Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
On October 30, 2020, the board of directors (the "Board") of Vertical Computer
Systems, Inc. (the "Company") voted to increase the size of the Board from two
directors to five directors and appointed Len Chermack, James Salz, and Scott
Winning to fill the resulting vacancies on the Board. All members of the Board
will serve until the earlier of the Company's next annual shareholder meeting or
their removal or resignation.
The new directors were not appointed to any committees of the Board.
Also on October 30, 2020, the Company entered into directors agreements (the
"Directors Agreements") with each non-employee director of the Company, which
were based substantially on the form attached hereto as Exhibit 10.1. Under the
terms of the Directors Agreements, such 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 Securities and Exchange Commission ("SEC") filings. The Directors Agreements
also provide for compensation for each such director to serve on an interim
basis until the next annual shareholder meeting 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.
Further, the Directors Agreements require the Company to indemnify such
directors to the fullest extent permitted by Delaware law and the Restated and
Amended By-Laws of the Company against liabilities that may arise by reason of
their service to the Company, and to advance expenses incurred as a result of
any proceeding against them as to which they could be indemnified. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted for directors, the Company has been informed that in
the opinion of the SEC, such indemnification is against public policy and is
therefore unenforceable.
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.
Also on October 30, 2020, the Board removed former director Richard Wade as CEO
and President of the Company, and placed him in his capacity as an employee on
unpaid administrative leave, while the Company performs an investigation of his
actions as a former corporate officer and director of the Company (under the
terms of his employment agreement) in order to determine the future status of
his employment and the appropriate remedies and actions that the Company may
take against him.
The Board made the following appointments of corporate officers of the Company,
effective as of October 30, 2020: Mike Short, age 66, Chairman of the Board, Len
Chermack, age 64, Chief Executive Officer, and Freddy Holder, age 55, Chief
Financial Officer.
Len Chermack has over 35 years of global management and profit and loss
experience ($2 million to $750 million) in software companies. Since 1986, he
has been brought into companies by investors as the turnaround or growth
executive for a number of technology companies, including Fortune 500 and
International 1000 companies. Since 2001, Mr. Chermack has also served as either
the Chief Executive Officer or worldwide President on several technology
companies. Len has served as an Associate of Naya Ventures and beginning in
February 2020, he has been the CEO/Founding Partner focusing on capital sourcing
for HEXA Global Ventures, which supports entrepreneurs and companies in the
technology, healthcare, human resources and services. With his team, he
identifies global investment opportunities and arranges funding through the
firm's venture capital arm and private equity communities, providing value-added
services to HEXA GV portfolio companies in Richardson, Texas. Mr. Chermack is a
serial CEO and turnaround specialist. His largest turnaround was as Worldwide
President Baan (now INFOR) and Managing Director of the Baan Companies (3rd
Largest Global Software Company in over 123 companies) located in the Netherland
and brought in from private equity-backed United Kingdom-based Invensys PLC. As
a co-founder of several software companies including two NASDAQ-traded companies
(Penultimate, whose product Salesforce created the Opportunity Management System
(OMS), which today is used in all customer relationship management, and Computer
Depot). Len has raised over $100 million in funding and has been involved in a
number of mergers and acquisitions in his career. Mr. Chermack serves on several
technology company boards of private companies in the cloud, information
technology ("IT") services, IT operations management, IT infrastructure,
healthcare IT, and social media industries. Mr. Chermack's leadership experience
includes serving in large public, venture capitalist, private equity and startup
enterprises and he has served on partner advisory boards for leading technology
companies including Microsoft and IBM. Mr. Chermack received his Bachelor of
Science in Economics with recognition in mathematical economics and a minor in
marketing from Loyola Marymount University in Los Angeles.
Mike Short has over 35 years of business experience at senior and
executive-level positions which include board level, Chief Operating Officer,
Senior Vice President and Vice President. His present positions include Chief
Operating Officer and Director at Alani Consulting, which provides Agile
Business Transformation services to domestic and international companies
including Banking/Financial and Telecom corporations (since 2016) and at
CorTechs, Inc. d/b/a B12 Government Solutions, which provides Consulting
Services and Technology Solutions for Federal, State and Local Government
companies (since 2017), Senior Advisor and Strategic Partnerships for B12
Consulting (since 2016), which provides Software Products and Services, Staffing
and Talent Management, and Training and Leadership Development services.to
domestic and global companies (since 2016), and Founder and Managing Partner of
Plaza Capital Group that provides investment capital and rehab services to the
residential housing markets (since 2015). During his career, Mr. Short has
served as an executive at blue chip, rapid growth and start-up companies. His
professional and business experience includes operations, strategic development
and planning, market growth, revenue generation and growth strategy, strategic
partnerships and alliances, business plan development, reorganizations, new
business launches and mergers and acquisitions and cross-patent licensing. Mr.
Short has expertise in revenue growth, has worked with early-stage pre-revenue
companies to companies with over $1 billion in revenue streams and has
experience in acquiring companies ranging from $1 million to over $9 billion and
investments from $1 million to $10 million in companies.
Freddy Holder has experience spanning all aspects of finance and accounting. He
started his career with the accounting firm of Ernst and Young and has worked
for both large and small multi-national public and private companies in the
software, retail and services industries. Mr. Holder has been a finance
consultant for the Company (VCSY) and its subsidiary, NOW Solutions, Inc. and
various other companies since 2012. Prior to that Mr. Holder was Director of
Consulting for Sirius Solutions, LLLP, where he was responsible for the finance
and accounting practice of the company's North Texas region. Prior to that, he
served as the Managing Director and International Controller for FedEx Office,
where he directed all international finance operations and financial control
management of eight countries outside the United States. Mr. Holder also served
as Director of Accounting for Software Spectrum, where he was responsible for
all North American accounting operations and worldwide financial reporting for
this Fortune 1,000 publicly held software reseller. Previous experience also
includes the position of Corporate Controller for US Data Corporation, a
publicly held software development company. Mr. Holder has held a CPA license in
the state of Texas since 1989 and received his degree from the University of
Texas at Dallas.
All of the newly appointed officers will serve until such officer's successor is
elected and qualified or until such officer's earlier death, resignation or
removal. No arrangement or understanding exists between any of the
newly-appointed officers and any other person pursuant to which such individual
was selected as an officer of the Company. There are no family relationships
between any of the newly-appointed officers and any director or other officer of
the Company.
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 or officers of the
Company had or will have a direct or indirect material interest within the
meaning of Item 404(a) of Regulation S-K.
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
10.1 Form of Director Agreement
10.4 Inline XBRL for the cover page of this Current Report on Form 8-K.
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