Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
On October 28, 2020, a shareholders' consent in lieu of meeting (the
"Shareholders' Consent") was served upon Vertical Computer Systems, Inc. (the
"Company"). The Shareholders' Consent was consented to by shareholders holding a
majority of shares of the Company with voting rights, which shares include the
Company's Common Stock and Series A Preferred Convertible Stock, effective as of
October 28, 2020 (the "Effective Date"). Under the terms of the Shareholders'
Consent, (1) Richard Wade and William Mills, and any other director that may
have been appointed since the filing with the Securities and Exchange Commission
(the "SEC") of the last Annual Report on Form 10-K (for the period ended
December 31, 2017), were removed (the "Removal") as members of the Company's
board of directors (the "Board") effective as of the Effective Date; and (2)
John Adler and Michael Short were appointed to the Board to replace the two
terminated directors effective immediately following the Removal.
The new directors were not appointed to any committees of the Board.
In connection with the appointment of the new independent directors of the
Company, the Company entered into compensation agreements with each independent
director. Under the terms of the director compensation agreements, the
independent directors have agreed to serve until the Company holds its next
annual shareholder meeting, which the Company intends to hold as soon as
reasonably practicable after the Company becomes current in all its SEC filings.
The compensation for each independent director to serve on an interim basis
until the next annual shareholder meeting is as follows:
(a) $3,000 per month, adjusted pro-rata, provided that the Company has
"Available Cash" to pay such fees. "Available Cash" means all cash from the
Company's operations on hand or on deposit from time to time after the Company
has raised sufficient funds or has sufficient funds to meet the working capital
requirement of the Company for the then current-month. If the Company does not
have sufficient "Available Cash" to pay the monthly fees, the fees will accrue
without interest for up to 90 days, at which time such fees will become due.
(b) The Company also agreed to grant the following warrants to purchase
shares (the "Shares") of the common stock of the Company: (i) a 5-year warrant
to purchase 500,000 Shares at a purchase price of $0.01 per share and (ii) a
5-year warrant to purchase 250,000 Shares at a purchase price that is 85% of the
15-day average of the closing per share price of the Company's common stock to
be issued on the date the Company holds its next annual shareholders meeting.
No arrangement or understanding exists between either of the newly appointed
directors and any other persons pursuant to which such directors were named as
directors. Since the beginning of the Company's last fiscal year through the
present there have been no transactions with the Company, and there are
currently no proposed transactions with the Company, in which the amount
involved exceeds $120,000 and in which any related person of the newly appointed
directors of the Company had or will have a direct or indirect material interest
within the meaning of Item 404(a) of Regulation S-K.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
On October 28, 2020, shareholders representing more than a 50% majority of the
issued and outstanding Common Stock of the Company and Series A Preferred Stock
of the Company adopted the Shareholders' Consent, effective as of the Effective
Date, which resulted in the adoption of a proposal to repeal any amendments,
changes or modifications made to the Restated and Amended By-Laws of the Company
since January 13, 2015. To the Company's knowledge, no amendments, changes or
modifications were made to the Restated and Amended By-Laws of the Company since
January 13, 2015, and, as such, the Restated and Amended By-Laws of the Company,
as amended October 28, 2020, are the same in substance as the Restated and
Amended By-Laws of the Company dated January 13, 2015.
Item 5.07 Submission of Matters to a Vote of Security Holders
On October 28, 2020, shareholders representing more than a 50% majority of the
issued and outstanding Common Stock of the Company and Series A Preferred Stock
of the Company adopted the Shareholders' Consent, effective as of the Effective
Date, which resulted in the adoption of the following proposals:
(1) Proposal 1, which removed Richard Wade and William Mills as members of the
Board and any other director that may have been appointed since the filing
with the SEC of the last Annual Report on Form 10-K (for the period ended
December 31, 2017);
(2) Proposal 2, which appointed Michael Short and John Adler to replace Richard
Wade and William Mills as members of the Board; and
(3) Proposal 3, which repealed any amendments, changes, or modifications made to
the Restated and Amended By-Laws, dated as of January 13, 2015.
The results of the shareholder voting were as follows:
For Against Abstained
Proposal 1 672,312,234 251,000 300,000
Proposal 2 669,184,099 1,065,713 2,613,422
Proposal 3 670,088,867 1,229,562 1,544,745
Certain matters contained in this 8-K constitute forward-looking statements and
are based upon management's expectations and beliefs concerning future events.
There can be no assurance that the proposed transaction or these future events
will occur as anticipated, if at all, or that actual results will be as
expected. Forward-looking statements speak only as of the date they were made,
and we undertake no obligation to publicly update them.
(d) Exhibits.
Item 9.01 Financial Statements and Exhibits
3.1 Restated and Amended By-Laws of the Company, as amended October
28, 2020
10.4 Inline XBRL for the cover page of this Current Report on Form 8-K.
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VERTICAL COMPUTER SYSTEMS, INC. 