EXHIBIT 10.43
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                                ESCROW AGREEMENT
                                ----------------

      THIS ESCROW  AGREEMENT  (this  "Agreement") is made and entered into as of
August ___, 2001, by VERTICAL  COMPUTER  SYSTEMS,  INC., a Delaware  corporation
(the "Company"); YORKVILLE ADVISORS MANAGEMENT LLC, a Delaware limited liability
company (the  "Consultant");  and FIRST UNION NATIONAL BANK, a national  banking
association, as Escrow Agent hereunder (the "Escrow Agent").


                                   BACKGROUND

      WHEREAS,  the Company and the  Consultant  have  entered into a Consulting
Agreement (the "Consulting Agreement"), dated as of the date hereof, pursuant to
which the Company  proposes to sell  convertible  debentures  (the  "Convertible
Debentures")  which shall be convertible  into the Company's  Common Stock,  par
value $0.00001 per share (the "Common Stock"), at a price per share equal to the
Purchase  Price,  as that term is defined in the Securities  Purchase  Agreement
dated the date hereof  between the Company and the Investors  named therein (the
"Purchase  Agreement").  The  Securities  Purchase  Agreement  provides that the
Investors shall deposit the purchase amount in a segregated escrow account to be
held by Escrow Agent in order to effectuate a  disbursement  to the Company at a
closing  to be held as set  forth  in the  Securities  Purchase  Agreement  (the
"Closing").

      WHEREAS,   the  Company  intends  to  sell  Convertible   Securities  (the
"Offering").

      WHEREAS,  Escrow Agent has agreed to accept,  hold, and disburse the funds
deposited with it in accordance with the terms of this Agreement.

      WHEREAS,  in order to  establish  the  escrow of funds  and to effect  the
provisions of the Securities Purchase Agreement, the parties hereto have entered
into this Agreement.

      NOW THEREFORE,  in consideration of the foregoing,  it is hereby agreed as
follows:

      1. DEFINITIONS. The following terms shall have the following meanings when
used herein:

         a.  "Escrow  Funds"  shall mean the funds  deposited  with Escrow Agent
pursuant to this Agreement.

         b. "Joint Written Direction" shall mean a written direction executed by
the  Consultant  and the Company  directing  Escrow  Agent to disburse  all or a
portion  of the  Escrow  Funds or to take or  refrain  from  taking  any  action
pursuant to this Agreement.

         c. "Escrow  Period" shall begin with the  commencement  of the Offering
and shall terminate upon the earlier to occur of the following dates:


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            (i) The date upon which Escrow Agent  confirms  that it has received
in the  Escrow  Account  all of the  proceeds  of the  sale  of the  Convertible
Debentures;

            (ii)  The   expiration   of  twenty  (20)  days  from  the  date  of
commencement  of the  Offering  (unless  extended  by mutual  written  agreement
between the Company and the  Consultant  with a copy of such extension to Escrow
Agent); or

            (iii) The date upon which a determination is made by the Company and
the  Consultant  to  terminate  the  Offering  prior  to the  sale  of  all  the
Convertible Debentures.

      1. During the Escrow Period, the Company and the Consultant are aware that
they are not entitled to any funds received into escrow and no amounts deposited
in the Escrow Account shall become the property of the Company or the Consultant
or any other entity, or be subject to the debts of the Company or the Consultant
or any other entity.

      2.  APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT.  The Consultant and the
Company hereby appoint Escrow Agent to serve as Escrow Agent  hereunder.  Escrow
Agent hereby accepts such  appointment and, upon receipt by wire transfer of the
Escrow  Funds in  accordance  with Section 3 below,  agrees to hold,  invest and
disburse the Escrow Funds in accordance with this Agreement.

