UNITED
STATES
SECURITIES
AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement
Pursuant
to Section
14(a)
of the
Securities
Exchange
Act of
1934
Filed by the
Registrant S
Filed by a party other
than the Registrant £
Check
the
appropriate
box:
S | | Preliminary
Proxy
Statement |
£ | | Confidential,
for
Use of
the Commission
Only
(as permitted
by Rule
14a-6(e)(2)) |
£ | | Definitive
Proxy
Statement |
£ | | Definitive
Additional
Materials |
£ | | Soliciting
Material
under
Rule 14a-12 |
|
VERTICAL COMPUTER SYSTEMS, INC. |
(Name of the Registrant as Specified In Its Charter) |
Payment of Filing Fee (Check the appropriate box): |
x |
No fee required. |
o |
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
|
1. |
Title of each class of securities to which transaction applies: |
|
2. |
Aggregate number of securities to which transaction applies: |
|
3. |
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
|
4. |
Proposed maximum aggregate value of transaction: ______________________________ |
|
5. |
Total fee paid: ______________________________ |
o |
Fee paid previously with preliminary materials. |
o |
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
|
1. |
Amount Previously Paid: ______________________________ |
|
2. |
Form, Schedule or Registration Statement No.: ______________________________ |
|
3. |
Filing Party: ________________________________________ |
|
4. |
Date Filed: _________________________________________ |
VERTICAL COMPUTER SYSTESMS,
INC.
101
W. Renner Road, Suite 300
Richardson,
TX 75082
NOTICE
OF ANNUAL
MEETING
OF SHAREHOLDERS
To
the Stockholders
of Vertical Computer Systems,
Inc.:
The
annual
meeting
(the “Annual
Meeting”)
of shareholders
of Vertical Computer Systems,
Inc.,
a Delaware corporation
(“VCSY” and the “Company”)
will be
held at
the
Company’s
office
building, located
at 101 W. Renner Road, Richardson, Texas,
75082, on
the 25th day, February
25, 2015, at
11:00
a.m.,
Central Standard
Time.
The meeting
will be
convened
for the
following
purposes:
| (1) | To elect
two director
nominees
described
in the
Proxy
Statement
to serve
until the
next
Annual |
Meeting
of Shareholders
and
the
election
and
qualification
of their
successors;
| (2) | To consider and act upon a proposal to amend the Certificate of Incorporation to increase the authorized
shares of common stock to 2,000,000,000,000 as contemplated by the Certificate of Amendment attached hereto as Appendix I. |
| (3) | To consider
an advisory
vote
on executive
compensation; |
| (4) | To
consider
an advisory
vote
on the
frequency
of future
advisory
votes
on executive
compensation; |
| (5) | To
ratify
the
selection
of Malone Bailey,
LLP as
our
independent
registered
public accountant
for
the year
ended
December 31, 2014; and |
| (6) | To
transact
such
other
business
as may
properly come
before
the Annual
Meeting
and
at any
adjournments
thereof. |
Only
holders
of record
of the
Company’s
Common
Stock and
the Company’s
Series
A 4% Cumulative Convertible
Preferred
Stock (the “Series A Preferred Stock”) at
the close
of business
on January
5, 2015 are
entitled
to notice
of and
to vote
at the
Annual
Meeting
or any
adjournments
thereof.
Even
if you
now
expect
to attend
the Annual
Meeting,
you
are
requested
to mark,
sign,
date,
and
return
the accompanying
proxy card
by fax
or by
mail.
If you
attend
the Annual
Meeting,
you
may vote
in person,
whether
or not
you
have
sent
in your
proxy.
A proxy
may
be revoked
at any
time
prior
to the voting
thereof.
|
|
By Order of the Board of Directors |
|
|
|
|
|
/s/ William Mills |
|
|
William Mills, Corporate Secretary, |
|
|
Richardson, Texas |
|
|
January 15, 2015 |
This
Notice
of Annual
Meeting and
the attached
Proxy
Statement
dated
January 15, 2015
should
be read
in combination
with the Company’s
Annual
Report
on Form
10-K,
for
the fiscal
year ended
December 31, 2013. Collectively,
these
documents
contain
all of
the information
and disclosures
required
in connection
with the Annual
Meeting of
Shareholders.
Copies
of all
these
materials
can be
found at
www.vcsy.com/investor/index.php.
VERTICAL COMPUTER SYSTEMS,
INC.
101
W. Renner Road, Suite 300
Richardson,
TX 75082
PROXY
STATEMENT
January __, 2015
This
Proxy
Statement
is furnished
to the shareholders
of Vertical Computer Systems,
Inc.,
a Delaware corporation
(the “Company”
or “VCSY”) in connection
with
the solicitation
on behalf
of the
Board
of Directors
(the
“Board”)
of proxies
for
use at
the
annual
meeting
of shareholders
(the “Annual
Meeting”)
to be held
at the
Company’s
offices,
located
at 101
W. Renner Road, Richardson, TX 75082, on
Wednesday,
February 25, 2015 at
11:00
a.m.,
Central Standard
Time,
and
at any
adjournments
thereof.
This
Proxy
Statement
and
the enclosed
form
of proxy,
together
with a copy
of the
Company’s
Annual
Report
on Form
10-K
for
the year
ended
December 31, 2013 (“Annual
Report”)
are first
being
made
available
to shareholders
on or
about
January
25, 2015,
and
the cost
of soliciting
proxies
in the
enclosed
form
will be
borne
by the
Company.
Proxies
may
be solicited
by personal
interview,
telephone,
facsimile
and
electronic
means.
Banks,
brokerage
houses
and
other
nominees
or fiduciaries
have
been
requested
to forward
the soliciting
material
to their principals
and
to obtain
authorization
for
the execution
of proxies,
and
the
Company
will, upon
request,
reimburse
them
for
their
expenses
in so
acting.
QUESTIONS
AND ANSWERS
ABOUT
THE
PROXY
MATERIALS
AND OUR
ANNUAL MEETING
Q: What
is the
purpose
of the
Annual Meeting?
A: This
is the
Annual
Meeting
of Shareholders
held
pursuant
to our
Bylaws
and
the Delaware General Corporation
Law. The
Annual
Meeting
is being
held
to permit
our
shareholders
to consider
and
vote upon:
| (1) | the election of two directors to serve until the next Annual Meeting of Shareholders and until
their successors are duly elected; |
| (2) | the approval of an amendment to our Certificate of Incorporation to effect an increased in the
authorized shares common stock of the Company from 1,000,000,000 to 2,000,000,000; |
| (3) | an advisory vote on executive compensation; |
| (4) | an advisory vote on the frequency of future advisory votes on executive compensation; and |
| (5) | the ratification of the selection of Malone Bailey, LLP as our independent registered public accountant
for the fiscal year ended December 31, 2014. |
| (6) | to transact such other business as may properly come before the Annual Meeting and at any adjournments
thereof. |
Q: What is the Board’s
Recommendation regarding these
proposals?
A: The
Board’s
recommendations
are set
forth
together
with a description
of the
proposals
in this
Proxy
Statement.
In summary,
the
Board
recommends
that you
vote:
| · | FOR the election of the director nominees named in this Proxy Statement to serve on our
Board as described under “Election of Directors;” |
| · | FOR the approval of the Certificate of Amendment to increase the authorized shares of common
stock to 2,000,000,000 (see Proposal No. 2); |
| · | FOR the approval, on an advisory basis, of the compensation of the named executive officers
as disclosed in this Proxy Statement (Proposal No. 3); |
| · | FOR the approval, on an advisory basis, that future advisory votes on executive compensation
occur every three years (Proposal No. 4); and |
| · | FOR the ratification of the selection of Malone Bailey, LLP as our independent registered
public accountant for the year ended December 31, 2014 (see Proposal No. 5). |
Q: Who
is entitled
to vote
at the
Annual Meeting?
A: Only
holders
of record
of shares
of Common
Stock
and
holders
of record
of shares
of Series A Preferred
Stock as
of the
close
of business
(5:00
p.m.,
Eastern
Standard
Time)
on January
5, 2015,
the
record date
fixed
by the
Board
(the
“Record
Date”),
will
be entitled
to receive
notice
of and
to vote
at the
Annual
Meeting.
