Exhibit 10.78
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, VCSY has agreed to reimburse and indemnify MRC for any costs incurred
by MRC with respect to the loan transaction made on December 14, 2001 (the
"Loan") made between VCSY and the Brighton Opportunity Fund ("Brighton").
WHEREAS, MRC, in connection with the Loan, pledged 36,303,932 shares of VCSY
common stock owned by MRC (the "MRC") as collateral pursuant to the MRC Pledge
Agreement to induce Brighton to make the Loan.
WHEREAS, it is the intention of the parties that in the event of any default and
sale of any MRC 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 MRC Shares have been
pledged as collateral and any MRC Shares are sold pursuant to the MRC any pledge
agreement, VCSY shall:
a. issue a number of new shares of VCSY common stock (the "Replacement
Shares") equal to the number of the MRC shares actually sold by
Brighton (or its designee) pursuant to MRC's pledge agreement .
b. use its 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 MRC 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.
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 MRC Shares as collateral to Brighton, 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 MRC 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 MRC 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:
"MRC"
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Xxxxx Xxxxx, President
Accepted and Agreed to by:
"VCSY"
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Xxxxxxx Xxxxx
Secretary, Vertical Computer Systems, Inc.
