Document:

EMPLOYMENT
      AGREEMENT

    

    THIS
      AGREEMENT (the “Agreement”) effective the first day of December 2001 entered
      into by and between RICHARD
      WADE (“Executive”)
      and VERTICAL
      COMPUTER SYSTEMS, INC.,
      a
      Delaware corporation
      (“the
      Company”) or any of its affiliates, with its principal place of business at 6336
      Wilshire Blvd. Los Angeles, California 90048. This Agreement may be unilaterally
      transferred to an affiliate of the Company, without economic detriment to the
      Employee.

    

    BACKGROUND

    

    A. The
      Company has been established for the purpose of e-commerce development and
      related Internet business operations;

    

    B. The
      Company desires to employ Executive as Chief Executive Officer and President
      and
      Executive desires to be so employed and;

    

    NOW,
      THEREFORE, the parties desire to memorialize herein the terms and conditions
      of
      Executive’s employment. In consideration of the mutual covenants and promises
      contained herein and other good and valuable consideration, the parties hereby
      acknowledge the receipt and sufficiency of which hereto, the parties agree
      as
      follows:

    

    1. Position.

    

    Executive
      shall serve as Chief Executive Officer and President upon the terms set forth
      in
      this Agreement. Executive shall have the responsibilities inherent in this
      position and shall report to the Board of Directors and Executive
      shall perform any other duties reasonably required by Board of
      Directors.

    

    2. Term
      of Employment.
      

    

    Subject
      to the provisions of this Agreement, the term of Executive’s employment under
      this Agreement shall commence on December 1, 2001 and shall continue up to
      December31, 2004 (the “Initial Term”). This Agreement may be renewed for an
      additional two (2) year term at Executive’s option and the Board’s approval.
      However, the Executive shall have the option to renew the agreement for two
      years provided the Company achieves a minimum profitability of $5,000,000 in
      2002 with a 50% minimum increase in net profit in 2003 and 2004 respectively
      upon the good faith concurrence of the Board in the achievement of the
      performance criteria or validation of "profitability" by independent auditors.
      Unless either party elects to terminate this Agreement at the end of the initial
      or any renewal term by giving the other party written notice of such election
      at
      least ninety (90) days before the expiration of the then current term, this
      Agreement shall be deemed to have been renewed for an additional term of two
      (2
      year commencing on the day after the expiration of the then current term. Either
      party may elect not to renew this Agreement with or without cause, in which
      case
      this Section 2 shall govern Executive’s termination, and not Section 5. Upon
      expiration of this Agreement after notice of non-renewal, Company shall provide
      Executive all compensation and benefits to which Executive is entitled through
      the date of termination and thereafter Company’s obligation hereunder shall
      cease.

     

    
      
        
        

      

      
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    Notwithstanding
      what is contained in this agreement, the Executive will sign and abide by the
      employee handbook and all other company’s policies.

    

    3. Compensation
      and Bonus.

    

    3.1 Salary.
      The
      Company shall pay Executive an annual base salary of THREE HUNDRED THOUSAND
      DOLLARS ($300,000.00) during the term of Executive’s employment, payable in
      accordance with the Company’s semi-monthly payroll disbursement cycle (“Base
      Compensation”). Executive’s Base Compensation shall be reviewed and increased
      each year during the term of Executive’s employment, provided that the Company’s
      performance criteria are achieved as set forth by the Board each year;
      and

    

    3.2 Bonus.
      Executive shall receive an annual bonus One Hundred Twenty (120) days after
      the
      end of the Company’s fiscal year from a pool equal to five (5) percent of the
      Company taxable income from the federal tax return filed before depreciation.
      Executive’s share of the bonus pool is equal to the percentage of his annual
      base compensation to the total combined annual base compensation of all
      executives of Company in bonus pool;

    

    3.3 Warrants.
      Executive
      will receive 20,000,000 warrants at a strike price of $0.10 and 600,000
      non-dilutable warrants at a strike price of $0.10 piggyback registration rights
      in the form attached. The Executive will be vested monthly in equal amounts
      over
      three (3) years, so long as Executive remains employed by the Company or as
      otherwise set forth herein in this Agreement.

    

    

    3.4 Service
      with the Company. During
      the term of this Agreement, Executive shall perform such reasonable employment
      duties, commensurate with Executive’s position, as the Board of Directors,
      shall, from time to time, assign to Executive;

    

    3.5 Performance
      of Duties.
      Executive shall serve the Company faithfully and to the best of his ability
      and
      devote full business time, attention, skill and effort exclusively to the
      performance of the duties described in this Agreement. Executive shall comply
      with all policies, procedures and budgets established by the Company in the
      performance of his duties and responsibilities. During
      the Period of Employment, (i) Executive’s working time, energy, skill and best
      efforts shall be devoted to the performance of Executive’s duties hereunder in a
      manner which will faithfully and diligently further the business and interests
      of Company; and (ii) Executive shall not accept any other employment, or engage,
      directly or indirectly, in any other business, commercial, or professional
      activity (whether or not providing compensation) that is or may be competitive
      with Company or any Affiliate that might create a conflict of interest with
      Company or any Affiliate or that otherwise might interfere with the business
      of
      Company or any Affiliate. Executive may engage in charitable, civic, fraternal,
      professional and trade association activities that do not interfere materially
      with Executive’s obligations to Company;

     

    
      
        
        

      

      
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    3.6 Vacation
      and Sick Leave.
      Executive will be entitled to Four (4) weeks of vacation and sick leave equal
      to
      six (6) days per year. Vacation time and sick leave shall not be accumulated
      after the end of any year. Sick leave shall accumulate at the rate of one half
      day per month;

    

    3.7 Expenses.
      The
      Company shall reimburse Executive for all expenses incurred in connection with
      his duties on behalf of the Company, provided that Executive shall keep, and
      present to the Company, records and receipts relating to reimbursable expenses
      incurred by her. Such records and receipts shall be maintained and presented
      in
      a format, and with such regularity, as the Company reasonably may require in
      order to substantiate the Company’s right to claim income tax deductions for
      such expenses. Without limiting the generality of the foregoing, Executive
      shall
      be entitled to reimbursement for any business-related travel, business-related
      entertainment, whether at his residence or otherwise, or other costs and
      customary business expenses reasonably incident to the performance of his duties
      on behalf of the Company. Executive will be entitled to reimbursement of all
      reasonable, customary business expenses incurred by his in the performance
      of
      his duties.

