Document:

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Exhibit 10.104a

                         EQUITY LINE OF CREDIT AGREEMENT

         AGREEMENT  dated as of the 14th day of  April  2003  (the  "AGREEMENT")
between  CORNELL  CAPITAL  PARTNERS,  LP, a Delaware  limited  partnership  (the
"INVESTOR"),  and VERTICAL COMPUTER SYSTEMS,  INC., a corporation  organized and
existing under the laws of the State of Delaware (the "COMPANY").

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall purchase from the
Company up to Ten Million Dollars  ($10,000,000)  of the Company's common stock,
par value $0.00001 per share (the "COMMON STOCK"); and

         WHEREAS,  such investments will be made in reliance upon the provisions
of Regulation D ("REGULATION D") of the Securities Act of 1933, as amended,  and
the regulations promulgated there under (the "SECURITIES ACT"), and or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

         WHEREAS,  the Company has engaged Katalyst Securities LLC to act as the
Company's exclusive placement agent in connection with the sale of the Company's
Common Stock to the Investor hereunder pursuant to the Placement Agent Agreement
dated the date  hereof by and among the  Company,  the  Placement  Agent and the
Investor (the "PLACEMENT AGENT AGREEMENT").

         NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I.
                               CERTAIN DEFINITIONS

         Section 1.1.  "ADVANCE" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.

         Section 1.2.  "ADVANCE  DATE" shall mean the date Butler  Gonzalez LLP.
Escrow Account is in receipt of the funds from the Investor and Butler  Gonzalez
LLP, as Escrow Agent,  is in possession of free trading  shares from the Company
and  therefore  an Advance by the Investor to the Company can be made and Butler
Gonzalez LLP can release the free  trading  shares to the  Investor.  No Advance
Date shall be less than six (6) Trading Days after an Advance Notice Date.

         Section  1.3.  "ADVANCE  NOTICE"  shall  mean a  written  notice to the
Investor  setting  forth the Advance  amount that the Company  requests from the
Investor and the Advance Date.

         Section  1.4.  "ADVANCE  NOTICE  DATE" shall mean each date the Company
delivers to the  Investor an Advance  Notice  requiring  the Investor to advance
funds to the Company,  subject to the terms of this Agreement. No Advance Notice
Date shall be less than seven (7) Trading  Days after the prior  Advance  Notice
Date,  and there  will be no more  than  three (3)  Advance  Notices  in any one
calendar month.

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         Section 1.5. "BID PRICE" shall mean, on any date, the closing bid price
(as reported by Bloomberg  L.P.) of the Common Stock on the Principal  Market or
if the Common Stock is not traded on a Principal  Market,  the highest  reported
bid price for the Common  Stock,  as furnished by the  National  Association  of
Securities Dealers, Inc.

         Section 1.6. "CLOSING" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.

         Section 1.7.  "COMMITMENT AMOUNT" shall mean the aggregate amount of up
to Ten Million Dollars ($10,000,000) which the Investor has agreed to provide to
the Company in order to purchase  the  Company's  Common  Stock  pursuant to the
terms and conditions of this Agreement.

         Section 1.8.  "COMMITMENT  PERIOD" shall mean the period  commencing on
the earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the  Investor  may  mutually  agree in writing,  and expiring on the
earliest to occur of (x) the date on which the Investor  shall have made payment
of Advances  pursuant to this  Agreement in the aggregate  amount of Ten Million
Dollars  ($10,000,000),  (y) the date this  Agreement is terminated  pursuant to
Section  2.5,  or (z) the date  occurring  twenty-four  (24)  months  after  the
Effective Date.

         Section 1.9.  "COMMON STOCK" shall mean the Company's common stock, par
value $0.00001 per share.

         Section 1.10. "CONDITION  SATISFACTION DATE" shall have the meaning set
forth in Section 7.2.

         Section 1.11. "DAMAGES" shall mean any loss, claim, damage,  liability,
costs and expenses (including,  without limitation,  reasonable  attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).

         Section  1.12.  "EFFECTIVE  DATE"  shall mean the date on which the SEC
first declares effective a Registration  Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).

         Section 1.13.  "ESCROW AGREEMENT" shall mean the escrow agreement among
the Company, the Investor, and Butler Gonzalez LLP dated the date hereof.

         Section 1.14.  "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.

         Section  1.15.  "MATERIAL  ADVERSE  EFFECT"  shall mean any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this  Agreement  or the  Registration  Rights  Agreement  in any  material
respect.

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         Section 1.16. "MARKET PRICE" shall mean the lowest closing Bid Price of
the Common Stock during the Pricing Period.

         Section 1.17.  "MAXIMUM  ADVANCE  AMOUNT" shall be $150,000 per Advance
Notice or $450,000 per month.

         Section  1.18.  "MINIMUM  ACCEPTABLE  PRICE"  shall mean a price of the
Company's  Common Stock as determined by the Company on the Advance  Notice Date
of which the  Investor  shall be advised of in writing  simultaneously  with the
Advance Notice. This operates as a floor for each Advance and the Purchase Price
for any Advance  shall never fall below the  Minimum  Acceptable  Price for such
Advance.

         Section 1.19 "NASD" shall mean the National  Association  of Securities
Dealers, Inc.

         Section  1.20  "PERSON"  shall mean an  individual,  a  corporation,  a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

         Section 1.21  "PLACEMENT  AGENT" shall mean Katalyst  Securities LLC, a
registered broker-dealer.

         Section  1.22  "PRICING  PERIOD"  shall  mean the five (5)  consecutive
Trading Days after the Advance Notice Date.

         Section 1.23 "PRINCIPAL  MARKET" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange,  the OTC Bulletin Board
or the New York Stock Exchange,  whichever is at the time the principal  trading
exchange or market for the Common Stock.

         Section 1.24 "PURCHASE PRICE" shall be set at ninety nine percent (99%)
of the Market Price during the Pricing Period.

         Section 1.25  "REGISTRABLE  SECURITIES" shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration  Statement
has not been declared  effective by the SEC, (ii) which have not been sold under
circumstances  meeting  all of the  applicable  conditions  of Rule  144 (or any
similar  provision then in force) under the Securities Act ("RULE 144") or (iii)
which have not been otherwise  transferred to a holder who may trade such shares
without  restriction  under the Securities  Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

         Section   1.26   "REGISTRATION   RIGHTS   AGREEMENT"   shall  mean  the
Registration Rights Agreement dated the date hereof, regarding the filing of the
Registration  Statement for the resale of the  Registrable  Securities,  entered
into between the Company and the Investor.

         Section  1.27  "REGISTRATION   STATEMENT"  shall  mean  a  registration
statement  on Form S-1 or SB-2  (if use of such  form is then  available  to the
Company  pursuant  to the  rules  of the SEC and,  if not,  on such  other  form
promulgated  by the SEC for which the Company then  qualifies  and which counsel
for the Company  shall deem  appropriate,  and which form shall be available for
the  resale  of the  Registrable  Securities  to be  registered  there  under in
accordance with the provisions of this Agreement and the Registration Rights

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Agreement,  and in accordance  with the intended  method of distribution of such
securities),  for  the  registration  of  the  resale  by  the  Investor  of the
Registrable Securities under the Securities Act.

         Section  1.28  "REGULATION  D" shall have the  meaning set forth in the
recitals of this Agreement.

         Section 1.29 "SEC" shall mean the Securities and Exchange Commission.

         Section 1.30  "SECURITIES  ACT" shall have the meaning set forth in the
recitals of this Agreement.

         Section 1.31 "SEC DOCUMENTS"  shall mean Annual Reports on Form 10-KSB,
Quarterly  Reports  on  Form  10-QSB,  Current  Reports  on Form  8-K and  Proxy
Statements  of the  Company as  supplemented  to the date  hereof,  filed by the
Company for a period of at least twelve (12) months  immediately  preceding  the
date  hereof or the  Advance  Date,  as the case may be,  until such time as the
Company  no  longer  has  an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

         Section 1.32 "TRADING DAY" shall mean any day during which the New York
Stock Exchange shall be open for business.

                                   ARTICLE II.
                                    ADVANCES

         Section 2.1.  ADVANCES.  Upon the terms and conditions set forth herein
(including,  without  limitation,  the provisions of Article VII hereof), on any
Advance  Notice Date the  Company may request an Advance by the  Investor by the
delivery  of an Advance  Notice.  The number of shares of Common  Stock that the
Investor  shall  receive for each Advance  shall be  determined  by dividing the
amount of the Advance by the  Purchase  Price.  No  fractional  shares  shall be
issued.  Fractional  shares  shall be rounded to the next higher whole number of
shares.  The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.

         Section 2.2.      MECHANICS.

                  (a) ADVANCE NOTICE. At any time during the Commitment  Period,
the  Company  may  deliver an  Advance  Notice to the  Investor,  subject to the
conditions  set forth in Section  7.2;  provided,  however,  the amount for each
Advance as designated by the Company in the applicable Advance Notice, shall not
be more than the Maximum  Advance Amount.  The aggregate  amount of the Advances
pursuant to this Agreement shall not exceed the Commitment  Amount.  The Company
acknowledges  that the  Investor may sell shares of the  Company's  Common Stock
corresponding  with a particular Advance Notice on the day the Advance Notice is
received  by the  Investor.  There will be a minimum of seven (7)  Trading  Days
between  each  Advance  Notice  Date,  and there  will be no more than three (3)
Advance Notices in any calendar month.

