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Exhibit 10.103a



                          SECURITIES PURCHASE AGREEMENT

         THIS  SECURITIES  PURCHASE  AGREEMENT (this  "AGREEMENT"),  dated as of
April 14,  2003,  by and among  VERTICAL  COMPUTER  SYSTEMS,  INC.,  a  Delaware
corporation,  with headquarters located at 6336 Wilshire Boulevard, Los Angeles,
California 90048 (the  "COMPANY"),  and the Buyers listed on Schedule I attached
hereto (individually, a "BUYER" or collectively "BUYERS").


                                   WITNESSETH:

         WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION  D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue and sell to the Buyer(s),
as provided  herein,  and the Buyer(s) shall purchase up to Two Hundred Thousand
Dollars  ($200,000) of convertible  debentures (the  "CONVERTIBLE  DEBENTURES"),
which shall be convertible  into shares of the Company's common stock, par value
$0.00001 (the "COMMON  STOCK") (as converted,  the "CONVERSION  SHARES"),  for a
total  purchase price of up to Two Hundred  Thousand  Dollars  ($200,000),  (the
"PURCHASE  PRICE") in the  respective  amounts set forth  opposite each Buyer(s)
name on Schedule I ( the "SUBSCRIPTION AMOUNT"); and

         WHEREAS,  contemporaneously  with the  execution  and  delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement  substantially in the form attached hereto as EXHIBIT A (the "INVESTOR
REGISTRATION  RIGHTS  AGREEMENT")  pursuant  to which the  Company has agreed to
provide  certain  registration  rights  under  the  1933 Act and the  rules  and
regulations promulgated there under, and applicable state securities laws; and

         WHEREAS,  the  aggregate  proceeds  of  the  sale  of  the  Convertible
Debentures  contemplated hereby shall be held in escrow pursuant to the terms of
an escrow agreement  substantially in the form of the Escrow Agreement  attached
hereto as EXHIBIT B.

         NOW,  THEREFORE,  in  consideration  of the mutual  covenants and other
agreements  contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:

1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.

         (a) PURCHASE OF CONVERTIBLE DEBENTURES. Subject to the satisfaction (or
waiver)  of the terms and  conditions  of this  Agreement,  each  Buyer  agrees,
severally and not jointly,  to purchase at Closing (as defined herein below) and
the Company  agrees to sell and issue to each Buyer,  severally and not jointly,
at  Closing,   Convertible   Debentures  in  amounts   corresponding   with  the
Subscription  Amount set forth  opposite each Buyer's name on Schedule I hereto.
Upon execution hereof by a Buyer, the Buyer shall wire transfer the Subscription

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Amount set forth  opposite  his name on Schedule I in same-day  funds or a check
payable to Butler Gonzalez LLP, as Escrow Agent for Vertical  Computer  Systems,
Inc. / Cornell Capital Partners,  LP ", which Subscription  Amount shall be held
in escrow pursuant to the terms of the Escrow Agreement (as hereinafter defined)
and disbursed in accordance  therewith.  Notwithstanding the foregoing,  a Buyer
may withdraw his  Subscription  Amount and terminate  this  Agreement as to such
Buyer  at any  time  after  the  execution  hereof  and  prior  to  Closing  (as
hereinafter defined).

         (b)  CLOSING  DATE.  The  closing  of  the  purchase  and  sale  of the
Convertible  Debentures (the "CLOSING")  shall take place at 10:00 a.m.  Eastern
Standard  Time on the fifth (5th)  business day ("CLOSING  DATE")  following the
date  hereof,  subject  to  notification  of  satisfaction  (or  waiver)  of the
conditions  to the  Closing  set forth in  Sections 6 and 7 below (or such later
date as is  mutually  agreed to by the Company  and the  Buyer(s)).  The Closing
shall occur on the Closing  Date at the offices of Butler  Gonzalez,  LLP,  1000
Stuyvesant Avenue,  Suite 6, Union, NJ 07083 (or such other place as is mutually
agreed to by the Company and the Buyer(s)).

         (c) ESCROW  ARRANGEMENTS;  FORM OF PAYMENT.  Upon  execution  hereof by
Buyer(s)  and  pending  Closing,  the  aggregate  proceeds  of the  sale  of the
Convertible  Debentures  to Buyer(s)  pursuant  hereto  shall be  deposited in a
non-interest  bearing escrow  account with Butler  Gonzalez LLP, as escrow agent
(the "ESCROW AGENT"),  pursuant to the terms of an escrow agreement  between the
Company,  the  Buyer(s)  and the  Escrow  Agent in the form  attached  hereto as
EXHIBIT B (the "ESCROW AGREEMENT"). Subject to the satisfaction of the terms and
conditions of this  Agreement,  on the Closing Date,  (i) the Escrow Agent shall
deliver to the Trust Account of  Kirkpatrick  & Lockhart LLP in accordance  with
the terms of the Escrow Agreement,  such aggregate  proceeds for the Convertible
Debentures  to be issued and sold to such Buyer(s) at the Closing minus the fees
set forth in Section 4(g) hereof by wire transfer of immediately available funds
in accordance with Kirkpatrick & Lockhart's written wire instructions,  and (ii)
the Company  shall  deliver to each  Buyer,  Convertible  Debentures  which such
Buyer(s) is  purchasing  in amounts  indicated  opposite  such  Buyer's  name on
Schedule I, duly executed on behalf of the Company.

2. BUYER'S REPRESENTATIONS AND WARRANTIES.

         Each Buyer represents and warrants, severally and not jointly, that:

         (a)  INVESTMENT  PURPOSE.  Each  Buyer  is  acquiring  the  Convertible
Debentures  and,  upon  conversion  of  Convertible  Debentures,  the Buyer will
acquire the Conversion Shares then issuable,  for its own account for investment
only and not with a view towards,  or for resale in connection  with, the public
sale or distribution  thereof,  except pursuant to sales  registered or exempted
under the 1933  Act;  provided,  however,  that by  making  the  representations
herein, such Buyer reserves the right to dispose of the Conversion Shares at any
time in  accordance  with or pursuant  to an  effective  registration  statement
covering such Conversion Shares or an available exemption under the 1933 Act.

         (b) ACCREDITED INVESTOR STATUS. Each Buyer is an "ACCREDITED  INVESTOR"
as that term is defined in Rule 501(a)(3) of Regulation D.

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         (c) RELIANCE ON EXEMPTIONS. Each Buyer understands that the Convertible
Debentures  are being offered and sold to it in reliance on specific  exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's  compliance  with,  the  representations,  warranties,  agreements,
acknowledgments  and  understandings  of such Buyer set forth herein in order to
determine the  availability of such exemptions and the eligibility of such Buyer
to acquire such securities.