As of
January 15, 2015, there
were
999,735,151 shares of
Common
Stock issued
and
outstanding
and
48,500 shares
of Series A Preferred
stock
issued
and
outstanding
and
convertible
into
24,250,000 shares
of Common
Stock,
for
a total of
1,023,985,151Common
Stock equivalents
available
to vote.
Q: What
shares
can I
vote?
A: You
may
vote
all shares
of VCSY’s Common
Stock and
all shares
of VCSY’s
Series A Preferred
Stock owned
by you
as of
the
close
of business
on the
Record Date.
You may
cast
one vote
per share
of Common
Stock that
you
held on
the
Record
Date.
Each share
of Series A Preferred
Stock will
be entitled to vote on
an as-converted
basis at
the conversion
rate of
500 shares
of Common
Stock.
A list
of record shareholders
entitled
to vote
at the
Annual
Meeting
will be
available
during
ordinary
business
hours
at the
Company’s
principal
executive
offices
located
at 101 W. Renner Road, Richardson, Texas
75082, for
a period
of at
least
10 days
prior
to the
Annual
Meeting.
Q: How
can I
vote
my shares?
A: You
can vote
your
shares
using
one
of the
following
methods:
| · | Vote
through the Internet at www.proxyvote.com using the instructions included in the
proxy card or voting instruction card; |
| · | Vote by telephone using the instructions on the proxy card or voting instruction card if you received
a paper copy of the proxy materials; |
| · | Complete and return a written proxy or voting instruction card using the proxy card or voting instruction
card if you received a paper copy of the proxy materials; or |
| · | Attend and vote in person at the meeting. If your shares are held in street or account name by
a broker and you intend to vote in person at the meeting, you will need a copy of your account statement and verification from
your broker that you were the beneficial owner of the shares in the account as of the Record Date. |
Internet
and
telephone
voting
are available
24 hours
a day,
and
if you
use
one
of those
methods,
you
do not
need
to return
a proxy or
voting
instruction
card. Unless
you are
planning
to vote
in person
at the
Annual
Meeting,
your
vote must
be received
by 11:59
p.m.
Eastern
Standard
Time,
on February
24, 2015.
Even
if you
submit
your
vote
by one
of the
first
three
methods
mentioned
above,
you
may still
vote
at the
meeting
if you
are the
record holder
of your
shares
or hold
a legal
proxy from
the
record holder.
Your
vote
at the
Annual
Meeting
will constitute
a revocation
of your
earlier
proxy
or voting
instructions.
Q: How
will my
shares
be voted
if I return
a blank
proxy
card?
A: If
you
send
in your
proxy card,
but
do not
specify
how
you
want
to vote your
shares,
your
shares
will be
voted
by the
named
proxies
as follows:
| · | FOR the election of the director nominees named in this Proxy Statement to serve on our
Board as described under “Election of Directors;” |
| · | FOR the approval of the Certificate of Amendment to increase the authorized shares of common
stock to 2,000,000,000 (see Proposal No. 2); |
| · | FOR the approval, on an advisory basis, of the compensation of the named executive officers
as disclosed in this Proxy Statement (Proposal No. 3); |
| · | FOR the approval, on an advisory basis, that future advisory votes on executive compensation
occur every three years (Proposal No. 4); and |
| · | FOR the ratification of the selection of Malone Bailey, LLP as our independent registered
public accountant for the year ended December 31, 2014 (see Proposal No. 5). |
Q: What
happens
if additional
matters
are presented
at the
Annual Meeting?
A: Other
than
the
5 proposals
described
in this
Proxy
Statement,
we are
not
aware
of any
other
business
to be acted
upon
at the
Annual
Meeting.
If you
grant
a proxy,
the persons
named
as proxy
holders,
Richard Wade, Chief
Executive Officer
and
William Mills, Secretary, will
have
the discretion
to vote your
shares
on any
additional
matters
properly
presented
for
a vote
at the
Annual Meeting.
Q: Who
will count
the votes?
A: A
representative
of the
Company
will be
appointed
at the
Annual
Meeting
to tabulate
the votes
and
act as
Inspector
of Elections.
Q: Where
can I
find the
voting results
of the
Annual Meeting?
A: We
will announce
preliminary
voting
results
at the
Annual
Meeting
and
publish
final
results
in a Current
Report
on Form
8-K
filed with
the Securities
and Exchange
Commission
within
four
business
days
following
the Annual
Meeting.
In addition,
a report of
the final
votes
will
be made
available
on our
corporate website
at www.VCSY.com.
Q: Who
will bear
the cost
of soliciting
votes
for the
Annual Meeting?
A: The
solicitation
of proxies
will be
conducted
primarily
by mail
and electronically over the Internet, and
the
Company
will bear
all attendant
costs.
These
costs
will include
the expense
of preparing
and
mailing
proxy solicitation
materials
for the Meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation materials
regarding the Annual Meeting to beneficial owners of our Common Stock. We may conduct further solicitation personally, telephonically,
through the Internet or by facsimile through our officers, directors and employees, none of whom will receive additional compensation
for assisting with the solicitation. We may generate other expenses in connection with the solicitation of proxies for the Annual
Meeting, which we will pay.
Q: May
I propose
matters
for consideration
at next
year’s Annual
Meeting
or nominate
individuals
to serve
as directors?
A: Yes.
If you
wish
to propose
a matter
for
consideration
at the
next Annual
Meeting
of Shareholders
or if you
wish
to nominate
a person
for
election
as a director
of the
Company.
The Company has made a limited exception for this Annual Meeting to allow and consider shareholder proposals to be submitted by
February 15, 2015 in accordance with the Company’s Amended and Restated By-Laws. See
the
information
set
forth
in “Shareholder
Proposals”
below.
Q: What
do I need
for admission
to the
Annual Meeting?
A: You
are entitled
to attend
the Annual
Meeting
only
if you
are a shareholder
of record
or a beneficial
owner
as of
the Record
Date,
or you
hold
a valid
proxy for
the Annual
Meeting
from
a shareholder
of record.
You should
be prepared
to present
photo
identification
for
admittance.
If you
are the
shareholder
of record,
your
name
will be
verified
against
the
list of
shareholders
of record
prior
to your
being
admitted
to the Annual
Meeting.
If you
hold your
shares
in street
name,
you
must provide
proof of
beneficial
ownership
on the
Record
Date,
such
as a brokerage
account
statement
showing
that you
owned
VCSY stock
as of
the
Record Date,
a copy
of the
Voting Instruction
Form
provided
by your
broker,
bank
or other
nominee,
or other
similar
evidence
of ownership
as of
the Record
Date.
If you
do not
provide
photo
identification
or comply
with
the
other
procedures
outlined
above
upon request,
you
will
not
be admitted
to the Annual
Meeting.
QUORUM
AND VOTING
REQUIREMENTS
Quorum
Requirement
A majority
of the
votes
of a
voting
group
entitled
to be cast
at the
Annual
Meeting
on all
matters
constitutes
a quorum
of that
voting
group.
If you
submit
a properly completed
proxy
or if you
appear at
the Annual
Meeting
to vote
in person,
your
shares
will
be considered
part of
the quorum.
Directions
to withhold
authority
to vote
for
any director,
abstentions
and
broker non-votes
(described
below)
will be
counted
to determine
if a quorum
for
the transaction
of business
is present.
Once
a quorum
is present,
voting
on specific
proposals
may
proceed. If
less
than
a quorum
of our
shares
is represented
at the
Annual
Meeting,
a majority
of the
shares
actually
represented
may adjourn
the meeting
without
further
notice
for
a period
not
to exceed
30 days
at any
one
adjournment.
At such
adjourned
meeting
at which
a quorum
is present
or represented,
any business
may
be transacted
which
might
have
been transacted
at the
Annual
Meeting
as originally
notified.
Once
a share
is represented
for any
purpose
at the
Annual
Meeting,
including
the
purpose
of determining
that
a quorum
exists,
it is deemed
present
for
quorum
purposes
for
the remainder
of the
meeting
and
any adjournment
thereof,
unless
a new
record date
is set
for
the adjourned
meeting.