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                  (b) MINIMUM  ACCEPTABLE PRICE.  Simultaneous with each Advance
Notice, the Company shall specify the Minimum Acceptable Price for such Advance.
The Minimum  Acceptable  Price shall  operate as a floor for such  Advance.  The
Company  shall not be  obligated  to sell any Common  Stock  corresponding  to a
particular  Advance  below the  Minimum  Acceptable  Price.  The  Company  shall
automatically  withdraw a pro rata portion of the Advance Notice amount based on
the  number of days the  closing  bid price of the  Company's  Common  Stock (as
reported by Bloomberg, L.P.) during the Pricing Period is lower than the Minimum
Acceptable  Price.  The shares of Common  Stock  issued shall also be reduced to
correspond with the reduction in the Advanced Notice amount. For example, if the
closing bid price of the  Company's  Common Stock on the Advance  Notice Date is
$0.90,  and the Minimum  Acceptable Price as determined by the Company is $0.89.
For every day  during  the  Pricing  Period  that the  closing  bid price of the
Company's  common stock is below  $0.89,  the  Advanced  Notice  amount shall be
reduced by Twenty Percent (20%).

                  (c) DATE OF  DELIVERY  OF ADVANCE  NOTICE.  An Advance  Notice
shall be deemed  delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time,  or (ii) the  immediately  succeeding  Trading  Day if it is  received  by
facsimile or otherwise  after 12:00 noon Eastern Time on a Trading Day or at any
time on a day  which is not a  Trading  Day.  No  Advance  Notice  may be deemed
delivered, on a day that is not a Trading Day.

                  (d)  PRE-CLOSING  SHARE  CREDIT.  Within two (2) business days
after the Advance  Notice Date, the Company shall credit shares of the Company's
Common  Stock to the Escrow  Agent's  (as  defined  herein)  Investor's  balance
account with The  Depository  Trust  Company  through its Deposit  Withdrawal At
Custodian  system,  in an amount  equal to the amount of the  requested  Advance
divided by the closing Bid Price of the Company's Common Stock as of the Advance
Notice Date multiplied by one point one (1.1).  Any adjustments to the number of
shares  to  be  delivered  to  the  Investor  at  the  Closing  as a  result  of
fluctuations  in the closing Bid Price of the  Company's  Common  Stock shall be
made as of the date of the Closing.  Any excess  shares shall be credited to the
next  Advance.  In no event shall the number of shares  issuable to the Investor
pursuant  to an  Advance  cause the  Investor  to own in excess of nine and 9/10
percent (9.9%) of the then outstanding Common Stock of the Company.

                  (e)  HARDSHIP.  In the event the  Investor  sells Common Stock
pursuant  to  subsection  (c)  above  and  the  Company  fails  to  perform  its
obligations  as mandated in Section 2.5 and 2.2 (c), and  specifically  fails to
provide the Investor with the shares of Common Stock for the applicable Advance,
the Company  acknowledges that the Investor shall suffer financial  hardship and
therefore  shall  be  liable  for any  and all  losses,  commissions,  fees,  or
financial hardship caused to the Investor.

         Section 2.3.  CLOSINGS.  On each Advance  Date,  which shall be six (6)
Trading Days after an Advance  Notice Date, (i) the Company shall deliver to the
Investor's Counsel,  as defined pursuant to the Escrow Agreement,  shares of the
Company's  Common Stock,  representing the amount of the Advance by the Investor
pursuant to Section 2.1 herein,  registered  in the name of the  Investor  which
shall be delivered to the Investor,  or otherwise in accordance  with the Escrow
Agreement  and (ii) the  Investor  shall  deliver  to Butler  Gonzalez  LLP (the
"ESCROW  AGENT") the amount of the Advance  specified  in the Advance  Notice by
wire transfer of immediately available funds which shall be delivered to the

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Company, or otherwise in accordance with the Escrow Agreement.  In addition,  on
or prior to the Advance Date, each of the Company and the Investor shall deliver
to the other  through the  Investor's  Counsel all  documents,  instruments  and
writings  required to be delivered by either of them pursuant to this  Agreement
in order to implement and effect the transactions  contemplated herein.  Payment
of funds to the  Company  and  delivery  of the  Company's  Common  Stock to the
Investor shall occur in accordance with the conditions set forth above and those
contained in the Escrow  Agreement;  PROVIDED,  HOWEVER,  that to the extent the
Company has not paid the fees, expenses,  and disbursements of the Investor, the
Investor's  counsel or  Kirkpatrick  & Lockhart LLP in  accordance  with Section
12.4, the amount of such fees,  expenses,  and  disbursements may be deducted by
the Investor  (and shall be paid to the  relevant  party) from the amount of the
Advance with no reduction in the amount of shares of the Company's  Common Stock
to be delivered on such Advance Date.

         Section 2.4. TERMINATION OF INVESTMENT.  The obligation of the Investor
to make an Advance to the Company  pursuant to this  Agreement  shall  terminate
permanently  (including  with  respect  to an  Advance  Date  that  has  not yet
occurred)  in the event that (i) there shall occur any stop order or  suspension
of the  effectiveness  of the  Registration  Statement for an aggregate of fifty
(50)  Trading  Days,  other  than due to the acts of the  Investor,  during  the
Commitment  Period,  and (ii) the Company  shall at any time fail  materially to
comply with the  requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written  notice from the  Investor,  PROVIDED,
HOWEVER,  that  this  termination  provision  shall  not  apply  to  any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such post  effective  amendment  is
declared effective by the SEC..

         Section 2.5.      AGREEMENT TO ADVANCE FUNDS.

                  (a) The Investor agrees to advance the amount specified in the
Advance  Notice to the Company  after the  completion  of each of the  following
conditions and the other conditions set forth in this Agreement:

                           (i) the execution and delivery by the Company, and
the Investor, of this Agreement, and the Exhibits hereto;

                           (ii) Escrow Agent shall have received the shares of
Common Stock applicable to the Advance in accordance with Section 2.2(c) hereof;

                           (iii)  the  Company's   Registration  Statement  with
respect to the resale of the Registrable Securities in accordance with the terms
of the Registration  Rights Agreement shall have been declared  effective by the
SEC;

                           (iv) the Company shall have obtained all material
permits and  qualifications  required by any applicable  state for the offer and
sale of the Registrable Securities, or shall have the availability of exemptions
there from. The sale and issuance of the Registrable Securities shall be legally
permitted by all laws and regulations to which the Company is subject;

                           (v) the Company shall have filed with the Commission
in a timely  manner all  reports,  notices  and other  documents  required  of a
"reporting   company"   under  the  Exchange  Act  and   applicable   Commission
regulations;

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                           (vi)     the fees as set forth in  Section  12.4
below shall have been paid or can be withheld as provided in Section 2.3; and

                           (vii) the conditions set forth in Section 7.2 shall
have been satisfied.

                           (viii)  The  Company   shall  have  provided  to  the
Investor an  acknowledgement,  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;

                           (ix) The Company's transfer agent shall be DWAC
eligible.

         Section 2.6.      LOCK UP PERIOD.

                           (i) During the Commitment  Period,  the Company shall
not, issue or sell (i) any Common Stock or Preferred Stock without consideration
or for a consideration per share less than the Bid Price on the date of issuance
or (ii) issue or sell any  warrant,  option,  right,  contract,  call,  or other
security or instrument  granting the holder  thereof the right to acquire Common
Stock without  consideration or for a consideration  per share less than the Bid
Price on the date of issuance.

                           (ii) On the date hereof, the Company shall obtain
from each officer and director a lock-up  agreement,  as defined  below,  in the
form annexed hereto as Schedule  2.6(b) agreeing to only sell in compliance with
the volume limitation of Rule 144.

                                  ARTICLE III.
                   REPRESENTATIONS AND WARRANTIES OF INVESTOR

         Investor  hereby  represents  and  warrants  to, and agrees  with,  the
Company  that the  following  are true and as of the date  hereof and as of each
Advance Date:

         Section  3.1.  ORGANIZATION  AND  AUTHORIZATION.  The  Investor is duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and has all  requisite  power and  authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor,  the  performance
by such  Investor of its  obligations  hereunder  and the  consummation  by such
Investor of the transactions  contemplated  hereby have been duly authorized and
requires no other  proceedings on the part of the Investor.  The undersigned has
the right,  power and  authority to execute and deliver this  Agreement  and all
other  instruments  (including,  without  limitations,  the Registration  Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and,  assuming the  execution and delivery  hereof and
acceptance thereof by the Company,  will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

         Section 3.2.  EVALUATION OF RISKS.  The Investor has such knowledge and
experience in financial tax and business  matters as to be capable of evaluating
the  merits  and risks of,  and  bearing  the  economic  risks  entailed  by, an
investment  in the Company and of protecting  its  interests in connection  with
this  transaction.  It recognizes that its investment in the Company  involves a
high degree of risk.

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         Section  3.3.  NO  LEGAL   ADVICE  FROM  THE   COMPANY.   The  Investor
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.  The Investor 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.

         Section 3.4. INVESTMENT PURPOSE.  The securities are being purchased by
the  Investor for its own account,  for  investment  and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part.  The Investor  agrees not to assign or in any way transfer the  Investor's
rights to the  securities  or any  interest  therein and  acknowledges  that the
Company  will not  recognize  any  purported  assignment  or transfer  except in
accordance with applicable  Federal and state  securities  laws. No other person
has or will have a direct or indirect beneficial interest in the securities. The
Investor  agrees not to sell,  hypothecate or otherwise  transfer the Investor's
securities  unless the securities  are  registered  under Federal and applicable
state securities laws or unless,  in the opinion of counsel  satisfactory to the
Company, an exemption from such laws is available.

         Section  3.5.  ACCREDITED  INVESTOR.  The  Investor  is an  "ACCREDITED
INVESTOR"  as that term is  defined in Rule  501(a)(3)  of  Regulation  D of the
Securities Act.

