Document:

INTEGRATED INFORMATION SYSTEMS, INC.

                              EMPLOYMENT AGREEMENT

        This Agreement entered into on this 28th day of September, 2001, but
effective as of the 16th day of September, 2001 (the "Effective Date") by and
between INTEGRATED INFORMATION SYSTEMS, INC., a Delaware corporation with its
principal place of business located at 1480 Hohokam Drive, Tempe, Arizona, 85281
(hereinafter called "Employer"), and Don Megrath (hereinafter called
"Employee").

                                    RECITALS:

        WHEREAS, Employer is a corporation organized and incorporated under the
laws of the State of Delaware, and has its principal office in Maricopa County,
Arizona;

        WHEREAS, Employee is an individual residing in West Linn, Oregon and is
a citizen of the State of Oregon;

        WHEREAS, the parties to this Agreement have had a full and fair
opportunity to review and discuss the terms of this Agreement and consult with
independent legal counsel so that they have a full and complete understanding of
the legal and practical significance of each of the provisions of this
Agreement;

        WHEREAS, Employee voluntarily and freely desires to accept such
employment under the terms and conditions hereinafter set forth; and

        WHEREAS, Employee is a former employee and officer of STEP Technology,
Inc., ("STEP") and is entering into this Agreement with Employer pursuant to a
Master Transaction Agreement dated as of September 28, 2001 by and among STEP,
Employer, Employee and others (the "Master Agreement").

        NOW THEREFORE, in consideration of the foregoing premises and of the
conditions hereinafter set forth, it is hereby agreed as follows:

                                   AGREEMENT:

        1.      General Terms of Employment.

        As of September 16, 2001, Employee is to be employed according to the
terms of this Agreement and Employer's policies and procedures as they relate to
full-time employees, as they exist as of the Effective Date of this Agreement or
may be changed from time to time, in the full time position of Vice President,
Operations Support (the "Position").

        Employee's time, duties and responsibilities shall be devoted to helping
manage IIS corporate operations for profitability and revenue growth. Employee
shall perform such other duties as are commonly associated with this Position,
or as may be assigned

<PAGE>

orally or in writing by the Employer from time to time. Employee shall report to
IIS CFO or other executive designated by the IIS CEO.

        For purposes of calculating the receipt of health or other benefits,
including but not limited to 401(k) plans, bonuses and stock options, the
Effective Date of this Agreement is the commencement of Employee's employment
with Employer.

        Employee hereby resigns employment with STEP.

        2.      Compensation.

                (a)     Employer agrees to pay Employee an initial annual salary
of One Hundred Thirty Three Thousand Five Hundred and Fifty Two Dollars
($133.552) subject to employment taxes and other payroll deductions as may be
required by law or requested by Employee. The initial annual salary will be
discounted by 5% to $126,874 until the IIS has it's first profitable fiscal
quarter measured as positive earnings before interest and taxes ("EBIT"). Once
the first profitable quarter has been achieved, the base salary will be raised
to the full initial annual salary of $133,552 beginning the first month of the
subsequent quarter. There will be an annual review within one month of the
anniversary of the date of hire in which a salary raise commensurate with job
performance and to adjust for inflation will be made. Employee will also be
provided a quarterly bonus of up to 30% of base salary. Targets will be defined
each quarter by the IIS CFO.

                (b)     For purposes of this Agreement, "Portland Region," shall
include managing the assigned delivery services for profitability and revenue
growth. The initial responsibility will be for Delivery Services for the
Portland office.

                (c)     During the term of this Agreement, Employer shall
provide to Employee those benefits including, but not limited to health
coverage, dental coverage, 401(k), life and disability coverage as provided to
employees generally. Such health and life benefits provided to Employee shall be
paid for by Employer. Such health and life benefits provided to Employee's
spouse and dependents shall be paid one-half by Employer and one-half by
Employee. Upon presentment of proper documentation and receipts, Employer will
reimburse Employee for expenses reasonably incurred in connection with the
performance of duties in accordance with Employer's policies.

