees that, without in any way affecting the liability
of the Company hereunder, Holder may in its sole discretion extend any maturity
date or the time for payment of any installment due hereunder, accept security,
release any party liable hereunder and release any security hereafter securing
this Note.

         5. Notices. Any notice required by the provisions of this Note shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile, (iii)
five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (iv) two (2) days after deposit with a
nationally recognized overnight courier, with written verification of receipt.
All



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<PAGE>

notices shall be addressed to Holder at 450 Park Avenue, 28th Floor, New York,
New York 10022, Attention: Mark A. Neporent or at such subsequent address as
Holder shall provide to the Company in writing. Any notice to the Company shall
be addressed to the Company at One Park Avenue, New York, New York 10016 or at
such subsequent address as the Company shall provide to the Holder in writing.

         6. Covenants.

            a. Certain Restrictions. So long as the principal balance of the
     Note remains outstanding, without the consent of the Holder, the Company
     agrees as follows (together with the covenants and agreements of the
     Company contained in Article V of the Securities Purchase Agreement, the
     "Covenants"):

              (i) The Company will not alter, amend or modify in any respect
         the rights, preferences or privileges of the Note.

              (ii) The Company and its subsidiaries shall not engage in any
         Disposition unless the terms thereof are approved by the Holder, and
         the Net Cash Proceeds thereof are applied to the prepayment of the Note
         or otherwise applied in accordance with Section 1 of this Note.

              (iii) The Company and its subsidiaries (other than any
         Unrestricted Subsidiary) shall not make, or commit to make, any
         Investment(s) in any Unrestricted Subsidiary in excess of $20,000 in
         the aggregate. "Investments" for purposes hereof shall mean all
         investments in the forms of direct or indirect loans (including
         guarantees of Indebtedness or other obligations), advances or capital
         contributions, purchases or other acquisitions for consideration of
         Indebtedness, equity interests (including, without limitation, capital
         stock, warrants, options or other rights to acquire capital stock) or
         other securities, together with all other items that are or would be
         classified as investments on a balance sheet prepared in accordance
         with generally accepted accounting principles.

            b. Mandatory Redemption. In connection with any Change of Control
     (as defined below), the Company shall, in accordance with the procedures
     set forth in this Section 6(b), offer to repurchase all or any portion of
     the Note designated by the Holder pursuant to the offer described below
     (the "Change of Control Offer") at an offer price in cash equal to 101% of
     the outstanding principal amount to be so repurchased plus accrued and
     unpaid interest thereon through the Change of Control Payment Date (as
     defined below) (the "Change of Control Payment"). Not later than 30 days
     prior to any such Change of Control, the Company shall mail a notice (a
     "Change of Control Notice") to the Holder stating: (i) that a Change of
     Control is to occur and describing the terms thereof in reasonable detail,
     including the identity of the acquiring person(s) and its capitalization;
     (ii) that the Change of Control Offer is being made pursuant to this
     Section 6(b) and that the Note (or any portion thereof designated by the
     Holder) shall be accepted for payment and redemption; (iii) the Redemption
     Price and the redemption date, which should be no later than the date the
     Change of Control shall occur


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<PAGE>

     (the "Change of Control Payment Date"); (iv) that, if not tendered, the
     Note (or untendered portion thereof) shall continue to accrue interest; (v)
     that, unless the Company defaults in the payment of the Change of Control
     Payment, the portion of the Note accepted for payment and redemption
     pursuant to the Change of Control Offer shall cease to accrue interest
     after the Change of Control Payment Date; (vi) that the Holder shall be
     required to surrender this Note pursuant to the Change of Control Offer to
     the Company by the close of business no later than the business day
     preceding the Change of Control Payment Date; (vii) that the Holder is
     entitled to withdraw its election to redeem the Note or any portion thereof
     if the Company receives, not later than the close of business on the
     business day immediately preceding the Change of Control Payment Date, a
     telegram, telex, facsimile transmission or letter, including a statement
     that such Holder is withdrawing its election to have the Note or any
     portion thereof redeemed; and (viii) that in the event of the Note being
     redeemed only in part, such Holder shall be issued a replacement Note in
     the aggregate amount of the unredeemed principal, and the accrued and
     unpaid interest thereon shall not be affected by consummation of the Change
     of Control Offer. The Company shall comply with the applicable securities
     laws and regulations thereunder to the extent such laws and regulations are
     applicable to the repurchase or exchange of shares in connection with
     Change of Control.