The
shareholders
present
at a duly
organized
meeting
may
continue
to transact
business
until
adjournment,
notwithstanding
the withdrawal
of shareholders
so that
less
than
a quorum
remains.
Record
Date and
Voting Power
The
Company
has
fixed
the close
of business
(5:00
p.m.
Eastern
Standard
Time)
on January
5, 2015 as
the “Record
Date”
to determine
those
shares
eligible
to vote
at the
Annual
Meeting.
Only
persons
holding
shares
of the
Company’s
common
stock,
par value
$0.00001 per
share
(“Common
Stock”)
or Series A Convertible
Preferred
Stock (“Series
A Preferred
Stock”)
as of
January
5, 2015, are
entitled
to vote
at the
meeting.
On December 14, 2014,
there
were
999,735,151 shares
of Common
Stock issued
and
outstanding
and
48,500 shares
of Series A Preferred
Stock issued
and
outstanding.
At the
Annual
Meeting,
each share
of Common
Stock
of the
Company
is entitled
to one
vote
per share.
Each share
of Series A Preferred
Stock when
voted
as a class
is entitled
to 500 votes per share and when voted
with
the Common
Stock,
on an
as-converted
basis,
votes
at the
conversion
rate of
500 shares
of Common
Stock.
Voting
on an
as-converted
basis
with the
Common
Stock,
the
holders
of the
Series A Preferred
Stock as
a class
hold
the equivalent
of 24,250,000
shares
of Common
Stock,
out
of a total
of 1,023,985,151
common
share
equivalents
available
to vote.
The Company would not be authorized to issue shares of Common Stock upon any conversion of the Series A Preferred Stock (or any
other series of Preferred Stock convertible into common stock).
Description of Securities
Common Stock. The authorized
capital stock of the Company consists of 1,000,000,000 shares of common stock, par value $0.00001 per share, of which 998,985,151
and 997,935,151 were issued and outstanding at December 31, 2013 and 2012, respectively. Each share of our common stock entitles
the holder to one vote on each matter submitted to a vote of our stockholders, including the election of directors. There is no
cumulative voting and there are no redemption or sinking fund provisions related to the common stock. Stockholders of our common
stock have no preemptive, conversion or other subscription rights.
Series A Cumulative Convertible Preferred
Stock. We have authorized the issuance of 250,000 shares of Series A 4% Cumulative Convertible Preferred Stock (“Series
A Preferred Stock”), of which there are 48,500 shares outstanding at December 31, 2013 and 2012. Holders of these shares
of Series A Preferred Stock were entitled to vote on an as-converted basis with the holders of common stock, except that the holders
are entitled to vote as a separate class on any matters affecting the Series A Preferred Stock stockholders, on the sale of the
business, the increase in the number of directors, the payment of a dividend on any junior stock, and the issuance of any stock
that is on parity or senior to the Series A Preferred Stock. Each share of Series A Preferred Stock is entitled to 500 votes per
share. Dividends accrue at an annual rate of 4% of the liquidation preference and are payable quarterly subject to the board’s
discretion. Each share of Series A Preferred Stock is convertible into 500 shares of common stock of the Company. In the event
of liquidation, each share of Series A Preferred Stock will be entitled to a preference of $200, plus accrued but unpaid dividends,
prior to the holders of any junior class of stock.
Series B 10% Cumulative Convertible Preferred
Stock. We have authorized the issuance of 375,000 shares of Series B 10% Cumulative Convertible Redeemable Preferred Stock
(“Series B Preferred Stock”), of which there were 7,200 shares outstanding at December 31, 2013 and December 31, 2012.
Holders of Series B Preferred Stock are not entitled to vote on matters presented to the stockholders, except as otherwise required
by law. Cash or stock dividends accrue cumulatively at an annual rate of 10% per annum on March 15 and September 15 of each year
and are payable subject to the board’s discretion. Each share of Series B Preferred Stock is convertible into 3.788 shares
of common stock of the Company. The shares of Series B Preferred Stock are redeemable at a rate of $6.25 per share, or $45,000
if all outstanding shares are redeemed. In the event of liquidation, each share will be entitled to a preference of all dividends
accrued and unpaid on each share up to the date fixed for distribution to any holders of any class of common stock.
Series C 4% Cumulative Convertible Preferred
Stock. We have authorized the issuance of 200,000 shares of Series C 4% Cumulative Convertible Preferred Stock (“Series
C Preferred Stock”), of which there were 50,000 shares outstanding at December 31, 2013 and December 31, 2012. Holders of
Series C Preferred Stock are not entitled to vote on matters presented to the stockholders, except as otherwise required by law.
Cash dividends accrue at an annual rate of 4% of the liquidation preference and are payable quarterly subject to the board’s
discretion. Each share of Series C Preferred Stock is convertible into 400 shares of common stock of the Company; however, of the
50,000 shares of the Company’s Series “C” Cumulative Convertible Preferred Stock that are outstanding, the holder
of 37,500 shares waived the conversion rights associated with these shares pursuant to an agreement in 2010. In the event of liquidation,
each share will be entitled to a preference of all dividends accrued and unpaid on each share up to the date fixed for distribution
to any holder of any class of common stock. In the event of liquidation, each share of Series C Preferred Stock will be entitled
to a preference of $100, plus accrued but unpaid dividends, prior to the holders of any junior class of stock.
Series D 15% Cumulative Convertible Preferred
Stock. We have authorized the issuance of 300,000 shares of Series D 15% Cumulative Convertible Redeemable Preferred Stock
(“Series D Preferred Stock”), of which there were 25,000 shares outstanding at December 31, 2013 and December 31, 2012.
Holders of these shares are not entitled to vote on matters presented to the stockholders, except as otherwise required by law.
Cash dividends accrue cumulatively at an annual rate of 15% per annum on March 15 and September 15 of each year and are payable
subject to the board’s discretion. Any aggregate deficiency shall be cumulative and shall be fully paid or set apart for
payment before any dividend shall be paid or set apart for payment of any class of common stock. Each share of Series D Preferred
Stock is convertible into 3.788 shares of common stock of the Company. The shares of Series D Preferred Stock are redeemable at
a rate of $6.25 per share, or $156,250 if all outstanding shares are redeemed. In the event of liquidation, each share will be
entitled to a preference of all dividends accrued and unpaid on each share up to the date fixed for distribution to any holders
of any class of common stock.
Assuming
the
presence
of a quorum,
the
affirmative
vote
of (1)
a plurality
of the
votes
cast
at the
Annual
Meeting
(in person
or by
proxy)
is required
for the
election
of directors
(cumulative
voting
is not
allowed),
(2) holders
of a majority
of the
Common
Stock present
at the
Annual
Meeting
(in
person
or by
proxy)
and entitled
to vote
is required
to approve
the proposals
regarding
the Certificate of Amendment in order to increase the authorized shares of Common Stock,
as well
as the
ratification
of the
selection
of Malone Bailey, LLP
as our
independent
registered
public
accounting
firm.
The
advisory
vote
on executive
compensation
will be
decided
by the
affirmative
vote
of a
majority
of the
shares,
present
in person
or represented
by proxy,
and
entitled
to vote
at the
Annual
Meeting.
The
advisory
vote
on executive
compensation
is a non-binding
advisory
vote;
however,
the Board
of Directors
intends
to consider
the outcome
of the
vote when
considering
future
executive
compensation
decisions.
Abstentions
will be
considered
shares
entitled
to vote
in the
tabulation
of votes
cast
on this
proposal,
and will
have
the same
effect
as negative
votes.
Broker
non-votes
are not
counted
for
the purpose
of determining
whether
a matter
has
been approved.
The
advisory
vote
on the
frequency
of the
advisory
vote
on executive
compensation
will be
decided by the alternative receiving
the affirmative
vote
of the
highest
number
of shares,
present
in person
or represented
by proxy,
and
entitled
to vote
at the
Annual
Meeting.
Because
the advisory
vote
on the
frequency
of the
advisory
vote
on executive
compensation
is a non-binding
advisory
vote,
the Board
may decide
that
it is
in the best
interests
of shareholders
and
the Company
to hold
an advisory
vote
on executive
compensation
more
or less
frequently
than
the option
approved
by the
shareholders.