                (d)     Subject to approval by Employer's board of directors,
Employee shall be granted stock options, pursuant to a separate Employer Stock
Option Agreement, to purchase 60,000 shares of Employer's common stock (the
"Stock") at a per share exercise price equal to the closing price of Employer's
common stock on the day of grant and an exercise term of ten (10) years (the
"Stock Options"). Subject to approval by Employer's board of directors, an
additional 20,000 stock options will be granted upon Employee achieving goals
set forth by IIS CFO. The Stock Options shall vest one sixth (1/6th) each six
months until fully vested three (3) years from the Effective Date (i.e.
September 16, 2001). Should employee be terminated without cause as defined
below, the vesting of stock options which would vest within six months of
termination will accelerate such that they are immediately exercisable on
termination.

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<PAGE>

        3.      Term of Agreement.

        The term of this Agreement shall continue until three (3) years from the
Effective Date or until earlier terminated in accordance with this paragraph 3.
Employee may terminate this Agreement at any time upon four (4) weeks prior
written notice to Employer. If Employee terminates this Agreement, Employee will
perform all job duties to the maximum of his ability during the notification
period. Employer can at its option request Employee to discontinue work before
completion of notification period; but if Employer requests such early
termination, Employer will pay for four (4) weeks severance less the days
elapsed from the date of Employee's written notice to the date of Employer's
early termination of Employee. Employer may terminate Employee's employment with
or without cause as specified below.

                (a)     Termination for Cause. As used in this Agreement, the
term "for cause" shall mean and include: dishonesty; violation of a law that
involves a felony; misconduct; violating any provision of this Agreement; or
aiding a competitor of Employer. If Employer terminates Employee's employment
for cause, Employee shall be entitled to a distribution of pay up to and
including the date of Employee's termination. Upon the date of such termination
for cause, Employee's benefits will cease, subject to applicable COBRA laws and
regulations in effect at such time, and Employer shall provide to Employee a
written statement setting forth the reasons for Employee's for cause
termination. Employee, however, shall be entitled to any expense reimbursement,
draw, commission, bonus, or other incentive that has accrued to Employee's
benefit up to the date of such for cause termination. As of the date of a for
cause termination, all unvested options will immediately lapse. All Stock
Options that have vested as of the date of termination shall lapse on the date
of termination.

                (b)     Termination Without Cause. If Employer terminates
Employee without cause, Employee will be entitled to four (4) weeks (the "Notice
Period") severance pay from Employer, commencing on the date of termination (the
"Severance Period") which severance pay will be paid to Employee on the regular
due dates thereof. Employer has the option to extend the Severance Period by
paying corresponding additional severance pay for the number of days extended.
During the Notice Period Employee shall be entitled to full benefits and (i) all
Stock Options that have vested as of the date of termination shall remain vested
and freely exercisable by Employee for a period of three (3) months after the
effective date of termination. All unvested options will immediately lapse. At
Employee's request, at any time after Employee's for cause or without cause
termination, Employer shall, when contacted by another employer for a reference
regarding Employee, confirm only that Employee worked for Employer and the dates
of such employment.

        4.      Vacation.

        Employee shall be entitled to accrue four (4) weeks paid vacation per
year. Employer agrees to pay Employee a signing bonus equal to Employee's
accrued vacation with STEP as it stands on September 15, 2001. The amount of
this accrued vacation is 392.34 hours. This signing bonus will be paid in a
payroll check to Employee by

                                     - 3 -
<PAGE>

November 1, 2001 if Employee so elects. If Employee does not elect payment as
described in the previous sentence, he or she will receive his signing bonus, in
lieu of cash payment, in the form of a substantially identical vacation accrual
with Employer based on the number of hours of vacation accrued on the books of
STEP on September 15, 2001 (392.34). Any vacation taken by Employee between
September 16, 2001 and September 30, 2001 shall be deemed to have been received
by Employee as vacation taken in lieu of cash payment and the remaining signing
bonus shall be adjusted accordingly. Employee hereby releases and forgives the
obligation of STEP to pay the Employee's accrued vacation balance on resignation
from STEP.