            On a Change of Control Payment Date, the Company shall accept for
     payment the Note, to the extent properly tendered pursuant to the Change of
     Control Offer, and promptly pay to the tendering Holder (by wire transfer,
     in accordance with the Holder's instructions, if so requested, and
     otherwise by certified or official bank check) the Change of Control
     Payment. The Corporation shall promptly deliver to the tendering Holder a
     replacement Note in the aggregate amount of the unredeemed principal, and
     the accrued and unpaid interest thereon shall not be affected by
     consummation of the Change of Control Offer.

            c. "Change of Control" means the occurrence of any of the following:

              (i) the acquisition, directly or indirectly, by any person or
         entity (a "Person") or group (within the meaning of Section 13(d)(3)
         of the Exchange Act), other than the Holder and its affiliates (the
         "Permitted Holder Group"), of beneficial ownership of more than 20% of
         the aggregate outstanding voting power of any and all shares,
         interests, participations or other equivalents (however designated and
         whether or not voting) of stock or other equity interests issued by
         the Company (the "Capital Stock");

              (ii) (A) during any period of two years, individuals who at the
         beginning of such period constituted the Board of Directors of the
         Company (together with any new directors whose election by such Board
         of Directors, or whose nomination for election by the shareholders of
         the Company, was approved by a vote of at least 75% of the directors
         of the Company then still in office who were either directors at the
         beginning of such period, or whose election or nomination for election
         was previously so approved) cease for any reason to constitute at
         least two-thirds of the members of the Board of Directors of the


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<PAGE>

         Company then in office; or (B) the nominees to the Board of Directors
         of the Company who are designated by the Holder in accordance with the
         Securities Purchase Agreement shall not be elected to the Board of
         Directors at any stockholders' meeting called and convened for such
         purpose;

              (iii) (A) the Company consolidates with or merges into another
         entity or (B) any entity consolidates with or merges into the Company,
         and such transaction is one in which the outstanding voting Capital
         Stock of the Company is reclassified or changed into or exchanged for
         cash, securities or other property, other than any such transaction in
         which (x) the stockholders of the Company immediately prior to such
         transaction retain beneficial ownership of at least 51% of the
         aggregate outstanding voting power of the capital stock of the
         resulting or surviving entity, and (y) no Person or group (other than
         the Permitted Holder Group) obtains beneficial ownership of more than
         20% of the aggregate outstanding voting power of the capital stock of
         the resulting or surviving entity;

              (iv) the Company or any of its subsidiaries, in any one
         transaction or series of related transactions, conveys, transfers or
         leases all or substantially all of its consolidated property and
         assets to any Person or group (within the meaning of Section 13(d)(3)
         of the Exchange Act), other than a sale of certain subsidiaries of the
         Company to M/E Contracting Corp. pursuant to that certain Stock
         Purchase Agreement, dated as of March 28, 2000, between the Company
         and M/E Contracting Corp.; or

              (v) the adoption of a plan relating to the liquidation or
         dissolution of the Company.

         7. Legal Fees. The Company agrees to pay all Holder's reasonable costs
and expenses actually incurred by Holder in connection with the good faith
enforcement of any obligation of the Company under this Note, including without
limitation reasonable attorneys' fees.

         8. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York.

         9. Second Amendment and Restatement. This Note amends and restates in
its entirety (and is given in substitution for but not in satisfaction of) the
Amended and Restated Promissory Note dated as of March 1, 2000 executed by the
Company in favor of the Holder in the original principal amount of $7,000,000,
as amended to date.


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         10. Severability. Should any provision or portion of this Note be held
unenforceable or invalid for any reason, the remaining provisions and portions
of this Note shall be unaffected by such holding.




DUALSTAR TECHNOLOGIES CORPORATION

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

Its:
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