(d) INFORMATION.  Each Buyer and its advisors (and his or, its counsel), if any,
have been  furnished with all materials  relating to the business,  finances and
operations  of the  Company  and  information  he deemed  material  to making an
informed   investment   decision  regarding  his  purchase  of  the  Convertible
Debentures and the Conversion  Shares,  which have been requested by such Buyer.
Each Buyer and its advisors,  if any, have been afforded the  opportunity to ask
questions  of the Company and its  management.  Neither such  inquiries  nor any
other due diligence  investigations  conducted by such Buyer or its advisors, if
any, or its representatives  shall modify, amend or affect such Buyer's right to
rely on the  Company's  representations  and  warranties  contained in Section 3
below. Each Buyer understands that its investment in the Convertible  Debentures
and the  Conversion  Shares  involves a high degree of risk.  Each Buyer is in a
position   regarding  the  Company,   which,   based  upon  employment,   family
relationship  or economic  bargaining  power,  enabled and enables such Buyer to
obtain information from the Company in order to evaluate the merits and risks of
this investment. Each Buyer has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Convertible Debentures and the Conversion Shares.

         (e) NO  GOVERNMENTAL  REVIEW.  Each  Buyer  understands  that no United
States federal or state agency or any other  government or  governmental  agency
has  passed on or made any  recommendation  or  endorsement  of the  Convertible
Debentures  or the  Conversion  Shares,  or the fairness or  suitability  of the
investment in the Convertible Debentures or the Conversion Shares, nor have such
authorities  passed  upon  or  endorsed  the  merits  of  the  offering  of  the
Convertible Debentures or the Conversion Shares.

         (f) TRANSFER OR RESALE.  Each Buyer understands that except as provided
in the Investor  Registration Rights Agreement:  (i) the Convertible  Debentures
have not been  and are not  being  registered  under  the 1933 Act or any  state
securities laws, and may not be offered for sale, sold,  assigned or transferred
unless (A)  subsequently  registered  thereunder,  or (B) such Buyer  shall have
delivered to the Company an opinion of counsel, in a generally  acceptable form,
to the effect that such  securities to be sold,  assigned or transferred  may be
sold,  assigned or transferred  pursuant to an exemption from such  registration
requirements;  (ii) any sale of such  securities  made in  reliance  on Rule 144
under the 1933 Act (or a successor  rule thereto)  ("RULE 144") may be made only
in  accordance  with  the  terms  of Rule  144 and  further,  if Rule 144 is not
applicable,  any  resale of such  securities  under  circumstances  in which the
seller  (or the  person  through  whom the sale is made)  may be deemed to be an
underwriter  (as that term is  defined in the 1933 Act) may  require  compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC there under; and (iii) neither the Company nor any other person is under any
obligation  to  register  such  securities  under  the  1933  Act or  any  state
securities  laws or to comply  with the terms and  conditions  of any  exemption
there under. The Company reserves the right to place stop transfer  instructions
against the shares and certificates for the Conversion Shares.

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         (g) LEGENDS.  Each Buyer  understands  that the  certificates  or other
instruments representing the Convertible Debentures and or the Conversion Shares
shall bear a restrictive  legend in substantially the following form (and a stop
transfer order may be placed against transfer of such stock certificates):

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
                  APPLICABLE  STATE  SECURITIES  LAWS. THE SECURITIES  HAVE BEEN
                  ACQUIRED  SOLELY FOR  INVESTMENT  PURPOSES AND NOT WITH A VIEW
                  TOWARD  RESALE  AND  MAY  NOT  BE  OFFERED  FOR  SALE,   SOLD,
                  TRANSFERRED  OR  ASSIGNED  IN  THE  ABSENCE  OF  AN  EFFECTIVE
                  REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES LAWS,
                  OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
                  REGISTRATION  IS NOT  REQUIRED  UNDER  SAID ACT OR  APPLICABLE
                  STATE SECURITIES LAWS.

The  legend set forth  above  shall be removed  and the  Company  within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion  Shares upon which it is stamped,  if, unless  otherwise  required by
state securities laws, (i) in connection with a sale  transaction,  provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale  transaction,  after such holder  provides  the Company  with an opinion of
counsel,  which  opinion  shall be in form,  substance  and scope  customary for
opinions  of counsel in  comparable  transactions,  to the effect  that a public
sale,  assignment  or  transfer  of the  Conversion  Shares may be made  without
registration under the 1933 Act.

         (h)  AUTHORIZATION,  ENFORCEMENT.  This  Agreement  has  been  duly and
validly  authorized,  executed  and  delivered  on behalf of such Buyer and is a
valid and binding  agreement of such Buyer  enforceable  in accordance  with its
terms,  except as such  enforceability  may be limited by general  principles of
equity  or  applicable  bankruptcy,  insolvency,   reorganization,   moratorium,
liquidation  and other  similar laws  relating to, or affecting  generally,  the
enforcement of applicable creditors' rights and remedies.


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         (i)  RECEIPT  OF  DOCUMENTS.  Each  Buyer  and his or its  counsel  has
received and read in their entirety: (i) this Agreement and each representation,
warranty  and  covenant  set forth  herein,  the  Investor  Registration  Rights
Agreement,  and  the  Escrow  Agreement;   (ii)  all  due  diligence  and  other
information   necessary  to  verify  the  accuracy  and   completeness  of  such
representations,  warranties and covenants;  (iii) the Company's Form 10-KSB for
the fiscal year ended December 31, 2001;  (iv) the Company's Form 10-QSB for the
fiscal  quarters ended March 31, 2002, June 30 , 2002 and September 30, 2002 and
(v) answers to all questions  each Buyer  submitted to the Company  regarding an
investment  in the  Company;  and  each  Buyer  has  relied  on the  information
contained  therein and has not been furnished any other  documents,  literature,
memorandum or prospectus.

         (j) DUE FORMATION OF CORPORATE  AND OTHER BUYERS.  If the Buyer(s) is a
corporation,  trust,  partnership  or  other  entity  that is not an  individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Convertible  Debentures and is not prohibited
from doing so.