        5.      Non-Compete.

        As a material part of the consideration given for this Agreement, during
the term of this Agreement and for a period of one (1) year following the
termination of Employee's employment, Employee agrees that he or she will not,
directly or indirectly, be connected in any manner whatsoever with the
ownership, management, operation, control, or financing of, and that he or she
will not own, manage, operate, control, be employed by, be associated with as an
independent contractor, participate in, finance, consult, or advise: (i) any
customer or prospective customer of Employer; or (ii) any business or
corporation which competes with Employer. For purposes of this Agreement, A
"customer" is defined as a person, business, organization, company, or any other
entity with whom Employer provided services to during the one (1) year
immediately preceding Employee's date of termination. A "prospective customer"
is defined as a person, business, organization, company, or any other entity
with whom Employer has begun substantive discussions to perform work or
submitted a bid or proposal during the one (1) year period preceding Employee's
date of termination. For purposes of this Agreement, "competes" shall mean the
providing services as a business or contractor of technology strategy
consulting, creative design, application development, network infrastructure
services, application management services, and hosting services of business on
the Internet. The running of the one (1) year period prescribed in this covenant
shall be tolled and suspended by the length of time Employee works in
circumstances that a court of competent jurisdiction subsequently finds to
violate the terms of this Section 5. If Employee is terminated by Employer
without cause, then upon completion of the Severance Period, Employee will be
entitled to accept employment or provide contract services to a competitor of
Employer; provided such employment or contract services do not violate other
provisions of this Agreement, including this Section 5 and Sections 6 and 9
below and Employee is not assisting in the creation of a new competitor to
Employer. This paragraph 5 shall survive the termination of this Agreement.

        6.      Non-Solicitation.

        Employee agrees that, during the term of this Agreement, and for a
period of two (2) years after termination of employment, he or she will not,
either directly or indirectly, for himself or herself or for any other party,
divert or attempt to divert any existing business or employees of Employer, or
induce, solicit, canvass or call upon any customer or prospective customer of
Employer or employee of Employer from continuing to do business with Employer.
For the purposes of this Agreement, a "customer" is defined as a

                                     - 4 -
<PAGE>

person, business, organization, company, or any other entity with whom Employer
provided services to or did business with during the one (1) year period
immediately preceding Employee's date of termination. A "prospective customer"
is defined as a person, business, organization, company, or any other entity
with whom Employer has begun substantive discussions to perform work or
submitted a bid or proposal to within six (6) months preceding Employee's date
of termination. The running of the two year period above shall be tolled and
suspended by the length of time Employee is in violation of this Section 6, as
determined by a court of competent jurisdiction. For the purposes of this
Agreement, an employee of Employer is defined as any person who is, or within
the 6-months preceding Employee's date of termination was, an employee of, or
consultant to, Employer. If Employee is terminated without cause by Employer,
then upon completion of the Severance Period, Employee will be entitled to
accept employment or provide contract services to a competitor of Employer;
provided, however, that such employment or contract services do not violate any
other provision of this Agreement, including this Section 6 and Sections 5 and
9, and Employee is not assisting in the creation of a new competitor to
Employer. This paragraph 6 shall survive the termination of this Agreement.

        7.      Cellular Telephone.

        During the term of Employee's employment, Employee shall be entitled to
the reasonable use of a cellular phone. The reasonable monthly service and fees
for such telephone shall be reimbursed by Employer.

        8.      Tele-Commuting.

        During the term of this Agreement, Employee may telecommute at such
times as are appropriate as long as such tele-commuting does not interfere with
Employee's full performance of duties and responsibilities.

        9.      Confidentiality and Return of Information.

        Employee's position with Employer requires considerable responsibility
and trust. Relying on Employee's undivided loyalty as pledged by this Agreement,
Employer expects to entrust to Employee highly sensitive confidential,
restricted, and proprietary information involving Employer's business, including
Trade Secrets. Employee acknowledges that it could prove very difficult to
isolate this protected information from business activities that Employee might
consider pursuing after termination of Employee's employment with Employer, and
in some instances, Employee may not be able to compete with Employer in certain
ways because of the risk that Employer's confidential and proprietary
information might be compromised. A "prospective customer" is defined as a
person, business, organization, company, or any other entity with whom Employer
has begun substantive discussions to perform work or submitted a bid or proposal
to within six (6) months preceding Employee's date of termination. Employee is
legally and ethically responsible for protecting and preserving Employer's
proprietary rights for use only for Employer's benefit, and this responsibility
may impose limitations on Employee's ability to pursue certain business
opportunities that might

                                     - 5 -
<PAGE>

interest Employee during or after his or her employment. Specifically, this can
include all information which is (a) applicable to the business of Employer or
STEP; or (b) Trade Secrets.