Effect
of Abstentions
and Broker
Non-Votes
Because
the election
of directors
is determined
on the
basis
of a plurality
of the
votes
cast,
abstentions
have
no effect
on the
election
of directors.
However,
because the
approval
of a
majority
of shares
present
and
entitled
to vote
is required
to approve
the adoption
of the
amendments
to our
Certificate of
Incorporation
and
the ratification
of the
selection
of our
independent
registered
public
accounting
firm,
abstentions
have
the same
effect
as a vote
against
these
proposals.
If
you
hold shares
through
a broker
or other
nominee,
your
broker
or nominee
is permitted
to exercise
voting
discretion
only
with respect
to certain,
routine
matters.
Broker
non-votes
are shares
held
by brokers
or other
nominees
that
do not
have
discretionary
voting
authority
with
respect
to a matter
and
have
not received
specific
voting
instructions
from
the beneficial
owner.
Broker
non-votes
will be
counted
for
purposes
of establishing
a quorum
but will
otherwise
have
no effect
on the
outcome
of the
vote on
any
of the
matters
presented
for
your
vote,
except
as described
above.
How
You
Can Vote
You
can vote
your
shares
using
one
of the
following
methods:
| · | Vote
through
the
Internet
at
www.proxyvote.com using
the
instructions
included
in the
proxy
card or voting instruction card; |
| · | Vote by telephone using the instructions on the proxy card or voting instruction card if you received
a paper copy of the proxy materials; |
| · | Complete and return a written proxy or voting instruction card using the proxy card or voting instruction
card if you received a paper copy of the proxy materials; or |
| · | Attend and vote in person at the meeting. If your shares are held in street or account name by
a broker and you intend to vote in person at the meeting, you will need a copy of your account statement and verification from
your broker that you were the beneficial owner of the shares in the account as of the Record Date. |
Internet
and
telephone
voting
are available
24 hours
a day,
and
if you
use
one
of those
methods,
you
do not
need
to return
a proxy or
voting
instruction
card. Unless
you are
planning
to vote
in person
at the
Annual
Meeting,
your
vote must
be received
by 11:59
p.m.
Eastern
Standard
Time,
on February
24, 2015.
Even
if you
submit
your
vote
by one
of the
first
three
methods
mentioned
above,
you
may still
vote
at the
meeting
if you
are the
record holder
of your
shares
or hold
a legal
proxy from
the
record holder.
Your
vote
at the
Annual
Meeting
will constitute
a revocation
of your
earlier
proxy
or voting
instructions.
You
May
Revoke
or Change
Your Vote
You
may
revoke
a proxy at
any
time
prior
to its exercise
by filing
with the
Secretary
of the
Company
a written
revocation
or a duly
executed
proxy
bearing
a later
date.
A shareholder
who
votes
in person
at the
Annual
Meeting
in a manner
inconsistent
with
a proxy
previously
filed
on the
shareholder’s
behalf
will be
deemed
to have
revoked
such
proxy as
it relates
to the matter
voted
upon
in person.
Attendance
at the
Annual
Meeting
will not
in and
of itself
constitute
a revocation
of a proxy.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Company’s
Certificate of
Incorporation
and the Amended and Restated By-Laws, dated January 13, 2015, provide
that
the Board
shall
consist
of a
minimum
of one and
a maximum
of six
directors.
The amount of directors is fixed by the Board. The
Board
currently
consists
of two members:
Messrs.
Richard S. Wade and William K. Mills.
The
Board
has
fixed
the
number
of directors
to be elected
at the
Annual
Meeting
at two.
Each director
elected
at the
Annual
Meeting
will hold
office
for
a one-year
term
until
the
next Annual
Meeting
of Shareholders
or until
his successor
is duly
elected,
unless
prior
thereto
the director
resigns
or the
director’s
office
becomes
vacant
by reason
of death
or other
cause.
If any
such person
is unable
or unwilling
to serve
as a
nominee
for
the office
of director
at the
date of
the Annual
Meeting
or any
postponement
or adjournment
thereof,
the proxies
may
be voted
for
a substitute
nominee,
designated
by the
proxy holders
or by
the
present
Board
to fill such
vacancy,
or for
the balance
of those
nominees
named
without
nomination
of a substitute,
and
the Board
may be
reduced
accordingly.
The Board
has
no reason
to believe
that
any of
such
nominees
will be
unwilling
or unable
to serve
if elected
as a director.
Nominee
Biographies
Richard S. Wade, President, Chief Executive
Officer (Principal Executive Officer and Principal Accounting Officer) and Director of VCSY, Chairman and Director of NOW Solutions
Age:
71
Director
since
1999
Richard S. Wade is President, CEO and Chairman
of the Board of the Company and has been a director since October 1999. Before coming to Externet World, Inc. in mid-1999, and
then transitioning to what is now the Company in late 1999, Mr. Wade held a number of executive positions with companies in the
Pacific Rim from 1983 through early 1999, including the position of Chief Operating Officer of Struthers Industries, Inc., a public
company in the business of wireless applications. Prior to these executive positions, Mr. Wade spent over 10 years with Duty Free
Shoppers, Inc., culminating in his attaining the positions of president of their Mid-Pacific Division and then president of their
U.S. Division. Prior to that, Mr. Wade was a CPA and staff auditor with Peat, Marwick & Mitchell. Over the course of his career,
Mr. Wade has accumulated experience in retail operations, distribution, international operations, and financial matters. The breadth
of Mr. Wade’s managerial and operational experience led the Board of Directors to believe this individual is qualified to
serve as a director of the Company. Mr. Wade earned his Bachelor of Science in Accounting at Brigham Young University, a Master
of Science in Business Policy from Columbia University Business School and received a certificate of recognition from the government
of Guam.
William K. Mills, Secretary and Director
of VCSY
Age:
56
Director
since
2000
William K. Mills has been a director since
December 2000. Mr. Mills is a founding partner of Parker Mills, LLP (“Parker Mills”) where he specializes in complex
commercial business representations, including transactional and litigation matters, such as legal malpractice, intellectual property
and general corporate and governmental representations since 1995. Between 1991 and 1994, Mr. Mills was a senior attorney and partner
with Lewis, D’Amato, Brisbois & Bisgaard, prior to which he was a senior attorney with Radcliff & West from 1989
to 1991, senior associate with Buchalter, Nemer Fields & Younger from 1987 to 1991 and an attorney with Daniels, Baratta &
Fine from 1982 to 1987. Mr. Mills holds a J.D. from UCLA Law School and an A.B. in American Government from Harvard College. Active
in professional and community organizations, Mr. Mills has served as General Counsel to the California Association of Black Lawyers,
a member of the Los Angeles County Bar Judicial Appointments Committee, and a Board Member of the John M. Langston Bar Association.
Mr. Mills has also served on the boards of the Didi Hirsch Mental Health Foundation, the United Way’s Los Angeles Metropolitan
Region Board, the Los Angeles City Ethics Commission, and the Los Angeles County Judicial Procedures Commission. The breadth of
Mr. Mills’ professional and legal experience led the Board of Directors to believe this individual is qualified to serve
as a director of the Company.
Director
Qualifications
In
nominating
individuals
to become
members
of the
Company’s
Board
of Directors,
the current Board strives
to achieve
participation
that
represents
a diverse
mix of
skills,
qualifications,
experience,
perspectives,
talents,
backgrounds
and
education
that will
assist
the Board
of Directors
in fulfilling
its responsibilities,
oversee
management’s
execution
of strategic
objectives,
and
represent
the
interests
of all
of the
Company’s
shareholders.
As of
the
date of
this
Proxy
Statement,
our
Common
Stock is
not listed
on any
exchange
and
we are
not currently
subject
to corporate
governance
standards
of listed
companies,
which
require,
among
other
things,
that the majority of
the Board
of Directors
be independent.
While
we are
not currently
subject
to corporate
governance
standards
relating
to the independence
of our
directors,
we choose
to define
an “independent”
director
in accordance
with
the NASDAQ
Capital
Market’s
requirements
for
independent
directors
(Marketplace
Rule 5605(a)(2)),
which
includes
a series
of objective
tests,
such
as that
the
director
is not
an employee
of the
Company
and
has
not engaged
in various
types
of business
dealings
with
the Company.