    

    3.8 Benefits.
      Executive will be entitled to participate in the employee benefit plans or
      programs of the Company, including medical and life insurance and profit
      sharing, to the fullest extent possible, subject to the rules and regulations
      applicable hereto and to standard eligibility and vesting requirements of any
      coverage and shall be furnished with other services and perquisites appropriate
      to his position. Without limiting the generality of the foregoing, Executive
      shall be entitled to the following benefits:

    

    (a) Comprehensive
      medical insurance for Executive, his spouse, and his dependent children with
      TWENTY
      PERCENT (20%)
      deductibles;

    

    (b) Dental
      insurance for Executive, Executive’s spouse, and his dependent
      children;

    

    (c) Group
      term life insurance with death benefits equal to one hundred percent (100%)
      of
      base salary;

    

    (d) Annual
      physical examination;

    

    (e) Long-term
      disability.

     

     

    
      
        
        

      

      
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        4.
          Termination.

      

    

    

    4.1 Due
      to
      Disability 

    

    (a) If
      Executive becomes unable to perform the duties specified hereunder due to
      partial or total disability or incapacity resulting from a mental or physical
      illness, injury or any other cause, Company will continue the payment of
      Executive’s base salary at its then current rate for a period of TWENTY-SIX (26)
      weeks following the date Executive is first unable to perform such duties due
      to
      such disability or incapacity. Thereafter, Company shall have no obligation
      for
      base salary, bonus or other compensation payments to Executive during the
      continuance of such disability or incapacity. Company will continue to provide
      benefits to Executive so long as Executive remains employed;

    

    (b) If
      Executive is unable to perform the duties specified hereunder due to partial
      or
      total disability or incapacity resulting from a mental or physical illness,
      injury or any other cause for a period of TEN (10) consecutive weeks or for a
      cumulative period of SEVENTY (70) business days during any FIVE (5) month period
      (“Disability”), then, to the extent permitted by law, Company shall have the
      right to terminate this Agreement thereafter, in which event Company shall
      have
      no further obligations or liabilities hereunder after the date of such
      termination except Executive will be deemed disabled and eligible for the
      payments outlined in paragraph 4.1 (a). EXECUTIVE REPRESENTS THAT TO THE BEST
      OF
      HIS KNOWLEDGE HE HAS NO MEDICAL CONDITION THAT COULD CAUSE PARTIAL OR TOTAL
      DISABILITY THAT WOULD RENDER HER UNABLE TO PERFORM THE DUTIES SPECIFIED IN
      THIS
      AGREEMENT OTHERWISE THE BENEFITS IN PARAGRAPH 4.1(a) SHALL BE NULL AND
      VOID.

    

    4.2 Due
      to
      Death.
      If
      Executive dies during the period of employment, Executive’s employment with
      Company shall terminate as of the end of the calendar month in which the death
      occurs. Company shall have no obligation to Executive or Executive’s estate for
      Base Compensation or other form of compensation or benefit other than amounts
      accrued through the date of Executive’s death, except as otherwise required by
      law or by benefit plans provided at Company expense.

    

    In
      the
      event of the termination of Executive’s employment due to Executive’s death or
      Disability, Executive or Executive’s legal representatives, as the case may be,
      shall be entitled to:

    

    (a) In
      the
      case of death, unpaid Base Compensation earned or accrued through Executive’s
      date of death and continued Base Compensation at a rate in effect at the time
      of
      death, for
      a
      period of (3) three months after which Executive’s death occurs, or the end of
      the employment term, which ever is the lesser amount.

    

    (b) Any
      performance or special incentive bonus earned but not yet paid;

     

    
      
        
        

      

      
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    (c) A
      pro
      rata performance bonus for the year in which employment terminates due to death
      or Disability based on the performance of Company for the year during which
      such
      termination occurs or, if performance results are not available, based on the
      performance bonus paid to Executive for the prior year; and

    

    (d) Any
      other
      compensation and benefits to which Executive or Executive’s legal
      representatives may be entitled under applicable plans, programs and agreements
      of Company to the extent permitted under the terms thereof, including, without
      limitation, life insurance as provided in Section 3.8 above.

    

    4.3 For
      Cause.
      Company
      may terminate Executive’s employment relationship with Company for
      "cause" by action of at least a majority of the Company's Board of Directors,
      at
      a meeting duly called and held upon at least 30 days written notice to the
      Executive specifying the particulars of the action or inaction alleged to
      constitute "cause" and at which meeting Executive and his counsel were entitled
      to be present and given adequate opportunity to be heard..