         Section  3.6.  INFORMATION.  The  Investor  and its  advisors  (and its
counsel),  if any,  have  been  furnished  with all  materials  relating  to the
business,  finances  and  operations  of the Company and  information  it deemed
material  to  making an  informed  investment  decision.  The  Investor  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  Investor  or its  advisors,  if any,  or its
representatives  shall modify,  amend or affect the Investor's  right to rely on
the Company's  representations and warranties  contained in this Agreement.  The
Investor  understands  that its  investment  involves a high degree of risk. The
Investor is in a position  regarding the Company,  which, based upon employment,
family  relationship  or economic  bargaining  power,  enabled and enables  such
Investor to obtain  information from the Company in order to evaluate the merits
and risks of this investment. The Investor has sought such accounting, legal and
tax  advice,  as it has  considered  necessary  to make an  informed  investment
decision with respect to this transaction.

         Section  3.7.  RECEIPT OF  DOCUMENTS.  The Investor and its counsel has
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto;  (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 year ended year ended December 31, 2001
and Form  10-QSB  for the  periods  ended  March  31,  2002,  June 30,  2002 and
September 30, 2002; and (iv) answers to all questions the Investor  submitted to
the Company regarding an investment in the Company;  and the Investor has relied
on the  information  contained  therein  and has not been  furnished  any  other
documents, literature, memorandum or prospectus.

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         Section 3.8.  REGISTRATION  RIGHTS AGREEMENT AND ESCROW AGREEMENT.  The
parties have  entered  into the  Registration  Rights  Agreement  and the Escrow
Agreement, each dated the date hereof.

         Section 3.9. 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 Securities  Act) in connection  with the offer or sale of
the shares of Common Stock offered hereby.

         Section  3.10.  NOT AN  AFFILIATE.  The  Investor  is  not an  officer,
director  or  a  person  that  directly,  or  indirectly  through  one  or  more
intermediaries,  controls or is controlled  by, or is under common  control with
the Company or any  "AFFILIATE"  of the Company (as that term is defined in Rule
405 of the Securities Act).  Neither the Investor nor its Affiliates has an open
short position in the Common Stock of the Company,  and the Investor agrees that
it will not, and that it will cause its  Affiliates  not to, engage in any short
sales of or hedging transactions with respect to the Common Stock, provided that
the Company  acknowledges  and agrees that upon receipt of an Advance Notice the
Investor  will sell the  Shares to be issued  to the  Investor  pursuant  to the
Advance Notice, even if the Shares have not been delivered to the Investor.

                                   ARTICLE IV.
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         Except as stated below, on the disclosure  schedule  attached hereto as
Schedule IV ("DISCLOSURE Schedule") or in the SEC Documents (as defined herein),
the Company hereby  represents and warrants to, and covenants with, the Investor
that the following are true and correct as of the date hereof:

         Section  4.1.  ORGANIZATION  AND  QUALIFICATION.  The  Company  is duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and  has  all  requisite  power  and  authority
corporate  power to own its properties and to carry on its 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.

         Section  4.2.   AUTHORIZATION,   ENFORCEMENT,   COMPLIANCE  WITH  OTHER
INSTRUMENTS.  (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement,  the Registration  Rights Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements,  in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement,  the Registration  Rights Agreement,  the Escrow Agreement,  the
Placement  Agent  Agreement  and any related  agreements  by the Company and the
consummation by it of the  transactions  contemplated  hereby and thereby,  have
been duly  authorized by the Company's Board of Directors and no further consent
or  authorization  is required by the  Company,  its Board of  Directors  or its
stockholders,  (iii) this Agreement,  the  Registration  Rights  Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the

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Registration  Rights  Agreement,  the  Escrow  Agreement,  the  Placement  Agent
Agreement and assuming the execution and delivery  thereof and acceptance by the
Investor 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.

         Section  4.3.  CAPITALIZATION.  As of the date hereof,  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,  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 hereof,  (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
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 outstanding  registration statements other than on
Form S-8 and there are no outstanding  comment letters from the SEC or any other
regulatory  agency and (iv) 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  Securities  Act  (except  pursuant  to  the
Registration   Rights  Agreement).   There  are  no  securities  or  instruments
containing  anti-dilution  or similar  provisions that will be triggered by this
Agreement  or any related  agreement  or the  consummation  of the  transactions
described herein or therein.  The Company has furnished to the Investor 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.

                                       10

<PAGE>

         Section 4.4. NO CONFLICT.  The execution,  delivery and  performance of
this  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 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  Principal  Market  on which  the  Common  Stock is  quoted)
applicable  to the Company or any of its  subsidiaries  or by which any material
property or asset of the Company or any of its subsidiaries is bound or affected
and which would cause a Material Adverse Effect.  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  in  violation  of any  material  law,  ordinance,  regulation  of any
governmental entity.  Except as specifically  contemplated by this Agreement and
as required under the Securities 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.  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 fact or
circumstance which might give rise to any of the foregoing.

         Section 4.5. 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 Exchange Act. The
Company has delivered to the Investor or its 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  Investor  which is not  included in the SEC  Documents  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.

                                       11

<PAGE>

         Section  4.6.  10B-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.

         Section 4.7. NO DEFAULT. Except as disclosed in the SEC Documents,  the
Company is not in default  in the  performance  or  observance  of any  material
obligation,  agreement,  covenant  or  condition  contained  in  any  indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its  property is bound and  neither the  execution,
nor the  delivery  by the  Company,  nor the  performance  by the Company of its
obligations  under this Agreement or any of the exhibits or  attachments  hereto
will  conflict  with or result in the breach or violation of any of the terms or
provisions  of, or  constitute a default or result in the creation or imposition
of any lien or  charge on any  assets or  properties  of the  Company  under its
Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of
trust or other  material  agreement  applicable  to the Company or instrument to
which the  Company is a party or by which it is bound,  or any  statute,  or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having  jurisdiction  over the Company or its  properties,  in each case
which  default,  lien or charge is likely to cause a Material  Adverse Effect on
the Company's business or financial condition.

         Section 4.8. ABSENCE OF EVENTS OF DEFAULT. Except for matters described
in the SEC Documents and/or this Agreement,  no Event of Default,  as defined in
the  respective  agreement to which the Company is a party,  and no event which,
with the giving of notice or the passage of time or both,  would become an Event
of Default (as so defined),  has occurred and is continuing,  which would have a
Material  Adverse  Effect  on the  Company's  business,  properties,  prospects,
financial condition or results of operations.

         Section  4.9.   INTELLECTUAL  PROPERTY  RIGHTS.  The  Company  and  its
subsidiaries  own or possess  adequate  rights or licenses  to use all  material
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.

         Section 4.10.  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.

                                       12

<PAGE>

         Section 4.11.  ENVIRONMENTAL LAWS. The Company and its subsidiaries are
(i) in compliance with any and all applicable material 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.

         Section  4.12.  TITLE.  Except as set forth in the SEC  Documents,  the
Company has good and  marketable  title to its  properties  and material  assets
owned by it, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable  interest other than such as are not material to the business
of the Company. 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.

         Section 4.13.  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.

         Section  4.14.  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.

         Section 4.15. 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,  (iii) access to assets is  permitted  only in  accordance  with
management's   general  or  specific   authorization   and  (iv)  the   recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate action is taken with respect to any differences.

                                       13

<PAGE>

         Section 4.16. 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.

         Section  4.17.  ABSENCE OF  LITIGATION.  Except as set forth 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.

         Section 4.18.  SUBSIDIARIES.  Except as disclosed in the SEC Documents,
the Company  does not  presently  own or control,  directly or  indirectly,  any
interest in any other  corporation,  partnership,  association or other business
entity.

         Section 4.19. TAX STATUS.  The Company and each of its subsidiaries has
made or 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
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.

         Section  4.20.  CERTAIN  TRANSACTIONS.  Except  as set forth 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.

                                       14

<PAGE>

         Section 4.21. FEES AND RIGHTS OF FIRST REFUSAL.  Except as set forth in
the SEC Documents,  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.

         Section  4.22.  USE OF PROCEEDS.  The Company  represents  that the net
proceeds  from  this  offering  will be used  for  general  corporate  purposes.
However,  in no event shall the net proceeds  from this  offering be used by the
Company for the  payment  (or loaned to any such person for the  payment) of any
judgment,  or other  liability,  incurred  by any  executive  officer,  officer,
director or  employee  of the  Company,  except for any  liability  owed to such
person for services rendered,  or if any judgment or other liability is incurred
by such person originating from services rendered to the Company, or the Company
has indemnified such person from liability.

         Section 4.23. FURTHER REPRESENTATION AND WARRANTIES OF THE COMPANY. For
so  long as any  securities  issuable  hereunder  held  by the  Investor  remain
outstanding, the Company acknowledges,  represents,  warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market

         Section  4.24.  OPINION OF COUNSEL.  Investor  shall receive an opinion
letter from  Kirkpatrick & Lockhart LLP,  counsel to the Company  (updated where
applicable) on the date hereof.

         Section  4.25.  OPINION OF  COUNSEL.  The  Company  will obtain for the
Investor, at the Company's expense, any and all opinions of counsel which may be
reasonably  required in order to sell the securities  issuable hereunder without
restriction.

         Section  4.26.  DILUTION.  The Company is aware and  acknowledges  that
issuance  of shares of the  Company's  Common  Stock  could  cause  dilution  to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.

                                   ARTICLE V.
                                 INDEMNIFICATION

         The Investor and the Company  represent to the other the following with
respect to itself:

         Section 5.1.      INDEMNIFICATION.