One member
of the
Company’s
Board
of Directors
-- William Mills -- if elected,
will be
considered
an “independent
director”
as such
term
is defined
in NASDAQ
Rule
4200(a)(15).
Further
information
about
the Company’s
corporate governance
practices,
the responsibilities
and
functioning
of the
Board
and
its committees,
director
compensation
and
related
party transactions
is found
throughout
this
Proxy Statement.
If
any nominee
should
decline
or be
unable
to serve
for
any reason,
votes
will
instead
be cast
for
a substitute
nominee
designated
by the
Board.
The
Board
has
no reason
to believe
that
any
nominee
will decline
to be a candidate
or, if
elected,
will be
unable
or unwilling
to serve.
The
Company’s
directors
are elected
by a plurality
vote.
Unless
authority
is withheld,
the persons
named
in the
enclosed
proxy will
vote
the shares
represented
by the
proxies
received
for the
election
of the
two nominees
named
above.
The
directors
elected
will serve
one-year
terms
until
the next
Annual
Meeting
of Shareholders
and
their
respective
successors
are elected
or appointed
and qualified.
BOARD
OF DIRECTORS
AND COMMITTEES
Election
and Meetings
Directors currently hold office until the next
Annual Meeting of Shareholders and until their successors have been elected or appointed and duly qualified. Executive officers
are appointed by the Board of Directors and hold office until their successors are appointed and duly qualified. Vacancies on the
Board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members
of the Board, with such new director serving the remainder of the term or until his/her successor shall be elected and qualify.
The
Board
of Directors
is elected
by and
is accountable
to our
shareholders.
The
Board
establishes
policy
and provides
strategic
direction,
oversight,
and
control.
The Board
met two times
during
fiscal
year
2014. All
directors
attended
100 percent
of the
meetings
of the
Board.
Board of Directors Meetings and Subcommittees.
Meetings. Our Board
of Directors held several meetings during the fiscal year ended December 31, 2013. All board actions were completed through unanimous
written consents.
Audit Committee and
Financial Expert. Our Board of Directors (the “Board”) does not have a separate audit committee. Although
Mr. Wade (a member of the Board) has the qualifications of an “audit committee financial expert” as defined in Item
407(d)(5), Mr. Wade would not be deemed independent since he is an employee of the Company. At this point, we do not intend to
establish a separate audit committee as this function will be performed by our full Board of Directors.
Compensation Committee.
As all our executive officers are currently under employment agreements or are at-will employees, we do not have a separate compensation
committee. We do not currently intend to establish a separate compensation committee as this function will be performed by our
full Board of Directors.
Nominating Committee.
We do not currently have a separate nominating committee as this function is performed by our full Board of Directors.
Director Independence; Board Leadership Structure
The Company’s common stock is quoted
through the OTC Bulletin Board System. For purposes of determining whether members of the Company’s Board of Directors are
“independent,” the Company’s Board utilizes the standards set forth in the NASDAQ Stock Market Marketplace Rules.
At present, the Company’s entire Board serves as its Audit, Compensation and Nominating Committees. The Company’s Board
of Directors has determined that, of the Company’s present directors, William Mills, constituting one of the two members
of the Board, is an “independent director,” as defined under NASDAQ’s Marketplace Rules, for purposes of qualifying
as independent members of the Board and an Audit, Compensation and Nominating Committee of the Board, but that Richard Wade is
not an “independent director” since he serves as executive officer of the Company. In reaching its conclusion, the
Board determined that Mr. Mills does not have a relationship with the Company that, in the Board’s opinion, would interfere
with his exercise of independent judgment in carrying out the responsibilities of a director, nor does Mr. Mills have any of the
specific relationships set forth in NASDAQ’s Marketplace Rules that would disqualify him from being considered an independent
director.
Currently, Mr. Richard Wade serves as both
Chairman of the Board and Chief Executive Officer. As noted above, Mr. William Mills is the sole independent director.
The Company’s Board of Directors is of
the view that the current leadership structure is suitable for the Company at its present stage of development, and that the interests
of the Company are best served by the combination of the roles of Chairman of the Board and Chief Executive Officer.
As a matter of regular practice, and as part
of its oversight function, the Company’s Board of Directors undertakes a review of the significant risks in respect of the
Company’s business. Such review is conducted in concert with the Company’s in-house legal staff, and is supplemented
as necessary by outside professionals with expertise in substantive areas germane to the Company’s business. With the Company’s
current governance structure, the Company’s Board of Directors and senior executives are, by and large, the same individuals,
and consequently, there is not a significant division of oversight and operational responsibilities in managing the material risks
facing the Company.
Code
of Ethics
We have adopted a Code of Ethics that applies
to our Principal Executive Officer, Principal Accounting Officer and other persons performing executive functions, as well as
all other employees and directors of the Company and its subsidiaries. Our Code of Ethics is filed as Exhibit 14.1 to our
2013 10-K Report, and is also available at our Internet website located at http://www.vcsy.com/investor.
We
have
established
a Code
of Business
Ethics
that
applies
to our
officers,
directors
and
employees.
The
Code
of Business
Ethics
contains
general
guidelines
for
conducting
our
business
consistent
with
the
highest
standards
of business
ethics,
and
is intended
to qualify
as a
“code
of ethics”
within
the
meaning
of Section
406 of
the Sarbanes-
Oxley
Act
of 2002
and
the rules
promulgated
thereunder.
We will
post
on our
website
www.vcsy.com
any amendments
to or waivers
from
a provision
of our
Code
of Business
Ethics
that
applies
to our
principal
executive
officer,
principal
financial
officer,
principal
accounting
officer,
controller
or persons
performing
similar
functions
and
that
relates
to any
element
of the
Code
of Business
Ethics.
Risk
Oversight
Our
Board
has
overall
responsibility
for
the oversight
of risk
management
at our
Company.
Day-to-day
risk management
is the
responsibility
of management,
which
has
implemented
processes
to identify,
assess,
manage
and monitor
risks
that
face
our
Company.
Our Board,
either
as a
whole
or through
its Committees,
regularly
discusses
with
management
our
major
risk exposures,
their
potential
impact
on our
Company,
and
the
steps we
take
to monitor
and
control
such
exposures.
Our
Board
has
general
oversight
responsibility
for
risk
at our
Company,
and oversees
risks
related
to corporate
governance,
generally
reviewing
and
discussing
the
Company’s
policies
and
guidelines
with
respect
to risk
assessment
and
risk
management
The Board also focuses
on the
management
of financial
risk
exposure
and
oversees
financial
statement
compliance
and
control
environment
risk
exposure
overseeing
policies
with
respect
to financial
risk
assessment
and considers
financial
risk management
including,
risks
relating
to liquidity,
access
to capital
and
macroeconomic
trends
and
risks.
The Board
oversees the management
of risks
arising
from
our
compensation
policies,
and
programs
related
to assessment,
selection,
succession
planning,
training
and
development
of executives
of the
Company.
Recommendation
of the
Board
of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE FOR ELECTION TO THE BOARD OF DIRECTORS.
EXECUTIVE
COMPENSATION
Compensation for our key executives is comprised
of three main components: base salary, annual performance-based cash bonus and long-term equity awards. We do not target a specific
weighting of these three components or use a prescribed formula to establish pay levels. Rather, the board of directors considers
changes in the business, external market factors and our financial position each year when determining pay levels and allocating
between long-term and current compensation for the named executive officers.
Cash compensation is comprised of base salary
and an annual performance-based cash bonus opportunity. The board of directors generally seeks to set a named executive officer’s
targeted total cash compensation opportunity within a range that is the average of the applicable peer company and/or general industry
compensation survey data, adjusted as appropriate for individual performance and internal pay equity and labor market conditions.
Where we have included an equity component
as part of our compensation package, we do so because we believe that equity-based compensation aligns the long-term interests
of our named executive officers with those of stockholders.
These cash and equity compensation components
of pay are supplemented by various benefit plans that provide health benefits, which are substantially the same as the benefits
provided to all of our U.S. based employees. The Company also provides life, accident, and disability voluntary benefit plans,
which are plans where employees generally make most or all of the contributions toward the respective benefit plan.