    

    (a) For
      purposes of this Agreement, termination of employment of Executive by the
      Company for “cause” means termination for the following reasons: (i) frequent
      and unjustifiable absenteeism, other than solely by reason of his illness or
      physical or mental disability; (ii) failing to follow the reasonable
      instructions of the Chairman; (iii) proven dishonesty materially injurious
      to
      the Company or to its business, operations, assets or condition (an “Adverse
      Effect”); or gross violation of Company policy or procedure after being warned,
      notified, or Executive’s acknowledged, gross or willful misconduct, or willful
      neglect to act, which misconduct or neglect is committed or omitted by Executive
      in bad faith and had an Adverse Effect; or (iv) a failure by Executive to comply
      with any material provision of this Agreement, which failure is not cured (if
      capable of cure) within 30 days after receipt of written notice of such
      non-compliance by Executive. Action or inaction by Executive shall not be
      considered "willful" unless done or omitted by him intentionally or not in
      good
      faith and without reasonable belief that his action or inaction was in the
      best
      interest of the Company, and shall not include failure to act by reason of
      total
      or partial incapacity due to physical or mental illness. 

    

    (b)
      Company shall have no obligation to Executive for Base Compensation or other
      form of compensation or benefits, except as otherwise required by law, other
      than (i) amounts accrued through the date of termination, and (ii) reimbursement
      of appropriately documented expenses incurred by Executive before the
      termination of employment, to the extent that Executive would have been entitled
      to such reimbursement but for the termination of employment.

     

    
      
        
        

      

      
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    4.4 Termination
      of Employment by the Executive

    

    (a)
       The
      Executive may terminate his employment for Good Reason and receive the payments
      and benefits specified in Section 4.4 (a)(iii)(B)). For purposes of this
      Agreement, “Good Reason” will exist if any one or more of the following
      occur:

    

    (i) Failure
      by the Company to honor any of its obligations under this Agreement, including,
      without limitation, its obligations under Sections 1 and 3.4 (Employment
      Capacity and Duties), Section 3.5 (Executive Performance Covenants), Sections
      3.1, 3.2, 3.3 (Compensation), Section 3.7 (Reimbursement of Expenses). Sections
      3.6 and 3.8 (Employee Benefits, Vacations), Section 11 (Indemnification)
      and Section 12.3 (Successors and Assigns); or

    

    (ii) Any
      purported termination by the Company of the Executive’s employment that is not
      effected pursuant to a Notice of Termination satisfying the requirements of
      Section 4.3 above and, for purposes of this Agreement, no such purported
      termination shall be effective.

    

    (iii) (A) If
      there
      is a Change in Control of the Company (as defined below) and the employment
      of
      the Executive is concurrently or subsequently terminated (i) by the Company
      without Cause, (ii) by service of a Notice of Termination or (iii) by
      the resignation of the Employee because he has reasonably determined in good
      faith that his titles, authorities, responsibilities, salary, bonus
      opportunities or benefits have been materially diminished, or that a material
      adverse change in his working conditions has occurred or the Company has
      breached this Agreement, then Executive shall be entitled to the “Benefits”
described in (B). For the purpose of this Agreement, a Change in Control of
      the
      Company has occurred when: (x) any person (defined for the purposes of this
      Section  to mean any person within the meaning of Section 13(d) of the
      Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Company,
      or an employee benefit plan established by the Board of Directors of the
      Company, acquires, directly or indirectly, the beneficial ownership (determined
      under Rule 13d-3 of the regulations promulgated by the Securities and Exchange
      Commission under Section 13(d) of the Exchange Act) of securities issued by
      the
      Company having twenty percent (20%) or more of the voting power of all of the
      voting securities issued by the Company in the election of directors at the
      meeting of the holders of voting securities to be held for such purpose; or
      (y) a majority of the directors elected at any meeting of the holders of
      voting securities of the Company are persons who were not nominated for such
      election by the Board of Directors of the Company or a duly constituted
      committee of the Board of Directors of the Company having authority in such
      matters; or (z) the Company merges or consolidates with or transfers
      substantially all of its assets to another person.

     

    
      
        
        

      

      
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    (B) Benefits.
      If during the term of this Agreement a Change of Control” occurs (as defined
      above) then the Executive shall be entitled to receive the following: (i) salary
      and vacation accrued through the date of the Change in Control plus an amount
      equal to three years of Executive’s salary then in effect, payable immediately
      upon Change in Control, (ii) an amount equal to three times target bonus for
      the
      fiscal year in which the Change in Control occurs (as well as any unpaid bonus
      from the prior fiscal year), all payable immediately upon Change in Control,
      (iii) acceleration in full of vesting of all outstanding stock options, Tarps
      and other equity arrangements subject to vesting and held by Executive (and
      in
      this regard , all such options and other exercisable rights held by Executive
      shall remain exercisable one year following the date of the Change in Control),
      (iv) (A) continuation of group health and insurance benefits at the Company’s
      cost pursuant to the Company’s standard programs as in effect from time to time
      (or at the Company’s election substantially similar benefits as in effect at the
      Termination Date (if applicable), through a third party carrier) for executive,
      his spouse and any children, for three years following date of Change in Control
      (even if executive ceases employment), and (B) thereafter, to the extent COBRA
      shall be applicable, continuation of health benefits for such persons at
      Executive’s cost, for a period of 18 months or such longer period as may be
      applicable under the Company’s policies then in effect, provided the Executive
      makes the appropriate election and payments, and (v) no other compensation
      ,
      severance or other benefits.