                  (a) In consideration of the Investor's  execution and delivery
of this  Agreement,  and in addition to all of the Company's  other  obligations
under this  Agreement,  the Company  shall defend,  protect,  indemnify and hold
harmless the Investor, and all of its officers,  directors,  partners, employees
and agents (including, without limitation, those retained in connection with the
transactions  contemplated  by  this  Agreement)  (collectively,  the  "INVESTOR
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 Investor Indemnitee is a

                                       15

<PAGE>

party  to the  action  for  which  indemnification  hereunder  is  sought),  and
including  reasonable   attorneys'  fees  and  disbursements  (the  "INDEMNIFIED
LIABILITIES"),  incurred by the Investor  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  or the
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 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  Investor  Indemnitee  not  arising  out of any  action or  inaction  of an
Investor  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  Investor
Indemnitees.  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 Investor's  other  obligations
under this  Agreement,  the Investor shall defend,  protect,  indemnify and hold
harmless the Company and all of its officers, directors, shareholders, 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  Company  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  Investor  in this  Agreement,  the  Registration  Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant,  agreement or obligation of the
Investor(s)  contained in this Agreement,  the Registration  Rights Agreement or
any other  certificate,  instrument or document  contemplated  hereby or thereby
executed by the Investor,  or (c) any cause of action,  suit or claim brought or
made against such Company  Indemnitee  based on  misrepresentations  or due to a
breach by the  Investor  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  Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason,  the Investor shall make the maximum  contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

                                   ARTICLE VI.
                            COVENANTS OF THE COMPANY

         Section  6.1.   REGISTRATION   RIGHTS.  The  Company  shall  cause  the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.

         Section 6.2.  LISTING OF COMMON STOCK.  The Company shall  maintain the
Common  Stock's  authorization  for  quotation  on the National  Association  of
Securities Dealers Inc's Over the Counter Bulletin Board.

         Section  6.3.  EXCHANGE  ACT  REGISTRATION.  The Company will cause its
Common Stock to continue to be  registered  under  Section 12(g) of the Exchange
Act, will file in a timely manner all reports and other documents required of it
as a reporting  company  under the  Exchange Act and will not take any action or
file any document  (whether or not  permitted by Exchange Act or the rules there
under to terminate or suspend such  registration  or to terminate or suspend its
reporting and filing obligations under said Exchange Act.

                                       16

<PAGE>

         Section  6.4.  TRANSFER  AGENT  INSTRUCTIONS.  Not  later  than two (2)
business  days after each Advance  Notice Date and prior to each Closing and the
effectiveness  of the  Registration  Statement and resale of the Common Stock by
the Investor,  the Company will deliver  instructions  to its transfer  agent to
issue shares of Common Stock free of restrictive legends.

         Section  6.5.  CORPORATE  EXISTENCE.  The  Company  will take all steps
necessary to preserve and continue the corporate existence of the Company.

         Section  6.6.   NOTICE  OF  CERTAIN  EVENTS   AFFECTING   REGISTRATION;
SUSPENSION OF RIGHT TO MAKE AN Advance.  The Company will immediately notify the
Investor  upon its  becoming  aware of the  occurrence  of any of the  following
events in respect of a registration  statement or related prospectus relating to
an offering of Registrable Securities: (i) receipt of any request for additional
information  by the SEC or any other  Federal  or state  governmental  authority
during the period of effectiveness of the Registration  Statement for amendments
or supplements to the  registration  statement or related  prospectus;  (ii) the
issuance by the SEC or any other Federal or state governmental  authority of any
stop order suspending the  effectiveness  of the  Registration  Statement or the
initiation  of  any  proceedings   for  that  purpose;   (iii)  receipt  of  any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification  of  any of  the  Registrable  Securities  for  sale  in any
jurisdiction  or the  initiation  or  threatening  of any  proceeding  for  such
purpose;  (iv) the happening of any event that makes any  statement  made in the
Registration  Statement or related  prospectus of any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration  Statement,  related
prospectus or documents so that, in the case of the Registration  Statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the  Registration  Statement would be appropriate;  and the Company
will promptly make available to the Investor any such supplement or amendment to
the related  prospectus.  The  Company  shall not  deliver to the  Investor  any
Advance Notice during the continuation of any of the foregoing events.

         Section 6.7.  EXPECTATIONS  REGARDING ADVANCE NOTICES.  Within ten (10)
days after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor,  in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise  during such  calendar  quarter,  if any,  through the issuance of Advance
Notices.  Such  notification  shall  constitute  only the  Company's  good faith
estimate and shall in no way  obligate the Company to raise such amount,  or any
amount,  or otherwise limit its ability to deliver Advance Notices.  The failure
by the Company to comply with this provision can be cured by the Company's

                                       17

<PAGE>

notifying  the  Investor,   in  writing,  at  any  time  as  to  its  reasonable
expectations with respect to the current calendar quarter.

         Section  6.8.   RESTRICTION  ON  SALE  OF  CAPITAL  STOCK.  During  the
Commitment  Period,  the Company shall not issue or sell (i) any Common Stock or
Preferred Stock without consideration or for a consideration per share less than
the bid price of the Common Stock determined  immediately prior to its issuance,
(ii) issue or sell any Preferred Stock warrant,  option, right, contract,  call,
or other security or instrument granting the holder thereof the right to acquire
Common Stock without  consideration  or for a consideration  per share less than
such Common Stock's Bid Price determined  immediately prior to its issuance,  or
(iii) file any registration statement on Form S-8.

         Section 6.9. CONSOLIDATION;  MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into,  or a transfer  of all or  substantially  all the assets of the Company to
another  entity (a  "CONSOLIDATION  EVENT")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the Investor such shares of stock and/or  securities as
the Investor is entitled to receive pursuant to this Agreement.

         Section 6.10.  ISSUANCE OF THE COMPANY'S  COMMON STOCK. The sale of the
shares of Common  Stock  shall be made in  accordance  with the  provisions  and
requirements of Regulation D and any applicable state securities law.

                                  ARTICLE VII.
                CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING

         Section 7.1.  CONDITIONS  PRECEDENT TO THE  OBLIGATIONS OF THE COMPANY.
The  obligation  hereunder of the Company to issue and sell the shares of Common
Stock to the Investor  incident to each Closing is subject to the  satisfaction,
or  waiver  by the  Company,  at or before  each  such  Closing,  of each of the
conditions set forth below.

                  (a) ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The  representations and warranties of the Investor shall be true and correct in
all material respects.

                  (b)  PERFORMANCE  BY THE  INVESTOR.  The  Investor  shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions  required by this Agreement and the Registration Rights Agreement
to be performed,  satisfied or complied with by the Investor at or prior to such
Closing.

         Section  7.2.  CONDITIONS  PRECEDENT  TO THE  RIGHT OF THE  COMPANY  TO
DELIVER AN ADVANCE NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE  SHARES
OF COMMON STOCK.  The right of the Company to deliver an Advance  Notice and the
obligation  of the  Investor  hereunder  to  acquire  and pay for  shares of the
Company's  Common Stock  incident to a Closing is subject to the  fulfillment by
the  Company,  on (i) the date of delivery of such  Advance  Notice and (ii) the
applicable Advance Date (each a "CONDITION  SATISFACTION  DATE"), of each of the
following conditions:

                  (a) REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Company
shall have  filed  with the SEC a  Registration  Statement  with  respect to the
resale  of the  Registrable  Securities  in  accordance  with  the  terms of the
Registration  Rights  Agreement.   As  set  forth  in  the  Registration  Rights
Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition Satisfaction Date and (i) neither the

                                       18

<PAGE>

Company nor the Investor  shall have received  notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the  SEC  otherwise  has  suspended  or  withdrawn  the   effectiveness  of  the
Registration  Statement,  either  temporarily or permanently,  or intends or has
threatened  to do so (unless  the SEC's  concerns  have been  addressed  and the
Investor  is  reasonably  satisfied  that the SEC no  longer is  considering  or
intends  to take  such  action),  and  (ii) no  other  suspension  of the use or
withdrawal  of  the  effectiveness  of the  Registration  Statement  or  related
prospectus  shall exist.  The  Registration  Statement  must have been  declared
effective by the SEC prior to the first Advance Notice Date.

                  (b) AUTHORITY. The Company shall have obtained all permits and
qualifications   required  by  any  applicable  state  in  accordance  with  the
Registration  Rights  Agreement  for the offer and sale of the  shares of Common
Stock,  or shall have the  availability  of exemptions  there from. The sale and
issuance of the shares of Common  Stock shall be legally  permitted  by all laws
and regulations to which the Company is subject.

                  (c) FUNDAMENTAL CHANGES. There shall not exist any fundamental
changes to the information set forth in the  Registration  Statement which would
require  the  Company to file a  post-effective  amendment  to the  Registration
Statement.

                  (d)  PERFORMANCE  BY  THE  COMPANY.  The  Company  shall  have
performed,  satisfied and complied in all material  respects with all covenants,
agreements  and  conditions  required  by  this  Agreement  (including,  without
limitation, the conditions specified in Section 2.5 hereof) and the Registration
Rights  Agreement to be performed,  satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.

                  (e) NO INJUNCTION.  No statute,  rule,  regulation,  executive
order,  decree,   ruling  or  injunction  shall  have  been  enacted,   entered,
promulgated  or endorsed by any court or  governmental  authority  of  competent
jurisdiction  that  prohibits  or  directly  and  adversely  affects  any of the
transactions  contemplated by this Agreement,  and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely  affecting any of
the transactions contemplated by this Agreement.

                  (f) NO  SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common  Stock is not  suspended  by the SEC or the  Principal
Market (if the Common  Stock is traded on a Principal  Market).  The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder  approval  requirements of the Principal  Market (if the
Common  Stock is traded  on a  Principal  market).  The  Company  shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).

                  (g)  MAXIMUM  ADVANCE  AMOUNT.  The  amount of the  individual
Advance  requested by the Company does not exceed the Maximum Advance Amount. In
addition,  in no event  shall  the  number of shares  issuable  to the  Investor
pursuant  to an  Advance  cause the  Investor  to own in excess of nine and 9/10
percent (9.9%) of the then outstanding Common Stock of the Company.

