Exhibit 10.77

                      REIMBURSEMENT AND INDEMNITY AGREEMENT


This Agreement,  dated January 15, 2002, is by and between Mountain  Reservoir
Corporation  ("MRC") and Vertical Computer Systems, Inc. ("VCSY").


WHEREAS,  Richard Wade agreed,  on October 31, 2001, to pledge  10,450,000  (Ten
Million Four Hundred Fifty  Thousand)  shares of VCSY common stock (the "Pledged
Shares") on VCSY's behalf to FARIASFARIASRobert Farias. ("FARIAS") as collateral
for loans made to VCSY.


WHEREAS,  VCSY has agreed to reimburse and indemnify MRC for any costs  incurred
by MRC with respect to the loans made by FARIAS on VCSY's behalf.

WHEREAS, it is the intention of the parties that in the event of any default and
sale of any  Pledged  SHARES  that MRC  shall  receive  replacement  shares  and
reimbursement  of any  costs,  including  taxes for  selling  or  receiving  the
replacement shares.

THEREFORE, the parties hereby confirm their agreement as follows:

1. In the event of that VCSY defaults on the Loan for which Pledged  Shares have
been pledged as collateral  and any Pledged Shares are sold pursuant to the Wade
pledge agreement, VCSY shall:

      a.    issue a number of new shares of VCSY common stock (the  "Replacement
            Shares") equal to the number of the Pledged shares  actually sold by
            MRC,  FARIAS,  or their agent or designee  pursuant to Wade's pledge
            agreement .

      b.    use it best  efforts to (i) cause any  Replacement  Shares  that are
            issued to be freely tradable and without restriction to MRC and (ii)
            register  the  Replacement  Shares  with  the  Securities   Exchange
            Commission.

      c.    reimburse MRC for any costs or expenses in connection  with the sale
            of any Pledged  shares or the  issuance  by VCSY of any  Replacement
            Shares.  Such  reimbursement  of  expenses  shall  include,  without
            limitation, any tax consequences (federal, state, and local, if any)
            and brokerage fees. MRC shall provide all  documentation  reasonably
            necessary in order for VCSY to reimburse MRC.

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2. VCSY shall defend, protect,  indemnify and hold harmless MRC from and against
any and all actions,  causes of action, suits, claims, losses, costs, penalties,
fees,  liabilities  and damages,  and expenses in  connection  with the Loan for
which  MRC  pledged  the  Pledged  Shares as  collateral  to  FARIAS,  including
reasonable  attorneys' fees and disbursements  (the "Indemnified  Liabilities"),
incurred  by MRC as a result  of,  or  arising  out of, or  relating  to (a) any
misrepresentation  or breach of any representation or warranty made by VCSY with
regard  to the Loan for which  the  Pledged  Shares  are  pledged,  or any other
certificate,  instrument  or document  contemplated  hereby or thereby,  (b) any
breach of any covenant, agreement or obligation of VCSY in this 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 MRC 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 MRC, any  transaction  financed or to be financed in whole or in part,
directly or  indirectly,  with the proceeds of the issuance of the Loan in which
the Pledged Shares were pledged as collateral.  To the extent that the foregoing
undertaking  by VCSY may be  unenforceable  for any reason,  VCSY shall make the
maximum  contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

The parties hereby agree to the foregoing on the date first set forth above.


Accepted and Agreed to by:

"Mountain Reservoir Corporation"


-----------------------------------
Frank Mento, President



Accepted and Agreed to by:
"VCSY"


-----------------------------------
William Mills
Secretary, Vertical Computer Systems, Inc.