    

    (b) Additional
      Payments by the Company. If
      it is
      determined (as hereafter provided) that any payment or distribution by the
      Company to or for the benefit of Executive, whether paid or payable or
      distributed or distributable pursuant to the terms of this Agreement or
      otherwise pursuant to or by reason of any other agreement, policy, plan,
      program, or arrangement, including without limitation any stock option, stocck
      appreciation right or similar right or the lapse or termination of any
      restriction on or the vesting or exercisability of any of the foregoing (a
      “Payment “), would be subject to the excise tax imposed by section 4999 of the
      Code (or any successor provisions thereto) or to any similar tax imposed by
      state or local law , or any interest or penalties with respect to such excise
      tax (such tax or taxes, together with any such interest and penalties, are
      hereafter collectively referred to as the “Excise Tax”), then Executive will be
      entitled to receive an additional payment or payments (a “Gross-Up Payment”) in
      an amount such that, after payment by Executive of all taxes (including any
      interest or penalties imposed with respect to such taxes), including any Excise
      Tax, imposed upon the Gross-up Payment, Executive retains an amount of the
      Gross-Up Payment equal to the Excise Tax imposed upon the Payments

    

    (c) The
      Executive shall have the right voluntarily to terminate his employment other
      than for Good Reason prior to the Scheduled Employment Termination Date, and
      if
      the Executive shall so terminate his employment, he shall be entitled only
      to
      payment of the amounts which would be payable under Section 4.3 had he been
      terminated for Cause.

    

    
      
        
        

      

      
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    4.5 Termination
      Obligations.

    

    (a) All
      tangible Company Property shall be returned promptly to Company upon termination
      of the Period of Employment;

    

    (b) All
      benefits to which Executive is otherwise entitled shall cease upon Executive’s
      termination, unless explicitly continued either under this Agreement or under
      any specific written policy or benefit plan of Company;

    

    (c) Upon
      termination of the Period of Employment, Executive shall be deemed to have
      resigned from all offices and directorships then held with Company or any
      Affiliate.

    

    (d) Executive’s
      obligations under this Section 4.5 on Termination Obligations, Section 5 on
      Confidentiality and Non-Disclosure, Section 7 on Inventions, and Section 8
      on
      Arbitration shall survive the termination of the Period of Employment and the
      expiration or termination of this Agreement; and

    

    (e) Following
      any termination of the Period of Employment, Executive shall cooperate fully
      with Company in all matters relating to completing pending work on behalf of
      Company and the orderly transfer of work to other employees of Company.
      Executive shall also cooperate in the defense of any action brought by any
      third
      party against Company that relates in any way to Executive’s acts or omissions
      while employed by Company.

    

    
      
        5.
          Confidentiality
          and Non-Disclosure.

      

    

    

    Executive
      agrees to abide by the terms of the Confidentiality and Non-Disclosure Agreement
      appended hereto as Exhibit A and to comply with such confidentiality,
      non-disclosure, and proprietary information policies now in effect by the
      Company or as may be established in the future.

    

    
      
        6.
          Company
          Property.

      

    

    

    All
      products, records, designs, patents, plans, data, manuals, brochures, memoranda,
      devices, lists and other property delivered to Executive by or on behalf of
      the
      Company, all confidential information including, but not limited to, lists
      of
      potential customers, prices, and similar confidential materials or information
      respecting the business affairs of the Company, such as hardware manufacturers,
      software developers, networks, strategic partners, business practices regarding
      technology and schedules, legal actions and personnel information, and all
      records compiled by Executive which pertain to the business of the Company,
      and
      all rights, title and interest now existing or that may exist in the future
      in
      and to any intellectual property rights created by Executive for the Company,
      in
      performing his duties during the term of this Agreement shall be and remain
      the
      property of the Company. Executive agrees to execute and deliver at a future
      date any further documents that the Company, determines may be necessary or
      desirable to perfect the Company’s ownership in any intellectual or other
      property rights.

     

    
      
        
        

      

      
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    7. Inventions. 

    

    7.1
       Subject
      to the limitations of California Labor
      Code§
2870,
      a
      copy of which is attached as Exhibit B, “Inventions” shall mean any and all
      writings, original works or authorship, inventions, ideas, trademarks, service
      marks, patents, copyrights, know-how, improvements, processes, designs,
      formulas, discoveries, technology, computer hardware or software, procedures
      and/or techniques which Executive may make, conceive, discover, reduce to
      practice or develop, either solely or jointly with any other person or persons,
      at any time during the Period of Employment, whether or not during working
      hours
      and whether or not at the request or upon the suggestion of Company, which
      relate to or are useful in connection with any business now or hereafter carried
      on or contemplated by Company, including developments or expansions of its
      present fields of operations;

    

    7.2
       Executive
      shall make full disclosure to Company of all Inventions and shall do everything
      necessary or desirable to vest the absolute title thereto in Company. Executive
      shall write and prepare all specifications and procedures regarding such
      inventions, improvements, processes, procedures and techniques and otherwise
      aid
      and assist Company so that Company can prepare and present applications for
      copyright or Letters Patent therefor and can secure such copyright or Letters
      Patent wherever possible, as well as reissues, renewals, and extensions thereof,
      and can obtain the record title to such copyright or patents so that Company
      shall be the sole and absolute owner thereof in all countries in which it may
      desire to have copyright or patent protection. Executive shall not be entitled
      to any additional or special compensation or reimbursement regarding any
      Invention;

    

    7.3
       All
      Inventions shall be the sole and exclusive property of Company. Executive agrees
      to, and hereby does, assign to Company all of Executive’s right, title, and
      interest (throughout the United States and in all foreign countries), free
      and
      clear of all liens and encumbrances, in and to each Invention. 

    

    7.4
       Continuing
      Obligations.
      The
      rights and obligations of Executive and Company set forth in this Section shall
      survive the termination of Executive’s employment and the expiration of this
      Agreement.