                                       19

<PAGE>

                  (h) NO  KNOWLEDGE.  The Company has no  knowledge of any event
more likely than not to have the effect of causing such  Registration  Statement
to be suspended or otherwise ineffective.

                  (i) OTHER. On each Condition  Satisfaction  Date, the Investor
shall have received the certificate executed by an officer of the Company in the
form of EXHIBIT A attached hereto.

                                  ARTICLE VIII.
         DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION

         Section  8.1.  DUE  DILIGENCE  REVIEW.  Prior  to  the  filing  of  the
Registration  Statement the Company  shall make  available  for  inspection  and
review by the Investor,  advisors to and  representatives  of the Investor,  any
underwriter  participating  in any disposition of the Registrable  Securities on
behalf  of  the  Investor  pursuant  to the  Registration  Statement,  any  such
registration  statement or amendment or supplement thereto or any blue sky, NASD
or other filing,  all financial and other  records,  all SEC Documents and other
filings with the SEC, and all other  corporate  documents and  properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company's  officers,  directors and employees to supply all such information
reasonably  requested  by the  Investor or any such  representative,  advisor or
underwriter in connection with such Registration  Statement (including,  without
limitation,  in response to all questions and other inquiries reasonably made or
submitted  by any of them),  prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor  and  such   representatives,   advisors  and  underwriters  and  their
respective  accountants  and  attorneys  to  conduct  initial  and  ongoing  due
diligence  with  respect to the  Company and the  accuracy  of the  Registration
Statement.

         Section 8.2.      NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

                  (a) Except for the information on the Disclosure Schedule, the
Company shall not disclose non-public  information to the Investor,  advisors to
or   representatives  of  the  Investor  unless  prior  to  disclosure  of  such
information  the  Company   identifies  such  information  as  being  non-public
information and provides the Investor,  such advisors and  representatives  with
the  opportunity to accept or refuse to accept such  non-public  information for
review. The Company may, as a condition to disclosing any non-public information
hereunder,  require the Investor's  advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.

                  (b)  Nothing  herein  shall  require  the  Company to disclose
non-public  information to the Investor or its advisors or representatives,  and
the Company  represents that it does not disseminate  non-public  information to
any investors who purchase stock in the Company in a public  offering,  to money
managers or to securities  analysts,  provided,  however,  that  notwithstanding
anything  herein to the contrary,  the Company will,  as  hereinabove  provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters,  of any event or the  existence of any  circumstance  (without any
obligation to disclose the specific event or  circumstance)  of which it becomes
aware,  constituting  non-public  information  (whether or not  requested of the
Company specifically or generally during the course of due diligence by such

                                       20

<PAGE>

persons or entities),  which, if not disclosed in the prospectus included in the
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made,  not  misleading.  Nothing  contained  in this  Section  8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain  non-public  information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from  notifying the Company of their opinion that based
on such due  diligence  by such  persons  or  entities,  that  the  Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the  Registration  Statement  or  necessary to make the
statements  contained therein,  in light of the circumstances in which they were
made, not misleading.

                                   ARTICLE IX.
                           CHOICE OF LAW/JURISDICTION

         Section 9.1.  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,  New Jersey and the United States  District Court of New Jersey,
sitting in Newark, New Jersey, for the adjudication of any civil action asserted
pursuant to this paragraph.

                                   ARTICLE X.
                             ASSIGNMENT; TERMINATION

         Section 10.1. ASSIGNMENT.  Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.

         Section  10.2.  TERMINATION.  The  obligations  of the Investor to make
Advances under Article II hereof shall terminate  twenty-four  (24) months after
the Effective Date.

                                   ARTICLE XI.
                                     NOTICES

         Section  11.1.  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 receipt, when sent by facsimile,
provided a copy is mailed by U.S.  certified  mail,  return  receipt  requested;
(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:

                                       21

<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 Investor(s):           Cornell Capital Partners, LP
                                 101 Hudson Street -Suite 3606
                                 Jersey City, NJ 07302
                                 Attention:        Mark Angelo
                                                   Portfolio Manager
                                 Telephone:        (201) 985-8300
                                 Facsimile:        (201) 985-8266

With a 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

Each party shall provide five (5) days' prior written  notice to the other party
of any change in address or facsimile number.

                                  ARTICLE XII.
                                  MISCELLANEOUS

         Section 12.1.  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.

         Section 12.2. ENTIRE AGREEMENT;  AMENDMENTS.  This Agreement supersedes
all other prior oral or written  agreements  between the Investor,  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

                                       22

<PAGE>

therein,  neither  the  Company  nor  the  Investor  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.  In addition to and without
limiting  the  foregoing,  this  Agreement  supercedes  and cancels that certain
Equity  Line of Credit  Agreement  entered  into  between  the  Company  and the
Investor dated August 2001.

         Section  12.3.  REPORTING  ENTITY FOR THE COMMON  STOCK.  The reporting
entity relied upon for the  determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this  Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the  Investor  and the Company  shall be required to employ any other  reporting
entity.

         Section 12.4.  FEES AND EXPENSES.  The Company hereby agrees to pay the
following fees:

                  (a) LEGAL FEES. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection  with this  Agreement and the  transactions
contemplated  hereby. On each advance date, the Company will pay Butler Gonzalez
LLP, the sum of Five Hundred Dollars ($500) for legal, administrative and escrow
fees and any  outstanding  fees of  Kirkpatrick  & Lockhart LLP directly out the
proceeds of any Advances hereunder.

                  (b)      COMMITMENT FEES.

                           (i) On each Advance Date the Company shall pay to the
Investor,  directly from the gross  proceeds held in escrow,  an amount equal to
two percent (2%) of the amount of each Advance.  The Company  hereby agrees that
if such  payment,  as is  described  above,  is not made by the  Company  on the
Advance  Date,  such  payment  will be made at the  direction of the Investor as
outlined and mandated by Section 2.3 of this Agreement.

                           (ii)  Upon  the  execution  of  this  Agreement,  the
Company shall pay to the Investor One Hundred Ninety Thousand Dollars ($190,000)
in the form of a  Compensation  Debenture,  in  substantially  the form attached
hereto as EXHIBIT B (the "COMPENSATION DEBENTURE").

         Section 12.5. BROKERAGE.  Each of the parties hereto represents that it
has had no  dealings  in  connection  with this  transaction  with any finder or
broker who will demand  payment of any fee or  commission  from the other party.
The  Company on the one hand,  and the  Investor,  on the other  hand,  agree to
indemnify  the  other  against  and hold  the  other  harmless  from any and all
liabilities  to any person  claiming  brokerage  commissions or finder's fees on
account  of  services   purported  to  have  been  rendered  on  behalf  of  the
indemnifying  party  in  connection  with  this  Agreement  or the  transactions
contemplated hereby.

                                       23

<PAGE>

         Section  12.6.  CONFIDENTIALITY.  If for any  reason  the  transactions
contemplated by this Agreement are not  consummated,  each of the parties hereto
shall keep  confidential  any information  obtained from any other party (except
information  publicly  available  or in such  party's  domain  prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

         Section 12.7.  RESTRICTION ON SHORT SALE OF STOCK.  The Investor hereby
acknowledges  and agrees that it shall not short sell the Common Stock except in
connection  with an  Advance,  and  thereafter  only  such  number  of shares it
receives with respect to such Advance.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       24

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have caused this Line of Credit
Agreement to be executed by the undersigned,  thereunto duly  authorized,  as of
the date first set forth above.

                                    COMPANY:
                                      VERTICAL COMPUTER SYSTEMS, INC.

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

                                    INVESTOR:
                                      CORNELL CAPITAL PARTNERS, LP

                                      By:      Yorkville Advisors, LLC
                                      Its:     General Partner

                                       By:
                                      --------------------------------------
                                      Name:    Mark Angelo
                                      Title:   Portfolio Manager

                                       25

<PAGE>

                                    EXHIBIT A

                      ADVANCE NOTICE/COMPLIANCE CERTIFICATE

                         VERTICAL COMPUTER SYSTEMS, INC.

         The  undersigned,  ________________________________  hereby  certifies,
with respect to the sale of shares of Common Stock of Vertical Computer Systems,
Inc.,  (the  "COMPANY"),  issuable in  connection  with this Advance  Notice and
Compliance  Certificate  dated  ___________________  (the  "NOTICE"),  delivered
pursuant to the Equity Line of Credit Agreement (the "AGREEMENT"), as follows:

         1. The undersigned is the duly elected President of the Company.

         2. There are no fundamental changes to the information set forth in the
Registration  Statement which would require the Company to file a post effective
amendment to the Registration Statement.

         3. The Company has performed in all material respects all covenants and
agreements  to be  performed  by the  Company  on or prior to the  Advance  Date
related  to the  Notice  and has  complied  in all  material  respects  with all
obligations and conditions contained in the Agreement.

         4. The Advance requested is _____________________.

         The undersigned has executed this Certificate this ____ day of _______.

                                        VERTICAL COMPUTER SYSTEMS, INC.

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

<PAGE>

                                    EXHIBIT B

                             COMPENSATION DEBENTURE

<PAGE>

                                SCHEDULED 2.6(B)

                         VERTICAL COMPUTER SYSTEMS, INC.

         The undersigned  hereby agrees that for a period commencing on the date
hereof and expiring on the termination of the Agreement  dated  ________________
between Vertical  Computer  Systems,  Inc. (the "COMPANY"),  and Cornell Capital
Partners,  LP, (the "INVESTOR") (the "LOCK-UP PERIOD"),  he, she or it will not,
directly or  indirectly,  without  the prior  written  consent of the  Investor,
issue,  offer, agree or offer to sell, sell, grant an option for the purchase or
sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber
or dispose of except  pursuant to Rule 144 of the General Rules and  Regulations
under the  Securities  Act of 1933,  any  securities  of the Company,  including
common  stock or  options,  rights,  warrants  or other  securities  underlying,
convertible  into,  exchangeable  or exercisable  for or evidencing any right to
purchase or subscribe for any common stock (whether or not beneficially owned by
the  undersigned),  or  any  beneficial  interest  therein  (collectively,   the
"SECURITIES").