        For the purposes of this Agreement, "Trade Secrets" are defined to be
proprietary data that has been researched, compiled, developed and/or maintained
by Employer or STEP, and which is not generally known within the industry and
which could provide any value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use.

        Trade Secrets include, but are not limited to, information, ideas,
knowledge, data, or know-how related to products, processes, software, designs,
formulae, tests, research, business and/or marketing plans and strategies,
costs, profits, pricing, personnel and financial information, capitalization and
other corporate data and information, and information about or obtained from
customers, authors, suppliers, consultants, licensees, or affiliates. Trade
Secrets also includes confidential information Employer receives from third
parties in confidence.

        Employee agrees to not use or disclose Employer's Trade Secrets or
confidential information, in any form, for any purpose, except in the course and
for the purposes of employment with Employer. Employee agrees to immediately
notify Employer of any unauthorized use or disclosure of Trade Secrets or
confidential information of which Employee becomes aware.

        Employee will obtain no right, title or interest in Employer Trade
Secrets or confidential information, or any related information or data. The
Trade Secrets and confidential information and related information shall remain
the sole property of Employer.

        Employee acknowledges that the terms of this Agreement constitute a
Trade Secret and will not be disclosed to any third parties, including
Employer's other employees.

        During the term of this Agreement and for a period of four (4) years
thereafter, Employee agrees to keep all confidential information and Trade
Secrets of Employer confidential. Such information shall not be disclosed to any
third party. This does not apply to Employer's Trade Secrets or confidential
information that have become publicly known through no action of the Employee.
Employee further agrees that work product created by Employee for Employer
during the term of this Agreement shall remain the property of Employer.

        Employee agrees that immediately upon termination of Employee's
employment, or upon request by Employer, Employee will return to Employer all
company property, Trade Secrets and confidential information, as well as any
employee lists, customer lists, advertising or promotional materials, manuals,
and other books, papers, documents, or data (including all copies thereof)
belonging to or related to the business of the Employer

                                     - 6 -
<PAGE>

which Employee obtained, created or compiled in the course of his employment
with Employer.

        This Section 9 shall survive the termination of this Agreement.

10. Governing Law.

        This Agreement shall be governed by the laws of the State of Arizona. In
the event that any part of this Agreement shall be held to be invalid by any
reason of any law or court decision, such invalidity, if any, shall not affect
the validity or legality of any other part of this contract. The parties agree
that any dispute or claim arising out of this Agreement shall be resolved by
binding arbitration in Maricopa County, Arizona in accordance with the
applicable civil rules of the American Arbitration Association before one
arbitrator mutually chosen by the parties.

        11.     Knowledge of Agreement's Terms.

        Employee and Employer acknowledge that they have read this entire
Agreement and that they understand the nature of the foregoing restrictions, and
that the parties are signing this Agreement willingly and without duress.

        12.     Modification.

        This Agreement cannot be modified or amended except in a writing signed
by both parties.

        13.     Indemnification.

        Employer agrees to indemnify Employee for any and all expenses,
including reasonable attorney's fees, incurred by Employee in connection with
any suit, action, demand, litigation, or arbitration in which Employee is named
as a party in the event such suit, action, demand, litigation, or arbitration
concerns lawful actions taken by Employee within the scope of his employment.
This provision does not apply to any litigation or arbitration relating to the
termination of Employee's employment with Employer or relating to prior or
ongoing employment with STEP or its transactions with Employer, including any
litigation involving, arising out of or relating to the Master Agreement, or the
transactions contemplated thereby. Employer further agrees to maintain such
insurance such as director's and officer's insurance and/or errors and omissions
insurance in amounts and on terms as maintained by Employer for its other
employees and officers.

                                     - 7 -
<PAGE>

        IN WITNESS WHEREOF, the parties have duly executed this Agreement.