    

    
      
        8.
          Arbitration.

      

    

    

    8.1 Arbitrable
      Claims.
      To the
      fullest extent permitted by law, all disputes between Executive (and his
      attorneys, successors and assigns) and Company (and its Affiliates,
      shareholders, directors, officers, employees, agents, successors, attorneys
      and
      assigns) of any kind whatsoever, including, without limitation, all disputes
      arising under this Agreement (“Arbitrable Claims”), shall be resolved by
      arbitration. All persons and entities specified in the preceding sentence (other
      than Company and Executive) shall be considered third-party beneficiaries of
      the
      rights and obligations created by this Section on Arbitration. Arbitrable Claims
      shall include, but are not limited to, contract (express or implied) and tort
      claims of all kinds, as well as all claims based on any federal, state or local
      law, statute or regulation, excepting only claims under applicable workers’
compensation law and unemployment insurance claims. By way of example and not
      in
      limitation of the foregoing, Arbitrable Claims shall include any claims arising
      under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
      Employment Act, the Americans with Disabilities Act and the California Fair
      Employment and Housing Act;

     

    
      
        
        

      

      
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    8.2 Procedure.
      Arbitration of Arbitrable Claims shall be in accordance with the National Rules
      for the Resolution of Employment Disputes of the American Arbitration
      Association, as amended (“AAA Employment Rules”), as augmented in this
      Agreement. Arbitration shall be initiated as provided by the AAA Employment
      Rules, although the written notice to the other party initiating arbitration
      shall also include a statement of the claim(s) asserted and the facts upon
      which
      the claim(s) are based. Arbitration shall be final and binding upon the parties
      and shall be the exclusive remedy for all Arbitrable Claims. Either party may
      bring an action in court to compel arbitration under this Agreement and to
      enforce an arbitration award. Otherwise, neither party shall initiate or
      prosecute any lawsuit or administrative action in any way related to any
      Arbitrable Claim. Notwithstanding the foregoing, either party may, at its
      option, seek injunctive relief pursuant to section 1281.8 of the California
      Code
      of Civil Procedure. All arbitration hearings under this Agreement shall be
      conducted in Los Angeles, California. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY
      MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS, INCLUDING, WITHOUT
      LIMITATION, ANY RIGHT TO TRIAL BY JURY AS TO THE MAKING, EXISTENCE, VALIDITY
      OR
      ENFORCEABILITY OF THE AGREEMENT TO ARBITRATE;

    

    8.3 Arbitrator
      Selection and Authority.
      A
      single arbitrator shall decide all disputes involving Arbitrable Claims. The
      arbitrator shall be selected by mutual agreement of the parties within thirty
      (30) days of the effective date of the notice initiating the arbitration. If
      the
      parties cannot agree on an arbitrator, then the complaining party shall notify
      the AAA and request selection of an arbitrator in accordance with the AAA
      Employment Rules. The arbitrator shall have authority to award equitable relief,
      damages, costs and fees to the same extent that, but not greater than, a court
      would have. The fees of the arbitrator shall be split between both parties
      equally, unless this would render this Section of Arbitration unenforceable,
      in
      which case the arbitrator shall apportion said fees so as to preserve
      enforceability. The arbitrator shall have exclusive authority to resolve all
      Arbitrable Claims, including, but not limited to, whether any particular claim
      is arbitrable and whether all or any part of this Agreement is void or
      unenforceable;

    

    8.4 Continuing
      Obligations.
      The
      rights and obligations of Executive and Company set forth in this Section on
      Arbitration shall survive the termination of Executive’s employment and the
      expiration of this Agreement.

    

    

    
      
        
        

      

      
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    9. Prior
      Agreements; Conflicts of Interest. Executive
      represents to Company: (a) that there are no restrictions, agreements or
      understandings, oral or written, to which Executive is a party or by which
      Executive is bound that prevent or make unlawful Executive’s execution or
      performance of this Agreement; (b) none of the information supplied by Executive
      to Company or any representative of Company or placement agency in connection
      with Executive’s employment by Company misstated a material fact or omitted
      information necessary to make the information supplied not materially
      misleading; and (c) Executive does not have any business or other relationship
      that creates a conflict between the interests of Executive and the
      Company.

     

    10. Non-Competition.
      During
      the term of this Agreement Executive shall not:

    

    10.1
      Start employment with, offer consulting services to, or otherwise become
      involved in, advise or participate on behalf of any other company, entity or
      individual, in the field of the Company; and

    

    10.2
      Individually or through any agent, for herself or on behalf of any other person
      or entity (i) solicit employees of the Company, to entice them to leave the
      Company; or (ii) solicit or induce and third party now or at any time during
      the
      term of this Agreement who is providing services to the Company, through
      license, contract, partnership, or otherwise to terminate or reduce their
      relationships with the Company.

    

    11. Indemnification.
      As an
      employee, officer and director of the Company, the Executive shall be
      indemnified against all liabilities, damages, fines, costs and expenses by
      the
      Company in accordance with the indemnification provisions of the Company’s
      Certificate of Incorporation as in effect on the date hereof, and otherwise
      to
      the fullest extent to which employees, officers and directors of a corporation
      organized under the laws of Delaware may be indemnified pursuant to Delaware
      General Corporations Law, as the same may be amended from time to time (or
      any
      subsequent statute of similar tenor and effect), subject to the terms and
      conditions of such statute. 

    

    12. Binding
      Agreement; Successors.

    

    12.1 
      This
      Agreement shall be binding upon and shall inure to the benefit of the Company
      and its successors and assigns. The Company shall require any successor (whether
      direct or indirect, by purchase, merger, consolidation or otherwise) to all
      or
      substantially all of the business and/or assets of the Company, by agreement
      to
      assume expressly and agree to perform this agreement in the same manner and
      to
      the same extent that the Company would be required to perform it if no such
      succession had taken place. For purposes of this Agreement, “ Company” shall
      mean the Company as hereinbefore defined and any successor to its business
      and/or assets as aforesaid.