         (k) NO LEGAL ADVICE FROM THE COMPANY. Each Buyer acknowledges,  that it
had the opportunity to review this Agreement and the  transactions  contemplated
by this  Agreement  with his or its own legal  counsel  and  investment  and tax
advisors.  Each Buyer is relying  solely on such counsel and advisors and not on
any statements or representations  of the Company or any of its  representatives
or agents for legal,  tax or investment  advice with respect to this investment,
the  transactions  contemplated  by this Agreement or the securities laws of any
jurisdiction.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company  represents and warrants to each of the Buyers that, except
as set  forth  in the SEC  Documents  (as  defined  herein)  and the  disclosure
schedule attached hereto as SCHEDULE II (the "DISCLOSURE SCHEDULE"):

         (a)  ORGANIZATION AND  QUALIFICATION.  The Company and its subsidiaries
are corporations duly organized and validly existing and are, or within ten (10)
days  after  the  Closing  will  be,  in good  standing  under  the  laws of the
jurisdiction in which they are  incorporated,  and have the requisite  corporate
power to own  their  properties  and to carry on  their  business  as now  being
conducted.  Each of the  Company and its  subsidiaries  is duly  qualified  as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the  business  conducted  by it makes such  qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good standing  would not have a material  adverse  effect on the Company and its
subsidiaries taken as a whole.

         (b) AUTHORIZATION,  ENFORCEMENT, COMPLIANCE WITH OTHER INSTRUMENTS. (i)
The Company has the  requisite  corporate  power and authority to enter into and
perform this Agreement,  the Investor Registration Rights Agreement,  the Escrow
Agreement and any related  agreements,  and to issue the Convertible  Debentures
and the Conversion Shares in accordance with the terms hereof and thereof,  (ii)
the execution and delivery of this Agreement,  the Investor  Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent Instructions (as
defined herein) and any related  agreements by the Company and the  consummation
by it of the transactions  contemplated hereby and thereby,  including,  without
limitation, the issuance of the Convertible Debentures the Conversion Shares and
the reservation for issuance and the issuance of the Conversion  Shares issuable
upon conversion or exercise thereof,  have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the

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Company, its Board of Directors or its stockholders,  (iii) this Agreement,  the
Investor  Registration Rights Agreement,  the Escrow Agreement,  the Irrevocable
Transfer Agent  Instructions and any related  agreements have been duly executed
and delivered by the Company,  (iv) this  Agreement,  the Investor  Registration
Rights  Agreement,   the  Escrow  Agreement,   the  Irrevocable  Transfer  Agent
Instructions  and any  related  agreements  constitute  the  valid  and  binding
obligations of the Company  enforceable  against the Company in accordance  with
their terms,  except as such enforceability may be limited by general principles
of equity or  applicable  bankruptcy,  insolvency,  reorganization,  moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of  creditors'  rights and  remedies.  The  authorized  officer  of the  Company
executing this Agreement, the Investor Registration Rights Agreement, the Escrow
Agreement,   the  Irrevocable   Transfer  Agent  Instructions  and  any  related
agreements  knows of no reason  why the  Company  cannot  file the  registration
statement  as required  under the  Investor  Registration  Rights  Agreement  or
perform any of the Company's other obligations under such documents.

         (c)  CAPITALIZATION.  The  authorized  capital  stock  of  the  Company
consists of 1,000,000,000  shares of Common Stock, par value $0.00001 per share,
250,000 shares of Series A 4% Convertible  Cumulative Preferred Stock ("SERIES A
CONVERTIBLE  PREFERRED  STOCK"),  par value $0.001 per share,  750,000 shares of
Series A Preferred  Stock  ("SERIES A PREFERRED  STOCK"),  par value  $0.001 per
share,  375,000 Series B 10% Convertible  Preferred Stock ("SERIES B CONVERTIBLE
PREFERRED STOCK"),  par value $0.001 per share,  200,000 Series C 4% Convertible
Preferred Stock ("SERIES C CONVERTIBLE  PREFERRED STOCK"), par value $100.00 per
share,  175,000 shares of Series C Preferred Stock ("SERIES C PREFERRED STOCK"),
par value  $0.001  per share,  and  300,000  shares of Series D 15%  Convertible
Preferred Stock ("SERIES D CONVERTIBLE  PREFERRED  STOCK"),  par value $.001 per
share. As of March 20, 2003,  753,877,221 shares of Common Stock,  50,000 shares
of Series A Convertible  Preferred  Stock,  7,200 shares of Series B Convertible
Preferred  Stock,  80,000 of Series C Convertible  Preferred Stock and 25,000 of
Series D Convertible Preferred Stock were issued and outstanding and none of the
Series  A  Preferred  Stock  and  Series  C  Preferred  Stock  were  issued  and
outstanding.  All of such  outstanding  shares have been validly  issued and are
fully paid and  nonassessable.  Except as  disclosed  in the SEC  Documents  (as
defined in Section  3(f)),  no shares of Common Stock are subject to  preemptive
rights or any other  similar  rights or any liens or  encumbrances  suffered  or
permitted by the Company.  Except as disclosed in the SEC  Documents,  as of the
date of this Agreement, (i) there are no outstanding options,  warrants,  scrip,
rights  to  subscribe  to,  calls or  commitments  of any  character  whatsoever
relating to, or securities  or rights  convertible  into,  any shares of capital
stock of the  Company or any of its  subsidiaries,  or  contracts,  commitments,
understandings  or arrangements by which the Company or any of its  subsidiaries
is or may  become  bound to issue  additional  shares  of  capital  stock of the
Company  or any of its  subsidiaries  or  options,  warrants,  scrip,  rights to
subscribe to, calls or commitments of any character whatsoever relating to, or

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securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company  or  any  of its  subsidiaries,  (ii)  there  are  no  outstanding  debt
securities,  (iii)  there are no  agreements  or  arrangements  under  which the
Company or any of its  subsidiaries  is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration  Rights
Agreement); and (iv) there are no outstanding registration statements other than
on  Form  S-8  and  there  are no  outstanding  comment  letters.  There  are no
securities or instruments  containing  anti-dilution or similar  provisions that
will be triggered by the issuance of the Convertible  Debentures as described in
this  Agreement.  The Company has furnished to the Buyer true and correct copies
of the Company's  Certificate of  Incorporation,  as amended and as in effect on
the date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws,
as in effect on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible  into or exercisable for Common Stock and the material rights of the
holders  thereof in respect thereto other than stock options issued to employees
and consultants.

         (d)  ISSUANCE  OF  SECURITIES.  The  Convertible  Debentures  are  duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with  respect  to  the  issue  thereof.  The  Conversion  Shares  issuable  upon
conversion of the Convertible  Debentures have been duly authorized and reserved
for issuance.  Upon  conversion or exercise in accordance  with the  Convertible
Debentures  the  Conversion   Shares  will  be  duly  issued,   fully  paid  and
nonassessable.