      3. CREATION OF ESCROW FUNDS.  On or prior to the date of the  commencement
of the Offering,  the parties shall  establish an escrow account with the Escrow
Agent,  which escrow  account  shall be entitled as follows:  Vertical  Computer
Systems,  Inc./Yorkville  Advisors Management LLC Escrow Account for the deposit
of the Escrow Funds.  The Consultant will instruct  subscribers to wire funds to
the account of the Escrow Agent as follows:

BANK:                           First Union National Bank of New Jersey

ROUTING #:                      031201467

ACCOUNT #:                      2020000659170

NAME ON ACCOUNT:                Butler Gonzalez LLP/First Union as Escrow Agent

NAME ON SUB-ACCOUNT:            Vertical Computer Systems, Inc./Yorkville
                                Advisors Management LLC  Escrow account

REFERENCE SUB-ACCOUNT #:        1567-01

ATTN:                           Robert Mercado (732) 452-3005
                                Carmela Agugliaro (732) 452-3005

NOTE:                           Only wire transfers shall be accepted

      4. DEPOSITS INTO THE ESCROW ACCOUNT. The Consultant agrees that they shall
promptly  deliver all monies  received from  subscribers  for the payment of the
Convertible Debentures to Escrow Agent for deposit in the Escrow Account.



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      5. DISBURSEMENTS FROM THE ESCROW ACCOUNT.

         a. The  Escrow  Agent  will  continue  to hold  such  funds  until  the
Consultant and Company  execute a Joint Written  Direction  directing the Escrow
Agent to disburse the Escrow Funds pursuant to Joint Written Direction signed by
the Company and the  Consultant.  In  disbursing  such  funds,  Escrow  Agent is
authorized  to rely upon such Joint Written  Direction  from the Company and the
Consultant and may accept any signatory from the Company listed on the signature
page to this  Agreement and any signature  from the  Consultant  that the Escrow
Agent already has on file.

         b. In the event  Escrow Agent does not receive the amount of the Escrow
Funds  from the  Investors,  Escrow  Agent  shall  notify  the  Company  and the
Consultant.  Upon receipt of payment instructions from the Company, Escrow Agent
shall refund to each subscriber  without  interest the amount received from each
Investor, without deduction, penalty, or expense to the subscriber. The purchase
money returned to each subscriber  shall be free and clear of any and all claims
of the Company, the Consultant or any of their creditors.

         c. In the event  Escrow  Agent  does  receive  the amount of the Escrow
Funds  prior to  expiration  of the Escrow  Period,  in no event will the Escrow
Funds be released to the Company  until such amount is received by Escrow  Agent
in collected funds. For purposes of this Agreement,  the term "collected  funds"
shall mean all funds  received by Escrow Agent which have cleared normal banking
channels and are in the form of cash.

      6. COLLECTION PROCEDURE. Escrow Agent is hereby authorized to forward each
wire for  collection  and, upon  collection of the proceeds of each wire deposit
the collected proceeds in the Escrow Account.

      Any wires  returned  unpaid  to  Escrow  Agent  shall be  returned  to the
Consultant  and/or the  Subscriber.  In such cases,  Escrow Agent will  promptly
notify the Company of such return.

      If the Company  rejects any  subscription  for which the Escrow  Agent has
already  collected  funds,  Escrow Agent shall  promptly issue a refund check or
wire to the rejected  subscriber.  If the Company rejects any  subscription  for
which  Escrow  Agent  has  not  yet  collected   funds  but  has  submitted  the
subscriber's  wire for collection,  Escrow Agent shall promptly issue a check or
wire the amount of the subscriber's wire to the rejected subscriber after Escrow
Agent has cleared such funds.  If Escrow Agent has not yet  submitted a rejected
subscriber's  wire  for  collection,  Escrow  Agent  shall  promptly  remit  the
subscriber's wire directly to the subscriber.  The Company shall provide payment
instructions to Escrow Agent.

      7.  SUSPENSION OF  PERFORMANCE:  DISBURSEMENT  INTO COURT. If at any time,
there  shall exist any dispute  between  the  Company  and the  Consultant  with
respect to  holding or  disposition  of any  portion of the Escrow  Funds or any
other  obligations of Escrow Agent hereunder,  or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper disposition
of any portion of the Escrow Funds or Escrow Agent's proper actions with respect
to its obligations hereunder, or if the parties have not within thirty (30) days
of the furnishing by Escrow Agent of a notice of resignation pursuant to Section
9 hereof, appointed a successor Escrow Agent to act hereunder, then Escrow Agent