                                                     DON MEGRATH
                                                     "Employee"

                                                     /s/ Don Megrath
                                                     Signature

                                                     Don Megrath
                                                     Printed Name

                                                     9-28-01
                                                     Date

                                                     INTEGRATED INFORMATION
                                                     SYSTEMS, INC.
                                                     ("Employer")

                                                     By: /s/ Jill Clark

                                                     Its: HR Director

                                                     Date:10-28-01Exhibit 10.54

                              REVISED AND RESTATED
                                SUBORDINATED NOTE

$5,250,000.00                                                 Madison, Wisconsin
                                                                   April 4, 2003

      This Note revises and restates the Subordinated Note dated January 25,
2002, from Integrated Information Systems, Inc., a Delaware corporation ("the
Borrower") to AnchorBank, fsb ("Lender") as modified by a Modification to
Subordinated Note dated October 14, 2002.

      FOR VALUE RECEIVED, Borrower promises to pay to the order of Lender, or
the holder hereof, the principal sum of Five Million Two Hundred Fifty Thousand
and no/100 Dollars ($5,250,000.00), together with interest on the unpaid
principal balance from the date hereof, until paid, at the rate of seven percent
(7%) per annum, plus a loan fee in the amount of Two Thousand Five Hundred and
no/100 Dollars ($2,500.00) at the time of execution of this Note, which amount
may be paid from the loan proceeds. Interest shall be calculated on the basis of
a 360-day year over the actual number of days elapsed in a period. All payments
by Borrower shall be made in lawful currency of the United States and in
immediately available funds. Prior to any default hereunder, Lender agrees to
accept payment by check. Payments hereunder shall be applied first to the
payment of interest, with the balance, if any, to principal. The principal and
interest shall be due and payable at 25 West Main Street, Madison, Wisconsin
53703, or such other place as Lender may designate, in writing, as follows:

      1.    Commencing on the fifteenth (15th) day of April, 2003, and
            continuing on the same day of every third month thereafter until
            January 15, 2004, Borrower shall make quarterly payments of interest
            only (in arrears) on the outstanding principal balance hereunder.

      2.    Commencing on the fifteenth (15th) day of April, 2004, and
            continuing on the same day of every third month thereafter during
            the remaining term of this Note, Borrower shall make quarterly
            payments of principal and interest in an amount sufficient to fully
            amortize the original principal balance hereunder if paid over a
            period of ten (10) years.

      3.    Unless sooner paid, the unpaid principal balance and all accrued
            interest thereon shall be paid in full on January 25, 2006.

      If any installment or payment due under this Note is not received by
Lender within ten (10) calendar days after the installment or payment is due,
the undersigned shall pay to the holder a late charge of Five Percent (5%) of
such installment or payment, such late charge to be immediately due and payable
without demand by Lender.

      If (i) Borrower fails to pay any installment of principal and/or interest
due hereunder as and when due, and such default continues for ten (10) days
after Lender gives written notice thereof to Borrower, or (ii) defaults or
permits a default to occur in the performance of any of the terms contained
herein, or in any renewal, extension, or modification hereof, or in any other
document evidencing, securing, or referring to payment hereunder or in any
document or instrument executed and/or delivered by Borrower in connection
herewith or in connection with any other indebtedness of Borrower to Lender and
such default is not cured within the applicable cure periods, if any, set forth
therein, or (iii) any financial information, representation,