    

    12.2
      This
      Agreement shall be binding upon and shall inure to the benefit of the
      Executive’s personal or legal representatives, executors, administrators,
      successors, heirs, distributees, beneficiaries, devises and legatees. If the
      Executive should die while any amounts are payable to him hereunder, all such
      amounts, unless otherwise provided herein, shall be paid in accordance with
      the
      terms of this Agreement to the Executive’s devisee. Legatee, beneficiary or
      other designee or, if there be no such designee, to the Executive’s
      estate.

     

    
      
        
        

      

      
        Page
          11
          of 13

        
          

        

      

      
        
        

      

    

     

    12.3 Except
      as
      otherwise set forth in this Section 12, this Agreement is personal in nature
      and
      neither of the parties hereto shall, without the consent of the other, assign,
      or transfer this Agreement or any rights or obligations hereunder. Without
      limiting the foregoing, the Executive’s right to receive payments hereunder
      shall not be assignable or transferable, whether by pledge, creation of a
      security interest or otherwise, other than a transfer by his will or trust
      or by
      the laws of descent or distribution, and in the event of any attempted
      assignment or transfer contrary to this paragraph the company shall have no
      liability to pay any amount so attempted to be assigned or
      transferred.

    

    13.
       Miscellaneous
      Provisions.

    

    13.1 Authority. Each
      party hereto represents and warrants that it has full power and authority to
      enter into this Agreement and to perform this Agreement in accordance with
      its
      terms.

     

    13.2 Governing
      Law.
      This
      Agreement shall be construed, interpreted and enforced in accordance with the
      laws of the State of California.

     

    13.3 Captions.
      The
      captions of the sections of this Agreement are for convenience of reference
      only
      and in no way define, limit or affect the scope or substance of any section
      of
      this Agreement.

    

    13.4
      Severability.
      In the
      event that any provision of this Agreement shall be invalid, illegal or
      otherwise unenforceable, the validity, legality and enforceability of the
      remaining provisions shall in no way be affected or impaired
      thereby.

    

    13.5 Amendment.
      This
      Agreement may be amended only in writing executed by the parties hereto.

    

    13.6 Attorney’s
      Fees.
      In the
      event of a dispute the prevailing party shall be entitled to be reimbursed
      for
      its legal fees by the other party. 

    

    13.7 Special
      Costs.
      Notwithstanding Section 12.6, if a dispute arises regarding a termination of
      the
      Executive or the interpretation or enforcement of this Agreement, subsequent
      to
      a Change in Control or for Good Reason, all the reasonable legal fees and
      expenses incurred by the Executive and any arbitration costs in contesting
      any
      such termination or obtaining or enforcing all or part of any right or benefit
      provided for in this Agreement or in otherwise pursuing all or part of his
      claim
      will be paid by the Company, unless prohibited by law. The Company further
      agrees to pay pre-judgment interest on any money judgment obtained by Executive
      calculated at the prime interest rate reported in the Wall Street Journal in
      effect from time to time from the date that payment to him should have been
      made
      under this Agreement.

     

    
      
        
        

      

      
        Page
          12
          of 13

        
          

        

      

      
        
        

      

    

     

    13.8 Finality
      of Agreement.
      This
      Agreement, when executed by the parties, supersedes all other agreements of
      the
      parties with respect to the matters discussed.

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement effective as of the
      day and year first set forth above.

    

    
      	 	 	 
	 	“Executive”
	 	 
	 	 

              
Richard
              Wade
	 
 	 
 	 
 
	 	“Vertical Computer
              Systems,
              Inc.”
	 	 	 
	
            	By:  	 
	 	
              

              William
                Mills - Director & Secretary

            
	 	 

    

     

    
      
        
        

      

      
        Page
          13
          of 13THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “ACT”), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF THIS
      SECURITY OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS SECURITY
      ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR REGISTRATION UNDER
      STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND SUCH SHARES OF
      COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF
      OR
      AN OPINION OF COUNSEL REASONABLY ACCEPTABLE IN FORM, SCOPE AND SUBSTANCE TO
      THE
      COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

    

    No.
      49

    

    Right
      to
      Purchase 600,000 Shares
      of
      Common Stock of Vertical Computer Systems, Inc.

     

    

    VERTICAL
      COMPUTER SYSTEMS, INC.

    

    Common
      Stock Purchase Warrant (the “Warrant”)

    

    

    VERTICAL
      COMPUTER SYSTEMS, INC., a Delaware corporation (the “Company”), hereby certifies
      that, for value received, Richard
      Wade,
      or
      registered assigns (the “Holder”), is entitled, subject to the terms set forth
      below, to purchase from the Company at any time or from time to time up to
      and
      including Three
      (3)
      years
      after the date hereof, and before 5:00 p.m., Los Angeles time, on December
      19, 2004,
      Six
      Hundred Thousand
      (600,000) fully
      paid and nonassessable shares of Common Stock, $.00001 par value, of the Company
      (hereinafter the “Warrants”) at an Exercise Price per share initially equal to
      $0.10.
      The
      number of such shares of Common Stock and the Exercise Price are subject to
      adjustment as provided in this Warrant.

     

    1.
      Conditions and Rights of Holder to Exercise Warrants. 

    

    (a) If,
      from
      time to time, the Holder acquires any shares of stock pursuant to this Common
      Stock Purchase Warrant, the Holder accepts and agrees to the terms of the Lock
      Up Agreement, attached hereto as Exhibit A, and incorporated herein by this
      reference.