         (e) NO  CONFLICTS.  Except  as  disclosed  in the  SEC  Documents,  the
execution,   delivery  and   performance  of  this   Agreement,   the  Investors
Registration  Rights  Agreement and the Escrow  Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the  Certificate of  Incorporation,  any certificate of
designations of any outstanding  series of preferred stock of the Company or the
By-laws or (ii)  conflict  with or  constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of  termination,  amendment,  acceleration  or  cancellation  of, any
agreement,  indenture  or  instrument  to  which  the  Company  or  any  of  its
subsidiaries is a party, or result in a violation of any law, rule,  regulation,
order,  judgment  or decree  (including  federal and state  securities  laws and
regulations  and the  rules  and  regulations  of The  National  Association  of
Securities  Dealers  Inc.'s  OTC  Bulletin  Board on which the  Common  Stock is
quoted)  applicable  to the Company or any of its  subsidiaries  or by which any
property  or  asset  of the  Company  or any of its  subsidiaries  is  bound  or
affected. Except as disclosed in the SEC Documents,  neither the Company nor its
subsidiaries  is in violation of any term of or in default under its Certificate
of  Incorporation  or  By-laws  or  their  organizational  charter  or  by-laws,
respectively,  or any  material  contract,  agreement,  mortgage,  indebtedness,
indenture,  instrument,  judgment,  decree  or  order  or any  statute,  rule or
regulation  applicable to the Company or its  subsidiaries.  The business of the
Company and its subsidiaries is not being conducted,  and shall not be conducted
in violation of any material law,  ordinance,  or regulation of any governmental
entity.  Except as  specifically  contemplated by this Agreement and as required
under the 1933 Act and any applicable  state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental  agency in order for it to execute,
deliver  or  perform  any of its  obligations  under  or  contemplated  by  this
Agreement or the  Registration  Rights  Agreement in  accordance  with the terms
hereof or thereof.  Except as  disclosed  in the SEC  Documents,  all  consents,
authorizations,  orders, filings and registrations which the Company is required
to obtain  pursuant to the preceding  sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.

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         (f) SEC  DOCUMENTS:  FINANCIAL  STATEMENTS.  Since January 1, 2001, the
Company has filed all reports,  schedules, forms, statements and other documents
required to be filed by it with the SEC under of the Securities  Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing  filed prior to the date
hereof or amended  after the date hereof and all exhibits  included  therein and
financial  statements  and  schedules  thereto  and  documents  incorporated  by
reference therein,  being hereinafter  referred to as the "SEC DOCUMENTS").  The
Company has delivered to the Buyers or their representatives,  or made available
through the SEC's website at  http://www.sec.gov.,  true and complete  copies of
the SEC Documents. As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the "FINANCIAL  STATEMENTS") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise  indicated in such Financial  Statements or the notes  thereto,  or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the  Buyer  which  is not  included  in the SEC  Documents,  including,  without
limitation,  information  referred  to in this  Agreement,  contains  any untrue
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

         (g) 10(B)-5.  The SEC Documents do not include any untrue statements of
material fact, nor do they omit to state any material fact required to be stated
therein  necessary to make the  statements  made, in light of the  circumstances
under which they were made, not misleading.

         (h) ABSENCE OF  LITIGATION.  Except as disclosed in the SEC  Documents,
there is no action, suit, proceeding,  inquiry or investigation before or by any
court,  public board,  government agency,  self-regulatory  organization or body
pending  against  or  affecting  the  Company,  the  Common  Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  material  adverse  effect  on  the  business,   operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries taken as a whole.

         (i)  ACKNOWLEDGMENT  REGARDING  BUYER'S  PURCHASE  OF  THE  CONVERTIBLE
DEBENTURES.  The Company  acknowledges  and agrees  that the  Buyer(s) is acting
solely  in the  capacity  of an arm's  length  purchaser  with  respect  to this
Agreement  and  the  transactions   contemplated  hereby.  The  Company  further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar  capacity)  with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective  representatives or agents in connection with this Agreement
and the transactions  contemplated  hereby is merely  incidental to such Buyer's
purchase of the  Convertible  Debentures or the Conversion  Shares.  The Company
further  represents to the Buyer that the Company's  decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.

                                        8


<PAGE>





         (j) NO  GENERAL  SOLICITATION.  Neither  the  Company,  nor  any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation  D under  the 1933 Act) in  connection  with the offer or sale of the
Convertible Debentures or the Conversion Shares.

(k) NO INTEGRATED OFFERING.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has,  directly or indirectly,  made any
offers or sales of any  security or  solicited  any offers to buy any  security,
under   circumstances  that  would  require   registration  of  the  Convertible
Debentures or the Conversion Shares under the 1933 Act or cause this offering of
the Convertible  Debentures or the Conversion Shares to be integrated with prior
offerings by the Company for purposes of the 1933 Act.

         (l) EMPLOYEE RELATIONS. Neither the Company nor any of its subsidiaries
is involved in any labor  dispute nor, to the knowledge of the Company or any of
its subsidiaries,  is any such dispute threatened.  None of the Company's or its
subsidiaries'  employees  is a  member  of a  union  and  the  Company  and  its
subsidiaries believe that their relations with their employees are good.

         (m) INTELLECTUAL  PROPERTY RIGHTS. The Company and its subsidiaries own
or possess  adequate  rights or licenses  to use all  trademarks,  trade  names,
service  marks,  service mark  registrations,  service  names,  patents,  patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,  trade secrets and rights  necessary to conduct their respective
businesses as now conducted.  The Company and its  subsidiaries  do not have any
knowledge of any  infringement by the Company or its  subsidiaries of trademark,
trade name rights, patents,  patent rights,  copyrights,  inventions,  licenses,
service names, service marks, service mark registrations,  trade secret or other
similar  rights of others,  and, to the  knowledge  of the  Company  there is no
claim,  action or proceeding being made or brought against,  or to the Company's
knowledge,  being threatened against, the Company or its subsidiaries  regarding
trademark,  trade name, patents, patent rights, invention,  copyright,  license,
service names, service marks, service mark registrations,  trade secret or other
infringement;  and the Company and its  subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

         (n)  ENVIRONMENTAL  LAWS. The Company and its  subsidiaries  are (i) in
compliance with any and all applicable  foreign,  federal,  state and local laws
and  regulations  relating to the  protection  of human  health and safety,  the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable  Environmental Laws to conduct
their  respective  businesses  and  (iii) are in  compliance  with all terms and
conditions of any such permit, license or approval.


                                        9


<PAGE>





         (o) TITLE.  Any real  property and  facilities  held under lease by the
Company  and its  subsidiaries  are held by them  under  valid,  subsisting  and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its subsidiaries.

         (p) INSURANCE.  The Company and each of its subsidiaries are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  subsidiaries  are
engaged.  Neither  the  Company  nor any such  subsidiary  has been  refused any
insurance  coverage  sought or applied  for and neither the Company nor any such
subsidiary  has any  reason  to  believe  that it will not be able to renew  its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

         (q) REGULATORY  PERMITS.  The Company and its subsidiaries  possess all
material  certificates,  authorizations  and permits  issued by the  appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

         (r)  INTERNAL  ACCOUNTING  CONTROLS.   The  Company  and  each  of  its
subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  and (iii) the recorded  amounts for assets is compared with the
existing  assets at reasonable  intervals and  appropriate  action is taken with
respect to any differences.