         In  order  to  enable  the  aforesaid  covenants  to be  enforced,  the
undersigned  hereby  consents  to the  placing of legends  and/or  stop-transfer
orders with the transfer agent of the Company's  securities  with respect to any
of the  Securities  registered in the name of the  undersigned  or  beneficially
owned by the undersigned,  and the undersigned hereby confirms the undersigned's
investment in the Company.

Dated: _______________, 2003

                                    Signature

                                     ------------------------------------------
                                    Address:
                                             ----------------------------------
                                     City, State, Zip Code:
                                                           --------------------

                                     ------------------------------------------
                                     Print Social Security Number
                                     or Taxpayer I.D. Number

<PAGE>

                                   SCHEDULE IV

                               DISCLOSURE SCHEDULE<PAGE>

Exhibit 10.104b
                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of April 14,
2003 by and between VERTICAL  COMPUTER  SYSTEMS,  INC., a Delaware  corporation,
with headquarters  located at 6336 Wilshire Boulevard,  Los Angeles,  California
90048 (the  "COMPANY"),  and CORNELL CAPITAL  PARTNERS,  LP, a Delaware  limited
partnership (the "INVESTOR").

         WHEREAS:

         A. In  connection  with the  Equity  Line of  Credit  Agreement  by and
between the parties  hereto of even date  herewith  (the  "EQUITY LINE OF CREDIT
AGREEMENT"),  the  Company  has  agreed,  upon  the  terms  and  subject  to the
conditions  of the  Equity  Line of Credit  Agreement,  to issue and sell to the
Investor that number of shares of the Company's common stock, par value $0.00001
per share (the "COMMON STOCK"),  which can be purchased pursuant to the terms of
the Equity Line Credit  Agreement for an aggregate  purchase  price of up to Ten
Million Dollars  ($10,000,000) . Capitalized terms not defined herein shall have
the meaning ascribed to them in the Equity Line of Credit Agreement.

         B. To induce the  Investor  to execute  and  deliver the Equity Line of
Credit Agreement,  the Company has agreed to provide certain registration rights
under the  Securities  Act of 1933,  as amended,  and the rules and  regulations
there under, or any similar  successor statute  (collectively,  the "1933 ACT"),
and applicable state securities laws.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Investor hereby agree as follows:

         1.       DEFINITIONS.

         As used in this Agreement, the following terms shall have the following
meanings:

         a.  "PERSON"  means a  corporation,  a limited  liability  company,  an
association,  a partnership,  an  organization,  a business,  an  individual,  a
governmental or political subdivision thereof or a governmental agency.

         b. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in  compliance  with the 1933 Act and pursuant to Rule 415 under the 1933
Act or any successor rule  providing for offering  securities on a continuous or
delayed basis ("RULE 415"),  and the declaration or ordering of effectiveness of
such  Registration  Statement(s)  by the United States  Securities  and Exchange
Commission (the "SEC").

         c.  "REGISTRABLE  SECURITIES" means the shares of Common Stock issuable
to the Investor pursuant to the Equity Line of Credit Agreement.

<PAGE>

         d.  "REGISTRATION  STATEMENT" means a registration  statement under the
1933 Act which covers the Registrable Securities.

         2. REGISTRATION.

         a. MANDATORY REGISTRATION.  The Company shall prepare and file with the
SEC a  Registration  Statement  on Form S-1,  SB-2 or on such  other  form as is
available.  The Company shall cause such  Registration  Statement to be declared
effective  by the SEC prior to the first sale to the  Investor of the  Company's
Common Stock pursuant to the Equity Line of Credit Agreement.

         b. SUFFICIENT NUMBER OF SHARES  REGISTERED.  In the event the number of
shares  available under a Registration  Statement filed pursuant to Section 2(a)
is insufficient to cover all of the  Registrable  Securities  which the Investor
has purchased pursuant to the Equity Line of Credit Agreement, the Company shall
amend the Registration  Statement,  or file a new Registration Statement (on the
short form available therefore,  if applicable),  or both, so as to cover all of
such  Registrable  Securities  which the Investor has purchased  pursuant to the
Equity Line of Credit  Agreement  as soon as  practicable,  but in any event not
later than fifteen (15) days after the necessity  therefore arises.  The Company
shall use it best  efforts  to cause  such  amendment  and/or  new  Registration
Statement  to become  effective  as soon as  practicable  following  the  filing
thereof. For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed "insufficient to cover all of the
Registrable  Securities"  if at any time the  number of  Registrable  Securities
issuable  on an  Advance  Notice  Date is  greater  than the  number  of  shares
available for resale under such Registration Statement.

         3. RELATED OBLIGATIONS.

         a. The Company shall keep the Registration Statement effective pursuant
to Rule 415 at all times  until the date on which the  Investor  shall have sold
all the  Registrable  Securities  covered by such  Registration  Statement  (the
"REGISTRATION  PERIOD"),  which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein,  or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.

         b. The  Company  shall  prepare  and file with the SEC such  amendments
(including   post-effective   amendments)  and  supplements  to  a  Registration
Statement  and  the  prospectus  used  in  connection  with  such   Registration
Statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under the 1933 Act,  as may be  necessary  to keep such  Registration  Statement
effective at all times during the Registration  Period, and, during such period,
comply with the  provisions of the 1933 Act with respect to the  disposition  of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such  Registrable  Securities shall have been disposed
of in  accordance  with the  intended  methods of  disposition  by the seller or
sellers  thereof  as set forth in such  Registration  Statement.  In the case of
amendments and supplements to a Registration  Statement which are required to be
filed  pursuant to this Agreement  (including  pursuant to this Section 3(b)) by
reason of the Company's filing a report on Form 10-KSB, Form 10-QSB or Form 8-K

                                        2

<PAGE>

or any analogous  report under the  Securities  Exchange Act of 1934, as amended
(the "1934 ACT"), the Company shall have  incorporated  such report by reference
into the Registration Statement, if applicable, or shall file such amendments or
supplements  with the SEC within two (2) business days after the 1934 Act report
is filed which  created the  requirement  for the Company to amend or supplement
the Registration Statement.

         c. The Company shall  furnish to the Investor  without  charge,  (i) at
least one copy of such Registration  Statement as declared  effective by the SEC
and any amendment(s) thereto,  including financial statements and schedules, all
documents  incorporated therein by reference,  all exhibits and each preliminary
prospectus,  (ii) ten (10)  copies  of the  final  prospectus  included  in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may  reasonably  request) and (iii) such other
documents as such Investor may reasonably  request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Investor.

         d. The Company  shall use its best  efforts to (i) register and qualify
the Registrable  Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such  jurisdictions in the United States as the
Investor reasonably requests, (ii) prepare and file in those jurisdictions, such
amendments  (including  post-effective   amendments)  and  supplements  to  such
registrations   and   qualifications   as  may  be  necessary  to  maintain  the
effectiveness  thereof  during the  Registration  Period,  (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times  during  the  Registration  Period,  and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable  Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required  in  connection  therewith  or as a  condition  thereto to (w) make any
change to its  certificate  of  incorporation  or  by-laws,  (x)  qualify  to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d),  (y) subject  itself to general  taxation in any such
jurisdiction,  or (z) file a general  consent  to service of process in any such
jurisdiction.  The Company shall promptly  notify the Investor of the receipt by
the  Company  of  any  notification  with  respect  to  the  suspension  of  the
registration  or  qualification  of any of the  Registrable  Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the  initiation  or threat of any  proceeding
for such purpose.

         e. As promptly as  practicable  after  becoming  aware of such event or
development,  the Company  shall notify the Investor in writing of the happening
of any event as a result  of which the  prospectus  included  in a  Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated  therein or necessary to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading  (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such  supplement or amendment to each  Investor.  The
Company shall also promptly notify the Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and

                                        3

<PAGE>

when  a  Registration  Statement  or any  post-effective  amendment  has  become
effective (notification of such effectiveness shall be delivered to the Investor
by facsimile on the same day of such effectiveness),  (ii) of any request by the
SEC for  amendments  or  supplements  to a  Registration  Statement  or  related
prospectus  or  related  information,  and  (iii)  of the  Company's  reasonable
determination that a post-effective  amendment to a Registration Statement would
be appropriate.

         f. The Company  shall use its best  efforts to prevent the  issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable  Securities for
sale in any  jurisdiction  within the United  States of America  and, if such an
order or  suspension  is  issued,  to obtain  the  withdrawal  of such  order or
suspension  at the  earliest  possible  moment and to notify the Investor of the
issuance  of such  order and the  resolution  thereof  or its  receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

         g. At the reasonable request of the Investor, the Company shall furnish
to the Investor, on the date of the effectiveness of the Registration  Statement
and  thereafter  from time to time on such dates as the Investor may  reasonably
request (i) a letter, dated such date, from the Company's  independent certified
public  accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion,  dated as of such date, of counsel representing the Company
for purposes of such Registration  Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the Investor.