The below table shows information of compensation
of the named officers for the fiscal years ended December 31, 2012 and December 31, 2013:
|
|
Annual Compensation |
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
|
|
|
|
Payouts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal
Position |
|
Year |
|
Salary |
|
Bonus(6) |
|
Other
Annual
Compensation |
|
Restricted
Stock
Award(s) |
|
Options
/
SARs |
|
LTIP
Payouts |
|
All
Other
Compen-
sation |
|
|
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
(#) |
|
($) |
|
($) |
|
Richard Wade(1) |
|
|
2013 |
|
$ |
300,000 |
(1) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
President and Chief Executive Officer |
|
|
2012 |
|
$ |
300,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddy Holder (2) |
|
|
2012 |
|
$ |
140,500 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Chief Financial Officer |
|
|
2013 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luiz Valdetaro (3) |
|
|
2013 |
|
$ |
200,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Chief Technology Officer |
|
|
2012 |
|
$ |
200,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laurent Tetard (4) |
|
|
2013 |
|
$ |
165,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Chief Operating Officer-SaaS |
|
|
2012 |
|
$ |
163,750 |
|
|
- |
|
|
- |
|
$ |
13,500 |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________
No stock options were exercised by the named
executive officers during the fiscal year ended December 31, 2013 or 2012.
| (1) | Mr. Wade deferred $881,688 of salary earned during the period from 2002 through 2008, as adjusted
in connection with an agreement to defer payroll claims between the Company and certain employees of the Company executed in 2010.
For 2012 and 2013, the Company accrued unpaid salary for Mr. Wade of $63,500 and $37,500, respectively. |
| (2) | Mr.
Holder began to serve as our Chief Financial Officer on December 6, 2010. In December 2010, we issued 600,000 shares of VCSY common
stock to Mr. Holder pursuant to a restricted stock agreement whereby the shares vest in equal installments over a three year period.
Of these shares, 200,000 had vested at December
|
| | 31, 2011. Mr. Holder resigned in August of 2012 and the remaining 400,000 shares were forfeited. In 2012, Mr. Holder deferred $46,500 of salary. Mr. Holder continues to provide accounting services to the Company. |
| (3) | Mr. Valdetaro deferred $467,071 of salary earned during the period from 2002 through 2007, as adjusted
in connection with an agreement to defer payroll claims between the Company and certain employees of the Company executed in 2010.
For 2012 and 2013, the Company accrued unpaid salary for Mr. Valdetaro of $41,667 and $66,667, respectively. |
| (4) | Prior to 2012, Mr. Tetard served as the Executive Vice President of International Operations
of NOW Solutions. Mr. Tetard deferred $98,438 of salary earned during the period from 2002 through 2007, as adjusted in connection
with an agreement to defer payroll claims between the Company and certain employees of the Company executed in 2010. For 2012,
the Company accrued unpaid salary for Mr. Tetard of $20,625. Pursuant to a restricted stock agreement with the Company in March
2012, Mr. Tetard was granted 600,000 unregistered shares of VCSY common stock (at a fair market value of $13,500 based upon the
total number of shares issued and the share price on the date of the issuance), vesting in equal installments over a two-year period,
of which 400,000 shares had vested as of December 31, 2013, and an additional 200,000 had vested as of April 15, 2014. Mr. Tetard
was also given 15,000 shares of Series B Preferred Shares of VHS which vest over a two year period in equal installments (at a
fair market value which is nominal). |
No options
or warrants
held
by executive
officers
or directors
were
granted or exercised
during
the fiscal
years
ended
December 31, 2013 and
2012.
In December 2001, we executed an employment
agreement with Richard Wade pursuant to which Mr. Wade serves as Chief Executive Officer and President of the Company. The agreement
currently renews on annual basis unless terminated by either party. Under the agreement, Mr. Wade receives an annual base salary
of $300,000 In the event the agreement is terminated by Mr. Wade’s death, his estate shall be entitled to compensation accrued
to the time of death plus the lesser of one year’s base compensation or the compensation due through the remainder of the
employment term. In the event of termination by the Company without cause, Mr. Wade would receive base compensation for the remainder
of the employment term.
In January 2012, we executed an employment
agreement with Luiz Valdetaro to serve as Chief Technology Officer of the Company and its subsidiaries. The initial term of the
agreement was 2 years and renews on annual basis unless terminated by either party. Under the agreement, Mr. Valdetaro receives
an annual base salary of $200,000. In the event the employment agreement is terminated by Mr. Valdetaro’s death, his estate
shall be entitled to compensation accrued to the time of death plus the lesser of one year’s base compensation or the compensation
due for the lesser of 12 months or through the remainder of the employment term. In the event of termination by the Company without
cause, Mr. Valdetaro would receive base compensation for no less than six months of the remainder of the employment term. Mr. Valdetaro
may also terminate his employment for good reason and shall be entitled to continued health insurance benefits and base compensation
at the rate in effect at the time of his termination for good reason through the end of twelve months after which his employment
is terminated for good reason.
In February 2012, we executed an employment
agreement with Laurent Tetard to serve as Chief Operating Officer-SaaS of the Company and its subsidiaries. The initial term of
the agreement was 2 years and renews on annual basis unless terminated by either party. Under the agreement, Mr. Tetard receives
an annual base salary of $165,000. In the event the employment agreement is terminated by Mr. Tetard’s death, his estate
shall be entitled to compensation accrued to the time of death plus the lesser of one year’s base compensation or the compensation
due for the lesser of 12 months or through the remainder of the employment term. In the event of termination by the Company without
cause, Mr. Tetard would receive base compensation for no less than six months of the remainder of the employment term. Mr. Tetard
may also terminate his employment for good reason and shall be entitled to continued health insurance benefits and base compensation
at the rate in effect at the time of his termination for good reason through the end of twelve months after which his employment
is terminated for good reason. In connection with the employment agreement, the Company issued Mr. Tetard 600,000 shares of its
common stock at a fair market value of $13,500 and VHS issued 15,000 shares of Series B Preferred Stock of VHS at a fair market
value which is nominal.
All executives are entitled to an annual bonus
from a bonus pool for executives equal to 5% of the Company taxable income before net operating loss deduction and special deductions
from the federal tax return filed. Each executive’s share of the bonus pool is equal to the percentage of their annual base
compensation to the total of the combined annual base compensation of all executives in the pool.
Outstanding
Equity Awards
The below table shows
information of outstanding equity awards of the named officers at the end of 2013:
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (2013) |
Option Awards |
|
Stock Awards |
|
Name |
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
|
Number
of
Securities
Underlying
Unexercised
Options (#)
non-
exercisable |
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) |
|
Option
Exercise
Price ($) |
|
Option
Expiration
Date |
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested (#) |
|
Market
Value of
Shares
or Units
of
Stock
That
Have
Not
Vested ($) |
|
Equity
ncentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#) |
|
Equity
Incentive Plan
Awards:
Market or
Payout
Valueof
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($) |
|
Laurent Tetard COO-SaaS(1) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
200,000 |
|
4,500 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) | Pursuant to a restricted stock agreement with the Company, Mr. Tetard was issued 600,000 unregistered
shares of VCSY common stock (at a fair market value of $13,500 in February 2012, based upon the total number of shares issued and
the share price on the date of the issuance), vesting in equal installments over a two-year period, of which 400,000 shares had
vested at December 31, 2013 and an additional 200,000 shares had vested at April 15, 2014. |
Narrative Disclosure to Outstanding Equity Awards at Fiscal Year
End Table
Stock Option Plan. The
Company has no formal stock option plan and has issued no stock options or warrants to any employees or to any other parties and
do not have any stock options outstanding.
Stock Awards. The
common stock issued to Mr. Tetard was issued on the same terms as the stock issued to other employees of the Company and its subsidiaries.
The Company’s restricted stock agreements generally provide for the stock to vest over a 1 or 3 year period. In the event
the employee is terminated without cause, a portion of the remaining unvested stock will vest on a pro-rata basis.