         (s) NO MATERIAL ADVERSE  BREACHES,  ETC. Except as set forth in the SEC
Documents,  neither the Company  nor any of its  subsidiaries  is subject to any
charter,  corporate or other legal restriction,  or any judgment, decree, order,
rule or  regulation  which in the judgment of the  Company's  officers has or is
expected  in the  future to have a  material  adverse  effect  on the  business,
properties,  operations, financial condition, results of operations or prospects
of the Company or its  subsidiaries.  Except as set forth in the SEC  Documents,
neither the Company nor any of its  subsidiaries is in breach of any contract or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected  to  have  a  material  adverse  effect  on the  business,  properties,
operations,  financial  condition,  results of  operations  or  prospects of the
Company or its subsidiaries.

         (t) TAX STATUS.  The Company and each of its  subsidiaries has made and
filed all  federal  and state  income  and all other tax  returns,  reports  and
declarations required by any jurisdiction to which it is subject and (unless and
only to the extent that the Company and each of its  subsidiaries  has set aside
on its books  provisions  reasonably  adequate for the payment of all unpaid and
unreported  taxes)  has paid all taxes and other  governmental  assessments  and
charges that are material in amount, shown or determined to be due on such

                                       10


<PAGE>





returns,  reports and  declarations,  except those being contested in good faith
and has set aside on its books provision  reasonably adequate for the payment of
all taxes for periods  subsequent to the periods to which such returns,  reports
or declarations  apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any  jurisdiction,  and the officers of the
Company know of no basis for any such claim.

         (u) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents, and
except  for  arm's  length  transactions  pursuant  to which the  Company  makes
payments in the ordinary  course of business upon terms no less  favorable  than
the Company  could  obtain from third  parties and other than the grant of stock
options  disclosed in the SEC  Documents,  none of the officers,  directors,  or
employees  of the  Company  is  presently  a party to any  transaction  with the
Company  (other  than  for  services  as  employees,  officers  and  directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property to or from,  or  otherwise  requiring  payments to or from any officer,
director or such employee or, to the knowledge of the Company,  any corporation,
partnership,  trust or other entity in which any officer,  director, or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

         (v) FEES AND RIGHTS OF FIRST  REFUSAL.  The Company is not obligated to
offer the  securities  offered  hereunder on a right of first  refusal  basis or
otherwise to any third parties including,  but not limited to, current or former
shareholders  of the  Company,  underwriters,  brokers,  agents  or other  third
parties.

4. COVENANTS.

         (a) BEST  EFFORTS.  Each  party  shall use its best  efforts  timely to
satisfy each of the  conditions  to be satisfied by it as provided in Sections 6
and 7 of this Agreement.

         (b) FORM D. The  Company  agrees to file a Form D with  respect  to the
Conversion  Shares as required under  Regulation D and to provide a copy thereof
to each Buyer  promptly after such filing.  The Company shall,  on or before the
Closing  Date,  take such action as the Company  shall  reasonably  determine is
necessary  to qualify the  Conversion  Shares,  or obtain an  exemption  for the
Conversion  Shares  for  sale to the  Buyers  at the  Closing  pursuant  to this
Agreement  under  applicable  securities or "Blue Sky" laws of the states of the
United  States,  and shall  provide  evidence of any such action so taken to the
Buyers on or prior to the Closing Date.

         (c) REPORTING STATUS. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Conversion Shares without  restriction  pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor  thereto),  or (ii) the
date on which (A) the Buyer(s) shall have sold all the Conversion Shares and (B)
none of the Convertible Debentures are outstanding (the "REGISTRATION  PERIOD"),
the Company shall file in a timely manner all reports  required to be filed with
the SEC pursuant to the 1934 Act and the regulations of the SEC there under, and
the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations there under
would otherwise permit such termination.

                                       11


<PAGE>





         (d) USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Convertible Debentures for general corporate and working capital purposes.

         (e) RESERVATION OF SHARES. The Company shall take all action reasonably
necessary  to at all times have  authorized,  and  reserved  for the  purpose of
issuance,  such number of shares of Common Stock as shall be necessary to effect
the issuance of the Conversion  Shares. If at any time the Company does not have
available  such shares of Common Stock as shall from time to time be  sufficient
to effect the  conversion of all of the  Conversion  Shares of the Company shall
call and hold a special meeting of the  shareholders  within thirty (30) days of
such  occurrence,  for the sole  purpose  of  increasing  the  number  of shares
authorized. The Company's management shall recommend to the shareholders to vote
in favor of  increasing  the  number  of  shares  of  Common  Stock  authorized.
Management  shall also vote all of its shares in favor of increasing  the number
of authorized shares of Common Stock.

         (f)  LISTINGS OR  QUOTATION.  The  Company  shall  promptly  secure the
listing or  quotation of the  Conversion  Shares upon each  national  securities
exchange,  automated quotation system or The National  Association of Securities
Dealers Inc.'s  Over-The-Counter  Bulletin  Board or other market,  if any, upon
which  shares of Common  Stock are then  listed or quoted  (subject  to official
notice of issuance)  and shall use its best efforts to maintain,  so long as any
other shares of Common Stock shall be so listed,  such listing of all Conversion
Shares from time to time issuable under the terms of this Agreement. The Company
shall  maintain the Common Stock's  authorization  for quotation in the over-the
counter market.

         (g) FEES AND EXPENSES.  Each of the Company and the Buyer(s)  shall pay
all  costs  and  expenses   incurred  by  such  party  in  connection  with  the
negotiation,   investigation,   preparation,  execution  and  delivery  of  this
Agreement, the Escrow Agreement, and the Investor Registration Rights Agreement.
The Buyer(s) shall be entitled to cash compensation equal to Twenty Six Thousand
Dollars  ($26,000)  payable at Closing.  The  outstanding  fees and  expenses of
Kirkpatrick  &  Lockhart  LLP  shall  be  paid  directly  out of  Kirkpatrick  &
Lockhart's Trust Account.

         (h) CORPORATE EXISTENCE.  So long as any of the Convertible  Debentures
remain outstanding,  the Company shall not directly or indirectly consummate any
merger, reorganization,  restructuring,  reverse stock split consolidation, sale
of all or substantially  all of the Company's assets or any similar  transaction
or related  transactions  (each such transaction,  an  "ORGANIZATIONAL  CHANGE")
unless,  prior to the  consummation  of an  Organizational  Change,  the Company
obtains the written  consent of each Buyer.  In any such case,  the Company will
make appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable to
the Convertible Debentures.