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may, in its sole discretion, take either or both of the following actions:

         a. suspend the performance of any of its obligations (including without
limitation any disbursement  obligations) under this Escrow Agreement until such
dispute or  uncertainty  shall be  resolved to the sole  satisfaction  of Escrow
Agent or until a successor Escrow Agent shall be appointed (as the case may be);
provided  however,  Escrow  Agent shall  continue to invest the Escrow  Funds in
accordance with Section 8 hereof; and/or

         b.  petition  (by  means  of  an  interpleader   action  or  any  other
appropriate method) any court of competent  jurisdiction in any venue convenient
to Escrow Agent, for  instructions  with respect to such dispute or uncertainty,
and to the  extent  required  by law,  pay into  such  court,  for  holding  and
disposition in accordance with the instructions of such court, all funds held by
it in the Escrow Funds,  after deduction and payment to Escrow Agent of all fees
and expenses  (including  court costs and attorneys'  fees) payable to, incurred
by, or expected to be incurred by Escrow Agent in connection with performance of
its duties and the exercise of its rights hereunder.

         c. Escrow Agent shall have no liability to the Company, the Consultant,
or any person with respect to any such suspension of performance or disbursement
into court,  specifically  including any liability or claimed liability that may
arise,  or be alleged to have arisen,  out of or as a result of any delay in the
disbursement  of funds held in the Escrow  Funds or any delay in with respect to
any other action required or requested of Escrow Agent.

      8. INVESTMENT OF ESCROW FUNDS. Escrow Agent shall deposit the Escrow Funds
in a non-interest bearing money market account.

      If Escrow  Agent has not  received a Joint  Written  Direction at any time
that an investment  decision must be made,  Escrow Agent shall invest the Escrow
Funds, or such portion thereof,  as to which no Joint Written Direction has been
received,  in investments  described above. The foregoing  investments  shall be
made by Escrow Agent. Notwithstanding anything to the contrary contained, Escrow
Agent may, without notice to the parties, sell or liquidate any of the foregoing
investments at any time if the proceeds  thereof are required for any release of
funds permitted or required  hereunder,  and Escrow Agent shall not be liable or
responsible  for any  loss,  cost or  penalty  resulting  from any such  sale or
liquidation. With respect to any funds received by Escrow Agent for deposit into
the Escrow Funds or any Joint  Written  Direction  received by Escrow Agent with
respect to investment of any funds in the Escrow Funds after ten o'clock,  a.m.,
New Jersey  time,  Escrow Agent shall not be required to invest such funds or to
effect such  investment  instruction  until the next day upon which banks in New
Jersey are open for business.

      9.  RESIGNATION AND REMOVAL OF ESCROW AGENT.  Escrow Agent may resign from
the performance of its duties  hereunder at any time by giving thirty (30) days'
prior written notice to the parties or may be removed, with or without cause, by
the parties,  acting jointly,  by furnishing a Joint Written Direction to Escrow
Agent,  at any time by the  giving of ten (10)  days'  prior  written  notice to
Escrow Agent as provided  herein below.  Upon any such notice of  resignation or
removal,  the  representatives  of the Consultant and the Company  identified in


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<PAGE>

Sections 13a.(iv) and 13b.(iv),  below, jointly shall appoint a successor Escrow
Agent  hereunder,  which  shall be a  commercial  bank,  trust  company or other
financial  institution  with  a  combined  capital  and  surplus  in  excess  of
$10,000,000.00.  Upon the  acceptance  in writing of any  appointment  of Escrow
Agent hereunder by a successor  Escrow Agent,  such successor Escrow Agent shall
thereupon succeed to and become vested with all the rights,  powers,  privileges
and duties of the retiring Escrow Agent,  and the retiring Escrow Agent shall be
discharged  from its duties and  obligations  under this Escrow  Agreement,  but
shall not be  discharged  from any  liability  for actions taken as Escrow Agent
hereunder  prior  to  such   succession.   After  any  retiring  Escrow  Agent's
resignation or removal,  the provisions of this Escrow  Agreement shall inure to
its  benefit as to any  actions  taken or omitted to be taken by it while it was
Escrow  Agent under this  Escrow  Agreement.  The  retiring  Escrow  Agent shall
transmit all records pertaining to the Escrow Funds and shall pay all funds held
by it in the Escrow Funds to the successor Escrow Agent,  after making copies of
such records as the retiring  Escrow Agent deems  advisable and after  deduction
and payment to the retiring  Escrow  Agent of all fees and  expenses  (including
court costs and  attorneys'  fees)  payable to,  incurred  by, or expected to be
incurred by the retiring  Escrow Agent in connection with the performance of its
duties and the exercise of its rights hereunder.