<PAGE>

or warranty given by Borrower to Lender in writing in connection with the
borrowing evidenced by this Note shall prove untrue in any material respect as
of the time when given; or (iv) failure to advise Lender of any judgments
obtained against Borrower which, together with all outstanding unsatisfied
judgments against Borrower, exceed the sum of Fifty Thousand and no/100 Dollars
($50,000.00); or (v) any judgment shall be obtained against the Borrower which,
together with all outstanding unsatisfied judgments against the Borrower, shall
exceed the sum of Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00)
and shall remain unsatisfied, unvacated, unbonded, or unstayed for a period of
sixty (60) days following the date of entry thereof (excluding the items
disclosed to Lender in Schedule 3.c to the Security Agreement, as defined
below); or (vi) Borrower shall: (1) become insolvent; or (2) be unable, or admit
in writing its inability to pay the majority of its debts as they mature; or (3)
make a general assignment for the benefit of creditors or to an agent authorized
to liquidate any substantial amount of its property; or (4) file a petition in
bankruptcy, or for reorganization, or to effect a similar plan or other
arrangement with substantially all of its creditors; or (5) file an answer to a
creditor's petition (admitting the material allegations thereof) for an
involuntary bankruptcy or reorganization or to effect a similar plan or other
arrangement with substantially all of its creditors; or (6) apply to a court for
the appointment of a receiver for any of its assets; or (7) have a receiver
appointed for any of its assets (without the consent of the Borrower) and such
receiver shall not be discharged within sixty (60) days after his appointment;
then the entire unpaid principal balance, plus accrued interest, shall, at the
option of the holder hereof and without notice, which is hereby expressly
waived, mature and be immediately due and payable. Failure to exercise this
option following any event above shall not constitute a waiver of the right to
exercise the same at a later time or upon the occurrence of any such subsequent
event or events. The occurrence of any default under the terms of this Note
shall constitute a default on any other instrument, agreement, loan, or credit
facility evidencing any indebtedness of Borrower to Lender, including but not
limited to a Line of Credit of even date, and a Business Manager facility dated
October 14, 2002.

      During any period in which Borrower is in default hereunder, this Note
shall bear interest at the rate of Five Percent (5%) per annum in excess of the
Note rate in effect immediately prior to the default from the date of such
default until such default is cured, or, if acceleration has occurred, until
this Note has been paid; provided, however, that such rate shall not exceed the
highest rate permitted by law.

      During the term of this Note, Borrower may prepay all or any part of the
principal balance hereof without penalty or fee. Prepayments shall be applied
against the outstanding principal balance of this Note and shall not extend or
postpone the due date of any subsequent monthly payment or change the amount of
such monthly payment unless Lender shall agree otherwise in writing. As used
herein, the term prepayment shall include all voluntary payments and all
payments occurring as a result of the acceleration by Lender of the principal
amount of this Note, but shall not include payments occurring because of the
application by Lender of insurance proceeds or condemnation awards to the
indebtedness evidenced hereby.

      From time to time, without affecting the obligation of the Borrower or the
successors or assigns of the Borrower to pay the outstanding principal balance
of this Note and observe the covenants of the Borrower contained herein, without
giving notice to or obtaining the consent of the Borrower, the successors or
assigns of the Borrower, and without liability on the part of Lender, Lender
may, at its option, extend the time for payment of said outstanding principal
balance or any part thereof, reduce the payments thereon, release anyone liable
on any of said outstanding principal balance, accept a renewal of this Note,
modify the terms and time of payment of said outstanding principal balance, join
in any extension or subordination

                                       2
<PAGE>

agreement, release any security given herefor, take or release other or
additional security, and agree in writing with the Borrower, its successors, or
assigns, to modify the rate of interest or period of amortization for this Note.

      Borrower, for itself and successors and assigns, agrees hereby to be
bound, and waives and renounces presentment, protest, demand and notice of
presentment, notice of protest, notice of non-payment of the Note, notice of
dishonor and each and every other notice of any kind respecting this Note.
Borrower, for itself and successors and assigns, waives all lack of diligence or
delays in collection or endorsement hereof.

      Nothing contained herein nor in any transaction related hereto shall be
construed or shall so operate either presently or prospectively (a) to require
the payment of interest at a rate greater than is now lawful in such case to
contract for, but shall require payment of interest only to the extent of such
lawful rate, or (b) to require the payment or the doing of any act contrary to
law; but if any clause or provision herein contained shall otherwise so operate
to invalidate this Note and/or the transaction related hereto, in whole or in
part, then such clause(s) and provision(s) only shall be held for naught as
though not contained herein and the remainder of this Note shall remain
operative and in full force and effect.

      If for any reason interest in excess of the amount as limited in the
foregoing paragraph shall have been paid hereunder, whether by reason of
acceleration or otherwise, then in that event any such excess interest shall
constitute and be treated as a payment of principal hereunder and shall operate
to reduce such principal by the amount of such excess, or if in excess of the
principal indebtedness, such excess shall be refunded.