COMPENSATION
OF DIRECTORS
We
do not
pay any
compensation
to our
employee
directors
for
their
service
on the
Board.
However,
we do
pay our
non-employee
directors
as indicated
below.
The below table provides compensation for all
non-employee directors in 2013:
DIRECTOR COMPENSATION | |
| | | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Name | |
| Fees Earned or Paid in Cash | | |
Stock Awards | |
| Option Awards | | |
| Non-Equity Incentive Plan Compensation | | |
| Nonqualified Deferred Compensation Earnings | | |
| All Other Compensation | | |
| Total | |
| |
| ($) | | |
($) | |
| ($) | | |
| ($) | | |
| ($) | | |
| (#) | | |
| ($) | |
| |
| | | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
William Mills | |
| 42,000 | | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| 42,000 | |
| |
| | | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Narrative Disclosure to Director Compensation
Table
Non-employee directors are entitled to receive $3,500 per month
in 2013 and 2012.
Reimbursement
of Expenses
The
Company
reimburses
travel expenses
of members
for
their attendance
at Board
meetings.
Compensation
Risks
Assessment
As required
by rules
adopted
by the
SEC,
management
has
made an
assessment
of the
Company’s
compensation
policies
and
practices
with respect
to all employees
to determine
whether
risks
arising
from
those
policies
and practices
are reasonably
likely
to have
a material
adverse
effect on
the Company.
In doing
so,
management
considered
various
features
and elements
of the
compensation
policies
and
practices
that
discourage
excessive
or unnecessary
risk
taking.
As a result
of the
assessment,
the
Company
has
determined
that
its compensation
policies
and
practices
do not
create risks
that
are reasonably
likely
to have
a material
adverse
effect
on the
Company.
2014 Compensation
The Company did not have an annual shareholders
meeting in 2014. As a result, the Company is holding the Annual Meeting on February 25, 2015 in conjunction with the Annual Report
filed for the period ended December 31, 2013. The Company has elected to include further disclosure with respect to executive compensation
for the fiscal period ended December 31, 2014 (please see Appendix II). The executive compensation set forth in Appendix II will
also be reflected in the Annual Report for the fiscal period ended December 31, 2014.
SECURITY
OWNERSHIP
OF CERTAIN
BENEFICIAL
OWNERS
The following table sets forth certain information
regarding the beneficial ownership of the shares of common stock as of January 15, 2015, by each of our directors and executive
officers and any person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock.
The table also shows the beneficial ownership of our stock by all directors and executive officers as a group. The table includes
the number of shares subject to outstanding options and warrants to purchase shares of common stock. The percentages are based
on 999,735,151 shares of common stock outstanding as January 15, 2015, together with options, warrants or other securities convertible
or exchangeable by the beneficial owners into shares of common stock within 60 days of January 15, 2015.
| Title of Class | | |
Name and Address of Beneficial Owner(1) | |
| Shares of Common Stock Beneficially Owned | | |
| Percent of Class | |
| Common | | |
Richard Wade | |
| 75,042,716 | (2) | |
| 7.51 | % |
| Common | | |
William K. Mills | |
| 283,333 | (3) | |
| * | |
| Common | | |
All Directors and Executive Officers as a group (2 persons) | |
| 75,326,049 | | |
| 7.54 | % |
___________________________
*
Less than 1%.
| (1) | The address of each director and officer is c/o Vertical Computer Systems, Inc., 101 West Renner
Road, Suite 300, Richardson, TX 75082. |
| (2) | Includes 72,122,560
shares owned by MRC- MRC has pledged 57,000,000 common shares as collateral to secure various promissory notes issued in the aggregate
principal amount of approximately $1,286,946. Of these pledged shares, we are currently obligated to reimburse MRC with 1,309,983
common shares in connection with the payment of a $96,946 note issued in February 2008 to a third party lender and are currently
pursuing our rights to recover damages concerning 1,500,000 shares held or sold by the lender. In addition, Mr. Wade and MRC have
personally guaranteed the payment of $275,000 Note issued in March |
| | 2012
whereby, Mr. Wade and MRC are obligated to sell common shares owned by Wade and/or MRC in the event payments are not made. In
October 2013, MRC transferred 1,000,000 shares to a third party lender in connection with a $100,000 loan, which the company is
obligated to reimburse MRC with in October 2014. Mr. Wade is the President and CEO of the Company. MRC is a corporation controlled
by the W5 Family Trust and Mr. Wade is the trustee of the W5 Family Trust. |
| (3) | Includes 33,333 shares of VCSY common stock owned by Parker Mills. William Mills is a Director
of the Company and a partner of Parker Mills. |
Section
16(a) Beneficial
Ownership
Reporting
Compliance
Section 16(a) of the Exchange Act requires
the Company’s officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, based
solely on review of the copies of such forms furnished to it, or written representations that no other forms were required, the
Company believes that all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% stockholders
were complied with during 2013.
Certain Relationships and Related Transactions
In July 2011, the Company and Robert Farias,
an employee of the Company, agreed to cancel $364,679 of outstanding debt owed to Mr. Farias and in exchange for such cancellation;
the Company issued two notes with principal of $274,679 and $90,000, respectively. Beginning February 1, 2012, the interest rate
increased to 10% on the outstanding balance of principal and accrued interest accrued through January 31, 2012 under the respective
note. Also in February 2012, NOW Solutions granted Mr. Farias a junior security interest in all of its assets to secure the obligations
under the $274,679 note in consideration of a personal guarantee made by Mr. Farias to secure the obligations under a note in the
principal amount of $105,300 issued to Lakeshore Investment, LLC for a loan to NOW Solutions. Mr. Farias resigned as an employee
on December 31, 2012. On January 9, 2013, the Company paid off these notes owed to Robert Farias and the security interest granted
to Robert Farias was cancelled.
In August 2013, Luiz Valdetaro, on behalf of
the Company, transferred 1,000,000 unrestricted shares of our common stock owned by Mr. Valdetaro to Lakeshore in exchange for
an extension to having common shares of NOW Solutions returned, representing a 25% interest the Company was obligated to transfer
to Lakeshore. The fair-market value of these shares was valued at $47,000. Also in August 2013, in connection with the transfer,
the Company entered into an indemnity and reimbursement agreement to reimburse Mr. Valdetaro with 1,000,000 shares of our common
stock within one year and pay for all costs associated with the transfer of shares to Lakeshore and the reimbursement of shares
to Mr. Valdetaro. Mr. Valdetaro is the Chief Technology Officer of the Company.
In October 2013, MRC pledged 1,000,000 shares
of our common stock to secure a $50,000 loan made to the Company by a third party lender. MRC is a corporation controlled by the
W5 Family Trust. Mr. Wade, the President and CEO of the Company, is the trustee of the W5 Family Trust. The Company is obligated
to replace these shares if these shares are transferred to the lender. This note is currently in default and therefore these shares
have been classified as a derivative liability as of December 31, 2013 became past due. The initial fair value of these shares
was determined to be $72,000 as of December 9, 2013.
Also in in October 2013, MRC transferred 1,000,000
unrestricted shares of our common stock owned by MRC to a third party lender in connection with a $100,000 loan to the Company.
The fair-market value of these shares was valued at $85,000. Also in October 2013, in connection with the transfer, the Company
entered into an indemnity and reimbursement agreement to reimburse MRC with 1,000,000 shares of our common stock within one year
and pay for all costs associated with the transfer of shares to the lender and the reimbursement of shares to MRC.
As of December 31, 2013, the Company had accounts
payable to two employees in an aggregate amount of $23,594. The payables are unsecured, non-interest bearing and due on demand.
PROPOSAL NO. 2
AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON
STOCK
The affirmative vote of a majority of the 998,985,151
shares issued and outstanding of the Common Stock and Preferred Stock voting on an as converted basis, is required for the approval
of the proposal to amend the Company’s Certificate of Incorporation and effect the increase in the authorized shares of the
Company’s common stock, par value $.001 per share, from 1,000,000,000 to 2,000,000,000.
The Certificate of Amendment of Certificate
of Incorporation to the Company's Certificate of Incorporation that reflects the increase in the authorized common stock is attached
hereto as Appendix I. The increase in the authorized common stock will become effective upon the filing of the Certificate of Amendment
of Certificate of Incorporation with the Secretary of State of the State of Delaware, which is expected to occur as soon as is
reasonably practicable following shareholder approval of this proposal.