      10. LIABILITY OF ESCROW AGENT.

         a. Escrow Agent shall have no liability or  obligation  with respect to
the  Escrow  Funds  except  for  Escrow  Agent's  willful  misconduct  or  gross
negligence.  Escrow Agent's sole  responsibility  shall be for the  safekeeping,
investment, and disbursement of the Escrow Funds in accordance with the terms of
this  Agreement.  Escrow Agent shall have no implied duties or  obligations  and
shall not be charged with  knowledge or notice or any fact or  circumstance  not
specifically  set forth herein.  Escrow Agent may rely upon any instrument,  not
only as to its due  execution,  validity and  effectiveness,  but also as to the
truth and accuracy of any information contained herein, which Escrow Agent shall
in good faith  believe to be genuine,  to have been signed or  presented  by the
person or parties  purporting to sign the same and conform to the  provisions of
this  Agreement.  In no event  shall  Escrow  Agent be  liable  for  incidental,
indirect, special, and consequential or punitive damages. Escrow Agent shall not
be obligated to take any legal action or commence any  proceeding  in connection
with the Escrow  Funds,  any account in which Escrow Funds are  deposited,  this
Agreement or the Purchase  Agreement,  or to appear in,  prosecute or defend any
such legal action or proceeding. Escrow Agent may consult legal counsel selected
by it in any event of any dispute or question as to  construction  of any of the
provisions hereof or of any other agreement or its duties hereunder, or relating
to any dispute  involving  any party  hereto,  and shall incur no liability  and
shall be fully indemnified from any liability whatsoever in acting in accordance
with the opinion or instructions of such counsel. The Company and the Consultant
jointly and severally  shall promptly pay, upon demand,  the reasonable fees and
expenses of any such counsel.

         b. Escrow Agent is hereby authorized, in its sole discretion, to comply
with orders  issued or process  entered by any court with  respect to the Escrow
Funds, without determination by Escrow Agent of such court's jurisdiction in the
matter. If any portion of the Escrow Funds is at any time attached, garnished or
levied upon under any court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such  property  shall be stayed or enjoined by any
court  order,  or in any case any  order  judgment  or  decree  shall be made or


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entered by any court  affecting  such property or any part thereof,  then and in
any such event, Escrow Agent is authorized, in its sole discretion, to rely upon
and comply with any such order,  writ  judgment or decree which it is advised by
legal counsel  selected by it,  binding upon it,  without the need for appeal or
other action; and if Escrow Agent complies with any such order,  writ,  judgment
or decree,  it shall not be liable to any of the parties  hereto or to any other
person or entity by reason of such  compliance  even  though  such  order,  writ
judgment or decree may be subsequently reversed,  modified,  annulled, set aside
or vacated.