      This Note is secured by a Selective Business Security Agreement dated
January 25, 2002, a General Business Security Agreement dated October 14, 2002,
and a General Business Security Agreement of even date herewith given by
Borrower to Lender (the "Security Agreement"), together with all other
mortgages, security agreements, and assignments previously or hereafter given by
Borrower to Lender. This Note may be accelerated pursuant to the terms of any of
said documents. Borrower warrants and represents that, at present, no creditors
other than Lender hold a security interest in the collateral pledged to Lender
as security for this Note. Lender acknowledges that such collateral was,
however, previously pledged as collateral for obligations to other creditors and
that same collateral remains covered by active financing statements. Borrower
believes that it is entitled to have such financial statements terminated and
agrees to continue to use commercially reasonable efforts to effect termination
of such financing statements.

      In addition to Lender's common law right of setoff, Borrower hereby grants
Lender a security interest and lien in any deposit account Borrower may at any
time have with Lender.

      All of the covenants herein contained shall bind, and the benefits hereof
shall also inure to, the respective successors and permitted assigns of the
parties hereto. Whenever used, the singular shall include the plural, the plural
the singular, and the use of any gender shall include all genders. The term
"Lender" shall include all subsequent holders of this Note. This Note may be
modified only in a writing executed by the Borrower and Lender.

      Borrower shall cause to be furnished to Lender its financial statement
within forty-five (45) calendar days of each of its first three quarter fiscal
quarter ends (showing current and year-to-date amounts). In addition, within one
hundred (100) days after each of the Borrower's fiscal year ends, Borrower shall
furnish to Lender its audited financial statement for the

                                       3
<PAGE>

immediately preceding fiscal year, which audited statement shall be in form and
content acceptable to Lender and prepared by a certified accounting firm
selected by Borrower and reasonably acceptable to Lender. All quarterly
statements shall be certified by the President or Chief Financial Officer of
Borrower to be true, correct, and complete.

      All notices, consents, waivers, and other communications required or
permitted by this Note shall be in writing and shall be deemed given to a party
when: (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, to:

      Lender:                              Borrower
      -------                              --------

      AnchorBank, fsb                      Integrated Information Systems, Inc.
      25 West Main Street, 6th Floor       2250 West 14th Street
      Madison, WI 53703                    Tempe, AZ 85281
      Attn: David L. Weimert/              Attn: Chief Financial Officer
            Daniel Nichols

      with courtesy copies to:

      Lender's Counsel:                    Borrower's Counsel:
      ----------------                     ------------------

      Ms. Patricia M. Gibeault, Esq.       Integrated Information Systems, Inc.
      Axley Brynelson, LLP                 2250 West 14th Street
      2 East Mifflin Street, Suite 200     Tempe, AZ 85281
      Post Office Box 1767                 Attn: General Counsel
      Madison, WI 53701-1767

      Either Borrower or Lender may change the address to which notices intended
for it are to be directed by means of notice given to the other party in
accordance with this paragraph. Each party agrees that it will not refuse or
reject delivery of any notice given in accordance with this paragraph, that it
will acknowledge, in writing, the receipt of any notice upon request by the
other party, and that any notice rejected or refused by it shall be deemed for
purposes of this paragraph to have been received by the rejecting party on the
date given.

      Borrower agrees that whenever this Note is placed in the hands of an
attorney for collection or to defend or enforce any of Lender's rights
hereunder, the undersigned shall pay to Lender its attorneys' fees, together
with all costs and other expenses incurred or paid by Lender in connection
therewith, including, without limitation, all pre-judgment and post-judgment
costs and expenses, including attorneys' fees.

      This Note and the Loan Documents have all been negotiated in the State of
Wisconsin. Accordingly, it is the intention of the parties that this Note be
governed by the laws of the State of Wisconsin.

                                       4
<PAGE>

      IN WITNESS WHEREOF, the Borrower has caused this Note to be executed in
Madison, Wisconsin, as of the date first above written.

                                    INTEGRATED INFORMATION SYSTEMS, INC.,
                                    a Delaware corporation

                             BY:    /s/ James G. Garvey, Jr.
                                    James G. Garvey, Chief Executive Officer

[CORPORATE SEAL]             Attest:
(if none, so state)

                                    /s/ Mark N. Rogers
                                    Secretary
                                    (Type or Print Name and Title)

                                       5

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