    

    (b) The
      Warrants shall vest in equal amounts on a monthly basis over a three (3) year
      period so long as the Holder is employed by company or as otherwise set forth
      in
      the employment agreement between the Company and the Holder, dated December
      1,
      2001. 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (c)
       This
      Warrant may be exercised by the Holder hereof in full or in part at any time
      or
      from time to time during the exercise period specified in the first paragraph
      hereof, by surrender of this Warrant and the subscription form annexed hereto
      (duly executed) by such Holder to the Company and by making payment, in cash
      or
      by certified or official bank check payable to the order of the Company or
      wire
      transfer to the Company’s account or, with the prior written consent of the
      Company, through the surrender of previously acquired shares of Common Stock
      at
      their fair market value on the exercise date or through the execution of a
      promissory note collateralized by the shares underlying the Warrant, in the
      amount obtained by multiplying (a) the number of shares of Common Stock
      designated by the Holder in the subscription form by (b) the Exercise Price
      then
      in effect. On any partial exercise the Company will forthwith issue and deliver
      to or upon the order of the Holder hereof a new Warrant or Warrants of like
      tenor, in the name of the Holder hereof or as such Holder (upon payment by
      such
      Holder of any applicable transfer taxes) may request, providing in the aggregate
      on the face or faces thereof for the purchase of the number of shares of Common
      Stock for which such Warrant or Warrants may still be exercised.

    

    2.
      Delivery
      of Stock Certificates, etc., on Exercise.
      As soon
      as practicable after the exercise of this Warrant, and in any event within
      five
      business days thereafter, the Company at its expense (including the payment
      by
      it of any applicable issue or stamp taxes) will cause to be issued in the name
      of and delivered to the Holder hereof, or as such Holder (upon payment by such
      Holder of any applicable transfer taxes) may direct, a certificate or
      certificates for the number of fully paid and nonassessable shares of Common
      Stock to which such Holder shall be entitled on such exercise, in such
      denominations as may be requested by such Holder, plus, in lieu of any
      fractional share to which such Holder would otherwise be entitled, cash equal
      to
      such fraction multiplied by the then current fair market value of one full
      share, together with any other stock or other securities any property (including
      cash, where applicable) to which such Holder is entitled upon such exercise
      pursuant to Section 1 or otherwise. 

    

    3.
      Dilution.

    

    a. Dividends,
      Etc.
      If the
      Company shall pay to the holders of its Common Stock a dividend in shares of
      Common Stock or in securities convertible into Common Stock, the Exercise Price
      in effect immediately prior to the record date fixed for the determination
      of
      the holders of Common Stock entitled to such dividend shall be proportionately
      decreased, effective at the opening of business on the next following full
      business day.

    

    b. Splits,
      Combinations, Etc.
      If the
      Company shall split the outstanding shares of its Common Stock into a greater
      number of shares or combine the outstanding shares into a smaller number, the
      Exercise Price in effect immediately prior to such action shall be
      proportionately decreased in the case of a split or increased in the case of
      a
      combination, effective at the opening of business on the full business day
      next
      following the day such action becomes effective. Notwithstanding the foregoing,
      in the event that the Company shall approve a so-called reverse stock split,
      the
      number of Warrants shall not be decreased but the initial exercise price per
      share shall be multiplied by the inverse of the stock split. By way of example
      only, if the Company approves a 4 to 1 reverse stock split, the Holder would
      retain the right to purchase 600,000
      common
      shares underlying the Warrants at a purchase price per share four times the
      original purchase price per share.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    4.  Protection
      in Case or Reclassification, Etc.
      In case
      of any reclassification or change of the terms of the outstanding shares of
      the
      class of Common Stock issuable upon the exercise of this Warrant, then upon
      exercise of this Warrant (other than a change relating to par value, or as
      a
      result of a subdivision or combination), or in case of any consolidation or
      merger of the Company with or into another company (other than a merger in
      which
      the Company is the continuing company or which does not result in any
      reclassification or change of outstanding shares of Common Stock of the class
      issuable upon exercise of this Warrant, other than a split or combination of
      shares), or in case of any sale or conveyance to any other person or entity
      of
      all or substantially all of the assets of the Company, the Company shall use
      its
      best efforts to execute an agreement providing that the holder of this Warrant
      shall have the right thereafter to exercise this Warrant for the kind and amount
      of shares of stock and other securities and property receivable upon such
      reclassification, change, dividend, distribution, consolidation, merger, sale
      or
      conveyance by a holder of the number of shares of Common Stock of the Company
      for which this Warrant might have been exercised immediately prior to such
      reclassification, change, dividend, distribution, consolidation, merger, sale
      or
      conveyance. This Section 4 shall apply to successive reclassifications and
      changes of and dividends and distributions on shares of Common Stock and to
      successive consolidations, mergers, sales or conveyances. Notice of the
      execution of any agreement pertaining to such reclassification, change,
      dividend, distribution, consolidation, merger, sale or conveyance shall be
      given
      to the holder of this Warrant as soon as practicable and in any event not less
      than ten (10) business days before any such transaction is
      consummated.

     

    5.
      Reservation
      of Stock, etc., Issuable on Exercise of Warrants.
      The
      Company will at all times reserve and keep available, solely for issuance and
      delivery on the exercise of this Warrant, all shares of Common Stock from time
      to time issuable on the exercise of this Warrant. 

    

    6.
      Register
      of Warrants.
      The
      Company shall maintain, at the principal office of the Company (or such other
      office as it may designate by notice to the Holder hereof), a register in which
      the Company shall record the name and address of the person in whose name this
      Warrant has been issued, as well as the name and address of each successor
      and
      prior owner of such Warrant. The Company shall be entitled to treat the person
      in whose name this Warrant is so registered as the sole and absolute owner
      of
      this Warrant for all purposes.