      11.  INDEMNIFICATION OF ESCROW AGENT. From and at all times after the date
of this  Agreement,  the parties  jointly and severally,  shall,  to the fullest
extent  permitted by law and to the extent provided  herein,  indemnify and hold
harmless Escrow Agent and each director, officer, employee,  attorney, agent and
affiliate of Escrow Agent (collectively,  the "Indemnified Parties") against any
and all actions,  claims (whether or not valid), losses,  damages,  liabilities,
costs  and  expenses  of  any  kind  or  nature  whatsoever  (including  without
limitation  reasonable  attorney's  fees,  costs and  expenses)  incurred  by or
asserted against any of the Indemnified  Parties from and after the date hereof,
whether direct, indirect or consequential,  as a result of or arising from or in
any way relating to any claim,  demand,  suit, action, or proceeding  (including
any inquiry or  investigation) by any person,  including without  limitation the
parties to this Agreement,  whether  threatened or initiated,  asserting a claim
for any legal or  equitable  remedy  against  any  person  under any  statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or  equitable  cause or  otherwise,  arising  from or in
connection with the negotiation,  preparation, execution, performance or failure
of performance of this Agreement or any transaction contemplated herein, whether
or not any such  Indemnified  Party is a party to any such action or proceeding,
suit or the target of any such inquiry or investigation; provided, however, that
no  Indemnified  Party  shall  have the right to be  indemnified  hereunder  for
liability finally determined by a court of competent jurisdiction, subject to no
further appeal, to have resulted from the gross negligence or willful misconduct
of such  Indemnified  Party.  If any such  action or claim  shall be  brought or
asserted against any Indemnified  Party,  such Indemnified  Party shall promptly
notify the Company and the Consultant  hereunder in writing,  and the Consultant
and the Company shall assume the defense  thereof,  including the  employment of
counsel and the payment of all expenses.  Such  Indemnified  Party shall, in its
sole discretion,  have the right to employ separate counsel (who may be selected
by such  Indemnified  Party in its sole  discretion)  in any such  action and to
participate and to participate in the defense thereof, and the fees and expenses
of such  counsel  shall  be paid by such  Indemnified  Party,  except  that  the
Consultant  and/or the Company shall be required to pay such fees and expense if
(a) the  Consultant or the Company  agree to pay such fees and expenses,  or (b)
the  Consultant  and/or the  Company  shall  fail to assume the  defense of such
action or proceeding or shall fail, in the sole  discretion of such  Indemnified
Party, to employ counsel reasonably satisfactory to the Indemnified Party in any
such action or proceeding,  (c) the Consultant and the Company are the plaintiff
in any such action or  proceeding  or (d) the named or potential  parties to any
such action or proceeding  (including any potentially impleaded parties) include
both  the  Indemnified   Party,  the  Company  and/or  the  Consultant  and  the
Indemnified  Party shall have been  advised by counsel  that there may be one or
more legal  defenses  available to it which are different  from or additional to
those available to the Company or the Consultant. The Consultant and the Company
shall be  jointly  and  severally  liable to pay fees and  expenses  of  counsel
pursuant to the  preceding  sentence,  except that any  obligation  to pay under
clause (a) shall apply only to the party so agreeing. All such fees and expenses


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payable by the Company and/or the Consultant  pursuant to the foregoing sentence
shall be paid from time to time as  incurred,  both in  advance of and after the
final  disposition of such action or claim. The obligations of the parties under
this section shall survive any termination of this Agreement, and resignation or
removal of the Escrow Agent shall be  independent  of any  obligation  of Escrow
Agent.

      The parties agree that neither payment by the Company or the Consultant of
any claim by Escrow Agent for  indemnification  hereunder  shall impair,  limit,
modify,  or affect,  as between the Consultant  and the Company,  the respective
rights and obligations of Consultant,  on the one hand, and the Company,  on the
other hand, under the Placement Agency Agreement.

      12.  EXPENSES  OF ESCROW  AGENT.  Except as set  forth in  Section  11 the
Company shall  reimburse  Escrow Agent for all of its  reasonable  out-of-pocket
expenses,  including  attorneys' fees, travel expenses,  telephone and facsimile
transmission  costs,  postage  (including  express mail and  overnight  delivery
charges),   copying  charges  and  the  like.  All  of  the   compensation   and
reimbursement  obligations  set forth in this  Section  shall be  payable by the
Company,  upon demand by Escrow Agent. The obligations of the Company under this
Section shall survive any  termination of this Agreement and the  resignation or
removal of Escrow Agent.

      13. WARRANTIES.

         a. The Consultant makes the following representations and warranties to
Escrow Agent:

            (i) The  Consultant  has full power and  authority  to  execute  and
deliver this Agreement and to perform its obligations hereunder.

            (ii)  This  Agreement  has  been  duly  approved  by  all  necessary
corporate  action  of  the  Consultant,   including  any  necessary  shareholder
approval,  has been  executed by duly  authorized  officers  of the  Consultant,
enforceable in accordance with its terms.

            (iii) The execution,  delivery, and performance of the Consultant of
this  Agreement  will not violate,  conflict  with, or cause a default under the
certificate of incorporation or bylaws of the Consultant,  any applicable law or
regulation,  any  court  order or  administrative  ruling or degree to which the
Consultant  is a party or any of its  property  is  subject,  or any  agreement,
contract, indenture, or other binding arrangement.