         (i) TRANSACTIONS WITH AFFILIATES. So long as any Convertible Debentures
are outstanding, the Company shall not, and shall cause each of its subsidiaries
not to, enter into,  amend,  modify or  supplement,  or permit any subsidiary to
enter into, amend, modify or supplement any agreement, transaction,  commitment,
or arrangement with any of its or any subsidiary's officers,  directors,  person
who were  officers or  directors  at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) or with any individual related by blood,

                                       12


<PAGE>





marriage,  or  adoption to any such  individual  or with any entity in which any
such entity or individual owns a five percent (5%) or more  beneficial  interest
(each a "RELATED PARTY"),  except for (a) customary employment  arrangements and
benefit programs on reasonable  terms, (b) any investment in an Affiliate of the
Company,  (c) any  agreement,  transaction,  commitment,  or  arrangement  on an
arms-length  basis on terms no less  favorable  than terms which would have been
obtainable  from a person  other  than such  Related  Party,  (d) any  agreement
transaction,  commitment,  or arrangement which is approved by a majority of the
disinterested directors of the Company, for purposes hereof, any director who is
also an officer of the Company or any  subsidiary  of the Company shall not be a
disinterested  director  with  respect  to  any  such  agreement,   transaction,
commitment, or arrangement.  "AFFILIATE" for purposes hereof means, with respect
to any person or entity,  another person or entity that, directly or indirectly,
(i) has a ten percent  (10%) or more  equity  interest in that person or entity,
(ii) has ten percent (10%) or more common  ownership with that person or entity,
(iii)  controls that person or entity,  or (iv) shares common  control with that
person or entity.  "CONTROL"  or  "CONTROLS"  for  purposes  hereof means that a
person or entity has the  power,  direct or  indirect,  to conduct or govern the
policies of another person or entity.

         (j) TRANSFER AGENT. The Company covenants and agrees that, in the event
that the  Company's  agency  relationship  with the  transfer  agent  should  be
terminated  for any  reason  prior to a date  which is two (2)  years  after the
Closing Date,  the Company shall  immediately  appoint a new transfer  agent and
shall require that the transfer agent execute and agree to be bound by the terms
of the Irrevocable  Transfer Agent  Instructions (as defined herein) to Transfer
Agent.

         (k)  RESTRICTION  ON  ISSUANCE  OF THE  CAPITAL  STOCK.  So long as any
Convertible Debentures are outstanding, the Company shall not, without the prior
written  consent  of the  Buyer(s),  issue or sell  shares  of  Common  Stock or
Preferred Stock (i) without  consideration or for a consideration per share less
than the Bid  Price of the  Common  Stock  determined  immediately  prior to its
issuance,  (ii) any warrant,  option, right,  contract,  call, or other security
instrument  granting  the  holder  thereof,  the right to acquire  Common  Stock
without  consideration or for a consideration  less than such Common Stock's Bid
Price value determined immediately prior to it's issuance,  (iii) enter into any
security  instrument  granting  the  holder a security  interest  in any and all
assets of the Company or (iv) file any registration statement on Form S-8.

         (l)  LEGAL  OPINION  REGARDING  SALE  OF  SHARES.  The  Company  hereby
irrevocably  agrees to accept an opinion  from the law firm of Butler  Gonzalez,
LLP in connection with the sale by the Buyer of any shares of Common Stock under
the applicable securities laws.

5. TRANSFER AGENT INSTRUCTIONS.

         The Company shall issue  irrevocable  instructions in the form attached
hereto as EXHIBIT C to its transfer agent irrevocably appointing Butler Gonzalez
LLP as its agent for purpose of having  certificates  issued,  registered in the
name of the Buyer(s) or its respective  nominee(s),  for the  Conversion  Shares
representing  such amounts of  Convertible  Debentures as specified from time to
time  by the  Buyer(s)  to  the  Company  upon  conversion  of  the  Convertible
Debentures,  for any and all Liquidated  Damages (as such term is defined in the
Registration  Rights  Agreement)  that may be owed pursuant to the  Registration
Rights Agreement (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Butler

                                       13


<PAGE>





Gonzalez LLP shall be paid a cash fee of Fifty Dollars ($50) for every  occasion
they act pursuant to the Irrevocable  Transfer Agent  Instructions.  The Company
shall not change its transfer agent without the express  written  consent of the
Buyer(s), which may be withheld by the Buyer(s) in its sole discretion. Prior to
registration of the Conversion  Shares under the 1933 Act, all such certificates
shall bear the restrictive  legend  specified in Section 2(g) of this Agreement.
The Company  warrants that no instruction  other than the  Irrevocable  Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give  effect to Section  2(g)  hereof (in the case of the  Conversion  Shares
prior to  registration  of such shares  under the 1933 Act) will be given by the
Company to its transfer agent and that the Conversion  Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this  Agreement  and the  Investor  Registration  Rights  Agreement.
Nothing in this  Section 5 shall affect in any way the Buyer's  obligations  and
agreement  to  comply  with  all  applicable  securities  laws  upon  resale  of
Conversion  Shares.  If the  Buyer(s)  provides  the Company  with an opinion of
counsel,  in form,  scope and  substance  customary  for  opinions of counsel in
comparable  transactions  to the  effect  that  registration  of a resale by the
Buyer(s) of any of the Conversion Shares is not required under the 1933 Act, the
Company shall within two (2) business days instruct its transfer  agent to issue
one or more certificates in such name and in such  denominations as specified by
the  Buyer.  The  Company  acknowledges  that a breach by it of its  obligations
hereunder will cause  irreparable  harm to the Buyer by vitiating the intent and
purpose  of  the  transaction  contemplated  hereby.  Accordingly,  the  Company
acknowledges  that the remedy at law for a breach of its obligations  under this
Section 5 will be inadequate and agrees,  in the event of a breach or threatened
breach by the Company of the  provisions  of this  Section 5, that the  Buyer(s)
shall be entitled,  in addition to all other available remedies, to an order for
specific  performance and/or an injunction  restraining any breach and requiring
immediate issuance and transfer,  without the necessity of showing economic loss
and without any bond or other security being required.

6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

         The  obligation  of  the  Company  hereunder  to  issue  and  sell  the
Convertible  Debentures  to  the  Buyer(s)  at the  Closing  is  subject  to the
satisfaction,  at  or  before  the  Closing  Date,  of  each  of  the  following
conditions,  provided that these  conditions  are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:

         (a) Each Buyer shall have executed this Agreement, the Escrow Agreement
and the Investor  Registration  Rights  Agreement  and delivered the same to the
Company.