         h. The Company shall make  available for inspection by (i) the Investor
and (ii) one  firm of  accountants  or other  agents  retained  by the  Investor
(collectively,  the "INSPECTORS") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company  (collectively,  the
"RECORDS"), as shall be reasonably deemed necessary by each Inspector, and cause
the Company's officers,  directors and employees to supply all information which
any Inspector may reasonably  request;  provided,  however,  that each Inspector
shall agree,  and the Investor hereby agrees,  to hold in strict  confidence and
shall not make any  disclosure  (except to an  Investor) or use of any Record or
other information which the Company determines in good faith to be confidential,
and of which  determination  the  Inspectors  are so  notified,  unless  (a) the
disclosure  of such Records is necessary to avoid or correct a  misstatement  or
omission in any Registration  Statement or is otherwise  required under the 1933
Act,  (b)  the  release  of  such  Records  is  ordered  pursuant  to  a  final,
non-appealable  subpoena or order from a court or  government  body of competent
jurisdiction,  or (c) the  information  in such Records has been made  generally
available  to the public  other than by  disclosure  in violation of this or any
other  agreement of which the  Inspector  and the Investor  has  knowledge.  The
Investor agrees that it shall,  upon learning that disclosure of such Records is
sought  in or by a court  or  governmental  body of  competent  jurisdiction  or
through other means, give prompt notice to the Company and allow the Company, at
its expense,  to undertake  appropriate  action to prevent  disclosure of, or to
obtain a protective order for, the Records deemed confidential.

         i. The Company shall hold in confidence  and not make any disclosure of
information   concerning  the  Investor  provided  to  the  Company  unless  (i)
disclosure  of such  information  is  necessary  to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such information is ordered pursuant to a subpoena or other final,

                                        4

<PAGE>

non-appealable   order  from  a  court  or   governmental   body  of   competent
jurisdiction,  or (iv) such information has been made generally available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
agreement.  The Company agrees that it shall,  upon learning that  disclosure of
such  information  concerning  the  Investor  is  sought  in  or by a  court  or
governmental body of competent  jurisdiction or through other means, give prompt
written  notice  to the  Investor  and  allow the  Investor,  at the  Investor's
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

         j. The  Company  shall  use its best  efforts  either  to cause all the
Registrable  Securities covered by a Registration  Statement (i) to be listed on
each securities  exchange on which securities of the same class or series issued
by the Company  are then  listed,  if any,  if the  listing of such  Registrable
Securities is then  permitted  under the rules of such exchange or to secure the
inclusion for quotation on the National Association of Securities Dealers,  Inc.
OTC Bulletin Board for such  Registrable  Securities.  The Company shall pay all
fees and  expenses in  connection  with  satisfying  its  obligation  under this
Section 3(j).

         k.  The  Company  shall  cooperate  with  the  Investor  to the  extent
applicable,  to facilitate the timely  preparation  and delivery of certificates
(not bearing any restrictive legend) representing the Registrable  Securities to
be offered pursuant to a Registration  Statement and enable such certificates to
be in such  denominations  or amounts,  as the case may be, as the  Investor may
reasonably request and registered in such names as the Investor may request.

         l. The  Company  shall use its best  efforts  to cause the  Registrable
Securities  covered by the  applicable  Registration  Statement to be registered
with or approved by such other  governmental  agencies or  authorities as may be
necessary to consummate the disposition of such Registrable Securities.

         m. The Company shall make generally  available to its security  holders
as soon as practical, but not later than ninety (90) days after the close of the
period  covered  thereby,  an earnings  statement  (in form  complying  with the
provisions  of Rule 158 under  the 1933  Act)  covering  a  twelve-month  period
beginning  not later than the first day of the  Company's  fiscal  quarter  next
following the effective date of the Registration Statement.

         n. The Company shall  otherwise use its best efforts to comply with all
applicable  rules and regulations of the SEC in connection with any registration
hereunder.

         o. Within two (2) business days after a  Registration  Statement  which
covers Registrable Securities is ordered effective by the SEC, the Company shall
deliver,  and shall  cause legal  counsel  for the  Company to  deliver,  to the
transfer  agent for such  Registrable  Securities  (with copies to the Investor)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as EXHIBIT A.

         p. The Company  shall take all other  reasonable  actions  necessary to
expedite and facilitate  disposition  by the Investor of Registrable  Securities
pursuant to a Registration Statement.

                                        5

<PAGE>

         4.       OBLIGATIONS OF THE INVESTOR.

         The Investor  agrees that,  upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e),  the Investor  will  immediately  discontinue  disposition  of
Registrable  Securities pursuant to any Registration  Statement(s) covering such
Registrable  Securities  until  the  Investor's  receipt  of the  copies  of the
supplemented  or amended  prospectus  contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required.  Notwithstanding anything to
the contrary,  the Company shall cause its transfer agent to deliver  unlegended
certificates  for shares of Common  Stock to a  transferee  of the  Investor  in
accordance  with the terms of the Equity Line of Credit  Agreement in connection
with any sale of Registrable  Securities  with respect to which the Investor has
entered  into a contract  for sale prior to the  Investor's  receipt of a notice
from the Company of the happening of any event of the kind  described in Section
3(f) or the  first  sentence  of 3(e) and for  which  the  Investor  has not yet
settled.

         5.       EXPENSES OF REGISTRATION.

         All expenses  incurred in  connection  with  registrations,  filings or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualifications fees,  printers,  legal and accounting
fees shall be paid by the Company.

         6.       INDEMNIFICATION.

         With  respect  to  Registrable  Securities  which  are  included  in  a
Registration Statement under this Agreement:

         a. To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend the Investor, the directors, officers,
partners,  employees,  agents,  representatives of, and each Person, if any, who
controls the Investor  within the meaning of the 1933 Act or the 1934 Act (each,
an "INDEMNIFIED  Person"),  against any losses,  claims,  damages,  liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts
paid in  settlement  or  expenses,  joint or  several  (collectively,  "CLAIMS")
incurred in  investigating,  preparing or  defending  any action,  claim,  suit,
inquiry,  proceeding,  investigation  or appeal  taken from the  foregoing by or
before any court or governmental,  administrative  or other  regulatory  agency,
body or the SEC,  whether  pending or threatened,  whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
may become subject  insofar as such Claims (or actions or  proceedings,  whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any  untrue  statement  or alleged  untrue  statement  of a  material  fact in a
Registration Statement or any post-effective  amendment thereto or in any filing
made in connection with the  qualification  of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered  ("BLUE SKY  FILING"),  or the  omission or alleged  omission to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading; (ii) any untrue statement or alleged untrue statement of
a material fact contained in any final prospectus (as amended or supplemented,

                                        6

<PAGE>

if the Company files any amendment  thereof or supplement  thereto with the SEC)
or the omission or alleged omission to state therein any material fact necessary
to make the statements made therein,  in light of the circumstances  under which
the  statements  therein were made,  not  misleading;  or (iii) any violation or
alleged  violation  by the Company of the 1933 Act, the 1934 Act, any other law,
including,  without  limitation,  any  state  securities  law,  or any  rule  or
regulation  there  under  relating  to the  offer  or  sale  of the  Registrable
Securities  pursuant to a  Registration  Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively,  "VIOLATIONS"). The Company shall
reimburse  the  Investor  and each  such  controlling  person  promptly  as such
expenses  are  incurred  and  are  due  and  payable,  for  any  legal  fees  or
disbursements or other reasonable  expenses  incurred by them in connection with
investigating  or  defending  any such  Claim.  Notwithstanding  anything to the
contrary  contained  herein,  the  indemnification  agreement  contained in this
Section 6(a):  (x) shall not apply to a Claim by an  Indemnified  Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information  furnished in writing to the Company by such Indemnified Person
expressly  for  use in  connection  with  the  preparation  of the  Registration
Statement or any such amendment thereof or supplement thereto;  (y) shall not be
available  to the extent  such Claim is based on a failure  of the  Investor  to
deliver  or to  cause to be  delivered  the  prospectus  made  available  by the
Company, if such prospectus was timely made available by the Company pursuant to
Section 3(e); and (z) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect  regardless of any  investigation  made by or on behalf of
the Indemnified Person.

         b. In connection with a Registration Statement,  the Investor agrees to
indemnify,  hold harmless and defend,  to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers  who signs the  Registration  Statement  and each  Person,  if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each an
"INDEMNIFIED  PARTY"),  against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise,  insofar
as  such  Claim  or  Indemnified  Damages  arise  out of or is  based  upon  any
Violation,  in each  case to the  extent,  and  only to the  extent,  that  such
Violation  occurs in reliance  upon and in conformity  with written  information
furnished to the Company by the Investor  expressly for use in  connection  with
such  Registration  Statement;  and,  subject to Section 6(d), the Investor will
reimburse any legal or other expenses  reasonably incurred by them in connection
with  investigating  or defending any such Claim;  provided,  however,  that the
indemnity  agreement  contained  in this  Section  6(b) and the  agreement  with
respect to  contribution  contained in Section 7 shall not apply to amounts paid
in  settlement  of any Claim if such  settlement  is effected  without the prior
written  consent  of the  Investor,  which  consent  shall  not be  unreasonably
withheld;  provided,  further,  however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not  exceed  the  net  proceeds  to the  Investor  as a  result  of the  sale of
Registrable Securities pursuant to such Registration  Statement.  Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified  Party.  Notwithstanding  anything to the contrary
contained herein, the  indemnification  agreement contained in this Section 6(b)
with respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue  statement  or omission of material  fact  contained  in the
prospectus  was corrected and such new  prospectus was delivered to the Investor
prior to the Investor's use of the prospectus to which the Claim relates.