            (iv)  Mark   Angelo   has  been  duly   appointed   to  act  as  the
representative  of the Consultant  hereunder and has full power and authority to
execute,  deliver, and perform this Escrow Agreement, to execute and deliver any
Joint  Written  Direction,  to amend,  modify,  or waive any  provision  of this
Agreement,   and  to  take  any  and  all  other  actions  as  the  Consultant's
representative  under this  Agreement,  all without further consent or direction
form, or notice to, the Consultant or any other party.

            (v) No party other than the parties  hereto and the Investors  have,
or shall have, any lien,  claim or security  interest in the Escrow Funds or any
part thereof.  No financing  statement  under the Uniform  Commercial Code is on
file in any jurisdiction  claiming a security interest in or describing (whether

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specifically or generally) the Escrow Funds or any part thereof.

            (vi) All of the  representations  and  warranties of the  Consultant
contained  herein are true and  complete  as of the date hereof and will be true
and complete at the time of any disbursement from the Escrow Funds.

         b. The Company makes the following  representations  and  warranties to
the Escrow Agent:

            (i) The Company is a corporation duly organized,  validly  existing,
and in good standing  under the laws of the State of Delaware and has full power
and  authority  to  execute  and  deliver  this  Agreement  and to  perform  its
obligations hereunder.

            (ii)  This  Agreement  has  been  duly  approved  by  all  necessary
corporate action of the Company,  including any necessary  shareholder approval,
has been executed by duly  authorized  officers of the Company,  enforceable  in
accordance with its terms.

            (iii) The  execution,  delivery,  and  performance by the Company of
this Agreement is in accordance with the Securities  Purchase Agreement and will
not  violate,  conflict  with,  or cause a  default  under  the  certificate  of
incorporation  or bylaws of the Company,  any applicable law or regulation,  any
court order or  administrative  ruling or decree to which the Company is a party
or any of its property is subject,  or any agreement,  contract,  indenture,  or
other  binding  arrangement,  including  without  limitation  to the  Securities
Purchase Agreement, to which the Company is a party.

            (iv)   Richard   Wade  has  been  duly   appointed  to  act  as  the
representative  of the Company  hereunder  and has full power and  authority  to
execute,  deliver, and perform this Agreement,  to execute and deliver any Joint
Written Direction, to amend, modify or waive any provision of this Agreement and
to take all other actions as the Company's  Representative under this Agreement,
all without  further consent or direction from, or notice to, the Company or any
other party.

            (v) No party other than the parties  hereto and the Investors  have,
or shall have, any lien,  claim or security  interest in the Escrow Funds or any
part thereof.  No financing  statement  under the Uniform  Commercial Code is on
file in any jurisdiction  claiming a security interest in or describing (whether
specifically or generally) the Escrow Funds or any part thereof.

            (vi)  All of  the  representations  and  warranties  of the  Company
contained  herein are true and  complete  as of the date hereof and will be true
and complete at the time of any disbursement from the Escrow Funds.

      14. CONSENT TO JURISDICTION  AND VENUE. In the event that any party hereto
commences  a  lawsuit  or other  proceeding  relating  to or  arising  from this
Agreement,  the parties  hereto agree that the United States  District Court for
the District of New Jersey shall have the sole and exclusive  jurisdiction  over
any  such   proceeding.   If  all  such  courts  lack  federal   subject  matter
jurisdiction,  the parties agree that the Superior Court Division of New Jersey,
Chancery  Division of Essex County shall have sole and  exclusive  jurisdiction.


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Any of these  courts  shall be proper  venue for any such  lawsuit  or  judicial
proceeding and the parties hereto waive any objection to such venue. The parties
hereto consent to and agree to submit to the  jurisdiction  of any of the courts
specified  herein  and agree to accept the  service of process to vest  personal
jurisdiction over them in any of these courts.