         (b) The Buyer(s)  shall have delivered to the Escrow Agent the Purchase
Price for Convertible Debentures in respective amounts as set forth next to each
Buyer as outlined on Schedule I attached  hereto and the Escrow Agent shall have
delivered  the net  proceeds  to the  Company by wire  transfer  of  immediately
available U.S. funds pursuant to the wire instructions provided by the Company.

         (c) The  representations  and  warranties of the Buyer(s) shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Closing  Date as  though  made at that  time  (except  for  representations  and
warranties  that  speak as of a  specific  date),  and the  Buyer(s)  shall have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Buyer(s) at or prior to the Closing Date.


                                       14


<PAGE>





7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

         The  obligation of the Buyer(s)  hereunder to purchase the  Convertible
Debentures  at the  Closing  is subject  to the  satisfaction,  at or before the
Closing  Date,  of  each  of  the  following  conditions,  provided  that  these
conditions are for the Buyer's sole benefit and may be waived by the Buyer(s) at
any time in its sole discretion:

         (a) The Company  shall have executed this  Agreement,  the  Convertible
Debenture,  the Escrow Agreement,  the Irrevocable Transfer Instructions and the
Investor Registration Rights Agreement, and delivered the same to the Buyer(s).

         (b) The Common Stock shall be authorized  for quotation on The National
Association  of  Securities  Dealers,  Inc. OTC Bulletin  Board,  trading in the
Common  Stock  shall  not have  been  suspended  for any  reason  and all of the
Conversion  Shares issuable upon conversion of the Convertible  Debentures shall
be approved for listing or quotation on The National  Association  of Securities
Dealers, Inc. OTC Bulletin Board.

         (c) The representations and warranties of the Company shall be true and
correct  in all  material  respects  (except  to the  extent  that  any of  such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such  representations  and warranties  shall be true and
correct  without further  qualification)  as of the date when made and as of the
Closing  Date as  though  made at that  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to the Closing Date. If requested by
the  Buyer,  the Buyer  shall  have  received  a  certificate,  executed  by the
President of the Company,  dated as of the Closing Date, to the foregoing effect
and as to  such  other  matters  as may be  reasonably  requested  by the  Buyer
including,  without  limitation  an update as of the Closing Date  regarding the
representation contained in Section 3(c) hereof.

         (d) The Company  shall have  executed and delivered to the Buyer(s) the
Convertible  Debentures  in the  respective  amounts  set  forth  opposite  each
Buyer(s) name on Schedule I attached hereto.

         (e) The  Buyer(s)  shall have  received  an  opinion  of  counsel  from
Kirkpatrick & Lockhart, LLP in a form satisfactory to the Buyer(s).

         (f) The Company shall have  provided to the Buyer(s) a  certificate  of
good standing from the secretary of state from the state in which the company is
incorporated.

         (g) As of the Closing Date,  the Company shall have reserved out of its
authorized  and unissued  Common Stock,  solely for the purpose of effecting the
conversion of the Convertible  Debentures,  shares of Common Stock to effect the
conversion of all of the Conversion Shares then outstanding.


                                       15


<PAGE>





         (h) The Irrevocable Transfer Agent Instructions,  in form and substance
satisfactory  to the Buyer,  shall have been  delivered to and  acknowledged  in
writing by the Company's transfer agent.

         (i) The Company shall have provided to the Investor an acknowledgement,
to the satisfaction of the Investor,  from BDO Seidman LLP, as to its ability to
provide all  consents  required  in order to file a  registration  statement  in
connection with this transaction.

8. INDEMNIFICATION.

         (a) In  consideration  of the Buyer's  execution  and  delivery of this
Agreement and acquiring the  Convertible  Debentures and the  Conversion  Shares
hereunder,  and in addition to all of the Company's other obligations under this
Agreement,  the Company shall defend,  protect,  indemnify and hold harmless the
Buyer(s) and each other holder of the Convertible  Debentures and the Conversion
Shares, and all of their officers,  directors,  employees and agents (including,
without   limitation,   those  retained  in  connection  with  the  transactions
contemplated by this Agreement) (collectively, the "BUYER INDEMNITEES") from and
against any and all actions,  causes of action,  suits, claims,  losses,  costs,
penalties,  fees,  liabilities and damages, and expenses in connection therewith
(irrespective  of whether any such Buyer Indemnitee is a party to the action for
which indemnification  hereunder is sought), and including reasonable attorneys'
fees and disbursements  (the "INDEMNIFIED  LIABILITIES"),  incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any  misrepresentation  or breach of any  representation or warranty made by the
Company  in  this  Agreement,   the  Convertible   Debentures  or  the  Investor
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby or thereby,  (b) any breach of any  covenant,  agreement or
obligation  of  the  Company  contained  in  this  Agreement,  or  the  Investor
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby  or  thereby,  or (c) any  cause of  action,  suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution,  delivery,  performance or enforcement of this Agreement or any other
instrument,  document  or  agreement  executed  pursuant  hereto  by  any of the
Indemnities,  any  transaction  financed  or to be financed in whole or in part,
directly or  indirectly,  with the proceeds of the  issuance of the  Convertible
Debentures  or the status of the Buyer or holder of the  Convertible  Debentures
the Conversion Shares, as a Buyer of Convertible  Debentures in the Company.  To
the extent that the foregoing  undertaking  by the Company may be  unenforceable
for any reason,  the Company shall make the maximum  contribution to the payment
and  satisfaction of each of the Indemnified  Liabilities,  which is permissible
under applicable law.

         (b) In  consideration  of the Company's  execution and delivery of this
Agreement,  and in addition to all of the Buyer's other  obligations  under this
Agreement,  the Buyer shall  defend,  protect,  indemnify  and hold harmless the
Company and all of its officers,  directors,  employees  and agents  (including,
without   limitation,   those  retained  in  connection  with  the  transactions
contemplated by this Agreement)  (collectively,  the "COMPANY INDEMNITEES") from
and against any and all Indemnified  Liabilities  incurred by the Indemnitees or
any of  them  as a  result  of,  or  arising  out  of,  or  relating  to (a) any
misrepresentation  or  breach  of any  representation  or  warranty  made by the
Buyer(s) in this  Agreement,  ,  instrument or document  contemplated  hereby or
thereby  executed by the Buyer,  (b) any breach of any  covenant,  agreement  or
obligation  of  the  Buyer(s)   contained  in  this   Agreement,   the  Investor
Registration Rights Agreement or any other certificate, instrument or document

                                       16


<PAGE>





contemplated  hereby  or  thereby  executed  by the  Buyer,  or (c) any cause of
action,  suit or claim brought or made against such Company  Indemnitee based on
material  misrepresentations  or due to a material  breach and arising out of or
resulting  from the  execution,  delivery,  performance  or  enforcement of this
Agreement,  the Investor  Registration Rights Agreement or any other instrument,
document  or  agreement   executed   pursuant  hereto  by  any  of  the  Company
Indemnities.  To the extent that the foregoing  undertaking by each Buyer may be
unenforceable for any reason, each Buyer shall make the maximum  contribution to
the payment and  satisfaction of each of the Indemnified  Liabilities,  which is
permissible under applicable law.