                                        7

<PAGE>

         c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the  commencement  of any action or proceeding
(including  any  governmental  action or  proceeding)  involving  a Claim,  such
Indemnified  Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any  indemnifying  party under this Section 6, deliver to the
indemnifying  party  a  written  notice  of the  commencement  thereof,  and the
indemnifying  party shall have the right to  participate  in, and, to the extent
the indemnifying  party so desires,  jointly with any other  indemnifying  party
similarly  noticed,  to assume  control  of the  defense  thereof  with  counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel  with the fees  and  expenses  of not  more  than one  counsel  for such
Indemnified  Person or Indemnified  Party to be paid by the indemnifying  party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation  by such counsel of the Indemnified  Person or Indemnified  Party
and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented  by such counsel in such  proceeding.  The  Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with any  negotiation  or defense of any such action or claim by the
indemnifying  party and shall furnish to the indemnifying  party all information
reasonably  available  to the  Indemnified  Party or  Indemnified  Person  which
relates  to such  action  or  claim.  The  indemnifying  party  shall  keep  the
Indemnified  Party or  Indemnified  Person fully apprised at all times as to the
status of the defense or any settlement  negotiations  with respect thereto.  No
indemnifying  party shall be liable for any  settlement of any action,  claim or
proceeding effected without its prior written consent,  provided,  however, that
the indemnifying party shall not unreasonably  withhold,  delay or condition its
consent.  No indemnifying party shall,  without the prior written consent of the
Indemnified  Party or  Indemnified  Person,  consent to entry of any judgment or
enter into any  settlement  or other  compromise  which  does not  include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party or  Indemnified  Person of a release  from all  liability  in
respect to such claim or litigation.  Following  indemnification as provided for
hereunder,  the  indemnifying  party  shall be  subrogated  to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations  relating to the matter for which indemnification has been made.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time of the  commencement  of any such action shall not relieve such
indemnifying  party of any liability to the  Indemnified  Person or  Indemnified
Party under this Section 6, except to the extent that the indemnifying  party is
prejudiced in its ability to defend such action.

         d. The  indemnification  required  by this  Section  6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

         e. The indemnity  agreements  contained  herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

                                        8

<PAGE>

         7.       CONTRIBUTION.

         To  the  extent  any   indemnification  by  an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within  the  meaning of Section  11(f) of the 1933 Act)  shall be  entitled  to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.

         8.       REPORTS UNDER THE 1934 ACT.

         With a view to making  available  to the  Investor the benefits of Rule
144 promulgated  under the 1933 Act or any similar rule or regulation of the SEC
that may at any time permit the  Investors to sell  securities of the Company to
the public without registration ("RULE 144") the Company agrees to:

         a.  make and keep  public  information  available,  as those  terms are
understood and defined in Rule 144;

         b. file with the SEC in a timely manner all reports and other documents
required  of the  Company  under  the  1933  Act and the 1934 Act so long as the
Company remains subject to such  requirements  (it being understood that nothing
herein shall limit the  Company's  obligations  under  Section 6.3 of the Equity
Line of Credit  Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and

         c.  furnish to the Investor so long as the  Investor  owns  Registrable
Securities,  promptly upon request,  (i) a written statement by the Company that
it has complied  with the reporting  requirements  of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent  annual or quarterly  report of the
Company and such other reports and documents so filed by the Company,  and (iii)
such other information as may be reasonably  requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.

         9. AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance  thereof
may  be  waived  (either  generally  or  in a  particular  instance  and  either
retroactively or prospectively),  only by a written agreement.  Any amendment or
waiver  effected in  accordance  with this  Section 9 shall be binding  upon the
Investor  and the  Company.  No  consideration  shall be  offered or paid to any
Person to amend or consent to a waiver or  modification  of any provision of any
of this Agreement  unless the same  consideration  also is offered to all of the
parties to this Agreement.

                                        9

<PAGE>

         10.      MISCELLANEOUS.

a. A Person is deemed to be a holder of  Registrable  Securities  whenever  such
Person owns or is deemed to own of record such  Registrable  Securities.  If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable  Securities,  the Company shall act
upon the basis of instructions,  notice or election received from the registered
owner of such Registrable Securities.

b. 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 receipt,  when sent by facsimile (provided  confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one business 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:

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, Florida 33131-2399
                                 Attention:        Clayton Parker, Esq.
                                 Telephone:        (305) 539-3300
                                 Facsimile:        (305) 358-7095

If to the Investor, to:          Cornell Capital Partners, LP
                                 101 Hudson Street - Suite 3606
                                 Jersey City, New Jersey 07302
                                 Attention: Mark Angelo
                                 Portfolio Manager
                                 Telephone: (201) 985-8300
                                 Facsimile: (201) 985-8266

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

                                       10

<PAGE>

Any party may  change  its  address  by  providing  written  notice to the other
parties  hereto at least five days prior to the  effectiveness  of such  change.
Written  confirmation  of receipt  (A) given by the  recipient  of such  notice,
consent,  waiver or other  communication,  (B)  mechanically  or  electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile  number  and an image of the first  page of such  transmission  or (C)
provided by a courier or overnight courier service shall be rebuttable  evidence
of  personal  service,  receipt  by  facsimile  or  receipt  from  a  nationally
recognized  overnight  delivery  service in accordance  with clause (i), (ii) or
(iii) above, respectively.

         c.  Failure  of any party to  exercise  any right or remedy  under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

         d. The corporate  laws of the State of Delaware shall govern all issues
concerning  the  relative  rights of the  Company  and the  Investor.  All other
questions concerning the construction,  validity, enforcement and interpretation
of this  Agreement  shall be governed by the  internal  laws of the State of New
Jersey,  without giving effect to any choice of law or conflict of law provision
or rule  (whether  of the State of New  Jersey or any other  jurisdiction)  that
would cause the application of the laws of any jurisdiction other than the State
of New  Jersey.  Each party  hereby  irrevocably  submits  to the  non-exclusive
jurisdiction  of the  Superior  Courts of the State of New  Jersey,  sitting  in
Hudson County, New Jersey and the Federal District Court for the District of New
Jersey  sitting in Newark,  New  Jersey,  for the  adjudication  of any  dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, and hereby irrevocably  waives, and agrees not to assert in
any suit, action or proceeding,  any claim that it is not personally  subject to
the  jurisdiction  of any such court,  that such suit,  action or  proceeding is
brought  in an  inconvenient  forum or that the  venue of such  suit,  action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process  and  consents  to  process  being  served in any such  suit,  action or
proceeding  by  mailing a copy  thereof to such  party at the  address  for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient  service of process and notice  thereof.  Nothing  contained
herein  shall be deemed to limit in any way any  right to serve  process  in any
manner  permitted by law. 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.  EACH PARTY HEREBY  IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE ADJUDICATION
OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

         e. This  Agreement,  the Equity  Line of Credit  Agreement,  the Escrow
Agreement and the Placement  Agent  Agreement  constitute  the entire  agreement
among the parties  hereto with respect to the subject matter hereof and thereof.
There are no  restrictions,  promises,  warranties or  undertakings,  other than
those set forth or referred to herein and therein.  This  Agreement,  the Equity
Line of Credit Agreement, the Escrow Agreement and the Placement Agent Agreement
supersede all prior agreements and understandings  among the parties hereto with
respect to the subject matter hereof and thereof.

                                       11

<PAGE>

         f. This Agreement shall inure to the benefit of and be binding upon the
permitted successors and assigns of each of the parties hereto.

         g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

         h. This  Agreement may be executed in identical  counterparts,  each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement.  This Agreement,  once executed by a party,  may be delivered to
the other party hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the party so delivering this Agreement.

         i. 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.

         j.  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.

         k. 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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12

<PAGE>

         IN WITNESS WHEREOF,  the parties have caused this  Registration  Rights
Agreement to be duly executed as of day and year first above written.

                                    COMPANY:
                                      VERTICAL COMPUTER SYSTEMS, INC.

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

                                    INVESTOR:
                                      CORNELL CAPITAL PARTNERS, LP

                                      By:      Yorkville Advisors, LLC
                                      Its:     General Partner

                                       By:
                                      -----------------------------------
                                      Name:    Mark Angelo
                                      Title:   Portfolio Manager

                                       13

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

Olde Monmouth Stock Transfer Co., Inc.
77 Memorial Parkway
Atlantic Highlands, New Jersey 07716

                  Re:      VERTICAL COMPUTER SYSTEMS, INC.

Ladies and Gentlemen:

         We  are  counsel  to  Vertical  Computer  Systems,   Inc.,  a  Delaware
corporation (the "COMPANY"), and have represented the Company in connection with
that  certain  Equity  Line of  Credit  Agreement  (the  "EQUITY  LINE OF CREDIT
AGREEMENT")  entered  into  by and  between  the  Company  and  Cornell  Capital
Partners,  LP (the  "INVESTOR")  pursuant  to which  the  Company  issued to the
Investor  shares of its Common Stock,  par value $0.00001 per share (the "COMMON
STOCK").  Pursuant to the Equity Line of Credit Agreement,  the Company also has
entered  into  a   Registration   Rights   Agreement   with  the  Investor  (the
"REGISTRATION  RIGHTS  AGREEMENT")  pursuant to which the Company agreed,  among
other  things,  to  register  the  Registrable  Securities  (as  defined  in the
Registration Rights Agreement) under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights  Agreement,  on  ____________  ____,  the  Company  filed a  Registration
Statement  on Form  ________  (File No.  333-_____________)  (the  "REGISTRATION
STATEMENT") with the Securities and Exchange  Commission (the "SEC") relating to
the  Registrable  Securities  which names the Investor as a selling  stockholder
thereunder.

                                       14

<PAGE>

         In connection  with the  foregoing,  we advise you that a member of the
SEC's  staff has  advised  us by  telephone  that the SEC has  entered  an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF  EFFECTIVENESS]  on [ENTER DATE OF  EFFECTIVENESS]  and we have no knowledge,
after  telephonic  inquiry of a member of the SEC's  staff,  that any stop order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose  are  pending  before,  or  threatened  by, the SEC and the  Registrable
Securities  are  available  for  resale  under  the  1933  Act  pursuant  to the
Registration Statement.

                                           Very truly yours,

                                           KIRKPATRICK & LOCKHART LLP

                                           By:
                                              --------------------------------
cc:      CORNELL CAPITAL PARTNERS, LP

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