    

    7.
      Exchange
      of Warrant.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder hereof at
      the
      office or agency of the Company referred to in Section 6, for one or more new
      Warrants of like tenor representing in the aggregate the right to subscribe
      for
      and purchase the number of shares of Common Stock which may be subscribed for
      purchase hereunder, each of such new Warrants to represent the right to
      subscribe for and purchase such number of shares as shall be designated by
      said
      Holder hereof at the time of such surrender.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    8.
      Replacement
      of Warrant.
      On
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of any such loss,
      theft or destruction of this Warrant, on delivery of an indemnity agreement
      or
      security reasonably satisfactory in form and amount to the Company or, in the
      case of any such mutilation, on surrender and cancellation of this Warrant,
      the
      Company at its expense will execute and deliver, in lieu thereof, a new Warrant
      of like tenor.

    

    9.
      Warrant
      Agent.
      The
      Company will act as the exercise agent for the purpose of issuing Common Stock
      on the exercise of this Warrant pursuant to Section 1. The Company may, by
      written notice to the Holder, appoint an agent having an office in the United
      States of America, for the purpose of issuing Common Stock on the exercise
      of
      this Warrant pursuant to Section 1, redeeming this Warrant pursuant to Section
      2, exchanging this Warrant pursuant to Section 7, and replacing this Warrant
      pursuant to Section 8, or any of the foregoing, and thereafter any such
      issuance, exchange or replacement, as the case may be, shall be made at such
      office by such agent.

    

    10.
      No
      Rights or Liabilities as a Stockholder.
      This
      Warrant shall not entitle the Holder hereof to any voting rights or other rights
      as a stockholder of the Company, until properly exercised.  

    

    11.
      Notices, etc. All notices and other communications from the Company to the
      registered Holder of this Warrant shall be mailed by first class certified
      mail,
      postage prepaid, at such address as may have been furnished to the Company
      in
      writing by such Holder or at the address shown for such Holder on the register
      of Warrants referred to in Section 7.

    

    12.
      Miscellaneous. This Warrant and any terms hereof may be changed, waived,
      discharged or terminated only by an instrument in writing signed by the party
      against which enforcement or such change, waiver, discharge or termination
      is
      sought. This Warrant shall be construed and enforced in accordance with and
      governed by the internal laws of the State of Delaware. The headings in this
      Warrant are for purposes of reference only, and shall not limit or otherwise
      affect any of the terms hereof. The invalidity or unenforceability of any
      provision hereof shall in no way affect the validity or enforceability of any
      other provision.

    

    13.
      “Piggy-Back” Registration.

    

       a. Grant
      of
      Right. The Holder of this Warrant shall have the right for a period of five
      years from the date of grant of this Warrant to include all or any part of
      this
      Warrant and the shares of Common Stock underlying this Warrant (collectively,
      the “Registrable Securities”) as part of any registration of securities filed by
      the Company (other than in connection with a transaction contemplated by Rule
      145(a) promulgated under the Act); provided, however, that if, in the written
      opinion of the Company’s managing underwriter or underwriters, if any, for such
      offering determines that marketing factors require a limitation of the number
      of
      shares to be underwritten, the managing underwriter in its sole discretion
      may
      limit the number of Registrable Securities to be included in the registration,
      or may exclude Registrable Securities entirely from such registration. In such
      case, the Company shall so advise Holder whose Registrable Securities otherwise
      would be included in such registration and underwritten offering shall be
      allocated among other selling shareholders requesting registration in
      proportion, as nearly as practicable, to the respective amounts of Registrable
      Securities held by Holder and registrable shares each of such other selling
      shareholders at the date of filing of the Registration Statement. If Holder
      disapproves of the terms and conditions of the underwritten offering, Holder
      may
      withdraw therefrom by written notice to the Company and the managing
      underwriter(s). Any Registrable Securities excluded or withdrawn from such
      underwritten offering shall be withdrawn from such registration.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

       b.
       Lock
      Up.
      Holder hereby agrees that, if requested by the Company and the managing
      underwriter(s), it will enter into a customary form of “lock-up” agreement with
      the Company and the managing underwriter(s) with respect to any Registrable
      Securities then held by Holder, which agreement shall contain such Registrable
      Securities than those contained in any other such agreements then entered into
      by the Company and the managing underwriter(s) with other comparable holders
      of
      the Company’s Common Stock.

    

       c.
       Terms.
      The Company shall bear all fees and expenses attendant to registering the
      Reigstrable Securities, including any filing fees payable to the National
      Association of Securities Dealers, Inc. (NASD), but the Holder shall pay any
      and
      all underwriting commissions and the expenses of any legal counsel selected
      by
      the Holder to represent it in connection with the sale of the Registrable
      Securities. In the event of such a proposed registration, the Company shall
      furnish the then Holder of outstanding Registrable Securities with prompt
      written notice prior to the proposed date of filing of such registration
      statement. Such notice to the Holder shall continue to be given for each
      registration statement filed by the Company until such time as all of the
      Registrable Securities have been sold by the Holder. The Holder of the
      Registrable Securities shall exercise the “piggy-back” rights provided for
      herein by giving written notice, within twenty days of the receipt of the
      Company’s notice of its intention to file a registration statement. Nothing
      contained in this Warrant shall be construed as requiring any Holder to exercise
      this Warrant or any part thereof prior to the initial filing of any registration
      statement or the effectiveness thereof. The Company shall have the right to
      terminate or withdraw any registration initiated by the Company under this
      Section 5 prior to the effectiveness of such registration whether or not Holder
      has elected to include Registrable Securities in such registration.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, Vertical Computer Systems, Inc. has caused this Warrant to
      be
      executed on its behalf by one of its officers thereunto duly
      authorized.

     

    
      	 	 	 
	 Dated:
December
              19, 2001 	VERTICAL
              COMPUTER
              SYSTEMS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
William
              Mills, Secretary

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