9. GOVERNING LAW: MISCELLANEOUS.

         (a) GOVERNING LAW. This Agreement  shall be governed by and interpreted
in  accordance  with the laws of the  State of  Delaware  without  regard to the
principles  of  conflict  of laws.  The  parties  further  agree that any action
between them shall be heard in Hudson County,  New Jersey, and expressly consent
to the  jurisdiction  and venue of the Superior Court of New Jersey,  sitting in
Hudson  County and the United  States  District  Court for the  District  of New
Jersey sitting in Newark,  New Jersey for the  adjudication  of any civil action
asserted pursuant to this Paragraph.

         (b)  COUNTERPARTS.  This  Agreement  may be  executed  in  two or  more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered  to the other  party.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof.

         (c) HEADINGS.  The headings of this  Agreement are for  convenience  of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

         (d)  SEVERABILITY.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement in
that  jurisdiction  or the validity or  enforceability  of any provision of this
Agreement in any other jurisdiction.

         (e) ENTIRE AGREEMENT,  AMENDMENTS.  This Agreement supersedes all other
prior oral or written  agreements  between  the  Buyer(s),  the  Company,  their
affiliates  and  persons  acting on their  behalf  with  respect to the  matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither the Company nor any Buyer makes any representation,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

         (f) NOTICES.  Any notices,  consents,  waivers, or other communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be  deemed  to have  been  delivered  (i) upon  receipt,  when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by U.S.  certified  mail,  return  receipt
requested,  or (iv)  one (1) day  after  deposit  with a  nationally  recognized
overnight  delivery  service,  in each case  properly  addressed to the party to
receive the same.  The addresses and facsimile  numbers for such  communications
shall be:


                                       17


<PAGE>





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) 658-4214

With a copy to:                    Kirkpatrick & Lockhart LLP
                                   201 South Biscayne Boulevard - Suite 2000
                                   Miami, FL  33131-2399
                                   Attention:        Clayton E. Parker, Esq.
                                   Telephone:        (305) 539-3300
                                   Facsimile:        (305) 358-7095

If to the Transfer Agent, to:      Old Monmouth Stock Transfer Co., Inc.
                                   77 Memorial Parkway
                                   Atlantic Highlands, NJ 07716
                                   Telephone:        (732) 872-2727
                                   Facsimile:        (732) 872-2728

With Copy to:                      Butler Gonzalez LLP
                                   1000 Stuyvesant Avenue - Suite 6
                                   Union, NJ 07083
                                   Attention:        David Gonzalez, Esq.
                                   Telephone:        (908) 810-8588
                                   Facsimile:        (908) 810-0973

         If to the Buyer(s),  to its address and facsimile number on Schedule I,
with copies to the Buyer's  counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written  notice to the other party of any change in
address or facsimile number.

         (g)  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall  assign this  Agreement or any rights or
obligations  hereunder  without  the prior  written  consent of the other  party
hereto.

         (h) NO THIRD PARTY  BENEFICIARIES.  This  Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.


                                       18


<PAGE>





         (i) SURVIVAL.  Unless this Agreement is terminated  under Section 9(l),
the  representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the  indemnification  provisions  set forth in Section 8, shall  survive the
Closing for a period of one (1) year following the date on which the Convertible
Debentures are converted in full. The Buyer(s) shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.

         (j)  PUBLICITY.  The Company and the  Buyer(s)  shall have the right to
approve,  before  issuance any press release or any other public  statement with
respect to the  transactions  contemplated  hereby made by any party;  provided,
however,  that the Company shall be entitled,  without the prior approval of the
Buyer(s),  to issue any press release or other public disclosure with respect to
such  transactions  required  under  applicable  securities  or  other  laws  or
regulations  (the Company  shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public  disclosure  prior to its
release  and  Buyer(s)  shall  be  provided  with a copy  thereof  upon  release
thereof).

         (k) FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and  performed,  all such  further acts and things,  and shall  execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

         (l) TERMINATION.  In the event that the Closing shall not have occurred
with  respect to the Buyers on or before  five (5)  business  days from the date
hereof due to the Company's or the Buyer's failure to satisfy the conditions set
forth in Sections 6 and 7 above (and the non-breaching  party's failure to waive
such unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this  Agreement  with respect to such breaching  party at the close of
business  on such  date  without  liability  of any  party to any  other  party;
provided,  however, that if this Agreement is terminated by the Company pursuant
to this  Section  9(l),  the Company  shall remain  obligated  to reimburse  the
Buyer(s) for the fees and expenses of Butler Gonzalez  described in Section 4(g)
above.

         (m) NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language  chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.


                    [REMAINDER PAGE INTENTIONALLY LEFT BLANK]



                                       19


<PAGE>








         IN WITNESS  WHEREOF,  the  Buyers  and the  Company  have  caused  this
Securities  Purchase  Agreement to be duly executed as of the date first written
above.


                                          COMPANY:

                                          VERTICAL COMPUTER SYSTEMS, INC.

                                          By:
                                            -----------------------------
                                          Name:    Richard Wade
                                          Title:   President



                                       20



<PAGE>







                                                                       EXHIBIT A


                 FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT








<PAGE>








                                                                       EXHIBIT B


                            FORM OF ESCROW AGREEMENT








<PAGE>









                                                                       EXHIBIT C

                           TRANSFER AGENT INSTRUCTIONS








<PAGE>










                                   SCHEDULE I


                               SCHEDULE OF BUYERS


<TABLE>
<CAPTION>
                                                                       ADDRESS/FACSIMILE              AMOUNT OF
           NAME                          SIGNATURE                      NUMBER OF BUYER             SUBSCRIPTION
--------------------------- ---------------------------------     ------------------------------    -------------
<S>                         <C>                                   <C>                               <C>
Cornell Capital Partners,LP By:      Yorkville Advisors, LLC      101 Hudson Street - Suite 3606    $
                            Its:     General Partner              Jersey City, NJ  07303
                                                                  Facsimile:        (201)
                                                                        985-8266

                            By:
                              Name: Mark A. Angelo
                             Its: Portfolio Manager

</TABLE>



<PAGE>









                                   SCHEDULE II

                               DISCLOSURE SCHEDULE