      15. NOTICE.  All notices and other  communications  hereunder  shall be in
writing and shall be deemed to have been validly served, given or delivered five
(5) days after deposit in the United States mails, by certified mail with return
receipt requested and postage prepaid,  when delivered  personally,  one (1) day
delivered  to  any  overnight   courier,   or  when   transmitted  by  facsimile
transmission  and upon  confirmation of receipt and addressed to the party to be
notified as follows:

If to Consultant, to:              Yorkville Advisors Management LLC
                                   One World Trade Center, Suite 7705
                                   New York, NY  10048
                                   Attention:  Mark Angelo
                                   Telephone:  (212)488-4485
                                   Facsimile:  (212) 488-5027

With Copy to:                      Butler Gonzalez LLP
                                   1000 Stuyvesant Avenue
                                   Union, NJ 07083
                                   Attention:  David Gonzalez, Esq.
                                   Telephone:  (908) 810-8588
                                   Facsimile:  (908) 810-0973

If to the Company, to:             Vertical Computer Systems, Inc.
                                   6336 Wilshire Boulevard
`                                  Los Angeles, CA  90048
                                   Attention:  Richard Wade
                                               President
                                   Telephone:  (323) 658-4211
                                   Facsimile:  (323) 658-4223

With a copy to:                    Kirkpatrick & Lockhart LLP
                                   201 South Biscayne Boulevard - Suite 2000
                                   Miami, FL  33131
                                   Attention:  Clayton E. Parker, Esq.
                                   Telephone:  (305) 539-3300
                                   Facsimile:  (305) 358-7095



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If to Escrow Agent, to:            First Union National Bank
                                   407 Main Street
                                   Metuchen, NJ  08840
                                   Attention:  Robert Mercado
                                               Carmela Agugliaro
                                   Telephone:  (732) 452-3005

Or to such other address as each party may designate for itself by like notice.

      16.  AMENDMENTS  OR  WAIVER.  This  Agreement  may  be  changed,   waived,
discharged  or terminated  only by a writing  signed by the parties  hereto.  No
delay or omission by any party in exercising any right with respect hereto shall
operate as waiver.  A waiver on any one occasion shall not be construed as a bar
to, or waiver of, any right or remedy on any future occasion.

      17.  SEVERABILITY.  To the  extent  any  provision  of this  Agreement  is
prohibited  by  or  invalid  under  applicable  law,  such  provision  shall  be
ineffective  to  the  extent  of  such  prohibition,   or  invalidity,   without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

      18.  GOVERNING LAW. This Agreement  shall be construed and  interpreted in
accordance  with the  internal  laws of the State of New Jersey  without  giving
effect to the conflict of laws principles thereof.

      19. ENTIRE  AGREEMENT.  This Agreement  constitutes  the entire  Agreement
between the parties relating to the holding, investment, and disbursement of the
Escrow Funds and sets forth in their entirety the  obligations and duties of the
Escrow Agent with respect to the Escrow Funds.

      20. BINDING EFFECT.  All of the terms of this  Agreement,  as amended from
time to time,  shall be binding upon, inure to the benefit of and be enforceable
by the respective heirs, successors and assigns of the Consultant,  the Company,
or the Escrow Agent.

      21.  EXECUTION  OF  COUNTERPARTS.  This  Agreement  and any Joint  Written
Direction  may be  executed  in  counter  parts,  which when so  executed  shall
constitute one and same agreement or direction.

      22.  TERMINATION.  Upon the  first to  occur  of the  disbursement  of all
amounts  in the  Escrow  Funds  pursuant  to  Joint  Written  Directions  or the
disbursement of all amounts in the Escrow Funds into court pursuant to Section 7
hereof,  this Agreement  shall  terminate and Escrow Agent shall have no further
obligation or liability  whatsoever with respect to this Agreement or the Escrow
Funds.

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<PAGE>


      IN WITNESS WHEREOF the parties have hereunto set their hands and seals the
day and year above set forth.

                                        VERTICAL COMPUTER SYSTEMS, INC.

                                        By: ________________________________
                                        Name:  Richard Wade
                                        Title: President


                                        FIRST UNION NATIONAL BANK

                                        By: ________________________________
                                        Name:  Robert Mercado
                                        Title: As Escrow Agent


                                        YORKVILLE ADVISORS MANAGEMENT LLC

                                        By: ________________________________
                                        Name:  Mark Angelo
                                        Title: President

                                        BUTLER GONZALEZ LLP

                                        By: ________________________________
                                        Name:  David Gonzalez
                                        Title: Partner




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