As of January 15, 2015, the Company had 999,735,151
shares of common stock issued and outstanding. The Company also has 48,500 Series A Preferred Stock issued and outstanding. The
holders of the Series A Preferred Stock are entitled to vote on an as converted basis. There are 1,023,985,150 shares of common
stock eligible to vote on a fully diluted basis which includes the following: (i) 999,735,151 shares of common stock issued and
outstanding; (ii) 24,250,000 shares of Common Stock for the Series A Preferred Stock. Therefore, on a fully-diluted basis, the
Company is not able to convert the Series A Preferred Stock in its entirety, which requires us to seek approval to increase the
authorized number of shares of common stock.
In addition, as of January 15, 2015, we have
determined that we currently have (i) the following shares of common stock issued, and (ii) outstanding shares of preferred stock
which are convertible into the shares of common stock indicated below and a contractual commitment to issue the shares of common
stock indicated below:
|
|
|
999,735,151 |
|
Common Stock Granted and Outstanding |
4,309,983 |
|
Common Shares Company Is Obligated to Reimburse to officers of the Company for pledged shares sold and transferred on the Company’s behalf |
24,250,000 |
|
Common Shares convertible from Preferred Series A Stock (48,500 shares outstanding) |
27,274 |
|
Common Shares convertible from Preferred Series B Stock (7,200 shares outstanding) |
5,000,000 |
|
Common Shares convertible from Preferred Series C Stock (50,000 shares outstanding) |
94,700 |
|
Common Shares convertible from Preferred Series D Stock (25,000 shares outstanding) |
1,033,417,108 |
|
Total Common Shares Outstanding and Accounted For/Reserved |
|
|
|
In addition, the Company has $30,000 in an
outstanding convertible debenture that had been issued to a third party.
Accordingly, given the fact that the Company
currently has 1,000,000,000 shares of common stock authorized, on a fully diluted basis the Company would exceed its authorized
shares of common stock by approximately 34,000,000 shares if all of the financial instruments described in the table above were
exercised or converted into shares of common stock (which does not include the shares that would be converted from the $30,000
outstanding debenture noted above). The Board currently is authorized to issue any shares of common stock.
Reason for Increase
The primary reason for the increase is to avoid
any liability relating to the conversion of the preferred stock, derivative liabilities and contractual obligation set forth above.
The Board would not be authorized to issue such shares upon such conversion and the Company would therefore be liable to any holders
of the preferred stock of the Company that is convertible into common stock pursuant to the terms of the applicable agreements.
Further, in order to permit the Company to
raise capital or issue its common stock for any other business purposes, the Company needs to increase the number of shares of
its authorized common stock for issuance under its Certificate of Incorporation. As a result of the increase in authorized common
stock, the Company will be able to issue shares from
time to time as may be required for proper business purposes, such as raising
additional capital for ongoing operations, establishing strategic relationships with corporate partners, acquiring or investing
in complementary businesses or products, providing equity incentives to employees, and effecting stock splits or stock dividends.
The Company is at all times investigating additional
sources of financing which the board of directors believes will be in the Company’s best interests and in the best interests
of the Company’s shareholders. While the Company hopes to raise money in the near future, it currently has no plans, arrangements
or understandings for the issuance of additional shares at the present time.
In order to permit the Company to raise capital
or issue its common stock for other business purposes, the Company needs to increase the number of shares of its authorized common
stock for issuance under its Certificate of Incorporation. As a result of the increase in authorized common stock, the Company
will be able to issue shares from time to time as may be required for proper business purposes, such as raising additional capital
for ongoing operations, establishing strategic relationships with corporate partners, acquiring or investing in complementary businesses
or products, providing equity incentives to employees, and effecting stock splits or stock dividends.
Effects of Increase
With an increase in the Company’s authorized
common shares, the board of directors will be able to issue those additional shares without the approval of the Company’s
shareholders, except as may be required by applicable law. In general, the issuance of any new shares of common stock will cause
immediate dilution to the Company’s existing stockholders, may affect the amount of any dividends paid to such stockholders
and may reduce the share of the proceeds of the Company that they would receive upon liquidation of the Company. Another effect
of increasing the Company’s authorized common stock may be to enable the Board of Directors to render it more difficult to,
or discourage an attempt to, obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of present management. Such an issuance of shares of common stock would increase the number of outstanding
shares, thereby possibly diluting the interest of a party attempting to obtain control of the Company. The Board of Directors is
not aware of any attempt, or contemplated attempt, to acquire control of the Company, and this resolution was not presented with
the intent that the increase in the Company's authorized common stock be utilized as an anti-takeover measure.
Recommendation
of the
Board
of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL NO. 2 TO AMEND CERTIFICATE OF INCOPORARTION AND TO EFFECT AN INCREASE OF THE AUTHORIZED COMMON STOCK OF THE COMPANY
TO 2,000,000,000 SHARES.
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Company is providing its shareholders with
the opportunity to cast an advisory vote on executive compensation as described below. We believe that it is appropriate
to seek the views of shareholders on the design and effectiveness of the Company’s executive compensation program.
Our overall goal for the executive compensation
program is to attract, motivate, and retain a talented and creative team of executives who will provide leadership for our success
in very competitive markets in a competitive industry. The Company seeks to accomplish this goal in a way that rewards
performance and that is aligned with shareholders’ long-term interests. We believe that our executive compensation
program, which utilizes both short-term and long-term equity awards, satisfies this goal and is strongly aligned with the long-term
interest of our shareholders. The Company did not have a Compensation Committee during fiscal 2013 or 2014.
The Company requests shareholder approval
of the compensation of the Company’s Named Executive Officers as disclosed pursuant to the Securities and Exchange Commission’s
compensation rules (which include the narrative disclosures that accompany the compensation tables).
As an advisory vote, this proposal is not binding
upon the Company. However, Board, which is responsible for designing and administering our executive compensation program,
values the opinions expressed by shareholders in their vote on this proposal and will consider the outcome of the vote when making
future compensation decisions for the Named Executive Officers.
Vote Required
Approval of Proposal No. 3 requires that the
number of votes cast in favor of the proposal exceeds the number of votes cast in opposition. Abstentions and broker
non-votes will not affect the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE COMPENSATION
PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED PURSUANT TO ITEM 402 OF REGULATION S-K.
PROPOSAL NO. 4
ADVISORY VOTE ON THE FREQUENCY OF SAY-ON-PAY
VOTES
The Company is providing shareholders an advisory
vote to approve how often the Company votes on executive compensation as required by Section 14A of the Exchange Act. Section 14A
was added to the Exchange Act by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”). The advisory vote to approve executive compensation is not a vote on the Company’s general compensation policies
or the compensation of the Company’s Board of Directors. The Dodd-Frank Act requires the Company to hold the advisory vote
to approve executive compensation at least once every three years. We believe that our compensation policies and procedures
align with the Company’s strategic objectives and the long-term interests of our shareholders. Our compensation
program is guided by the philosophy that total executive compensation should vary based on achievement of goals and objectives,
both individual and corporate, and should be focused on long-term strategies to build stockholder value. We believe
that our philosophy and practices have resulted in executive compensation decisions that are appropriate and that have benefited
the Company over time.
The Board will generate an executive
compensation program, which is intended to reward named executive officers for sustaining our financial and operating performance
and leadership excellence, along with the limited use of executive perquisites and reasonable severance pay multiples contribute
to an executive compensation program that is competitive yet strongly aligned with stockholder interests.
This Proposal No. 4 provides shareholders with
the opportunity to cast an advisory vote on how often the Company should include a “say-on-pay” vote in its proxy materials
for future annual shareholder meetings (or a special shareholder meeting for which we must include executive compensation information
in the proxy statement for that meeting). Under this Proposal No.4, shareholders may vote to have the say-on-pay vote
every three years, or they may abstain.
We believe that say-on-pay votes should be
conducted every three years. This is the first year that shareholders are provided with the opportunity to cast a say-on-pay vote,
and the Compensation Committee, which administers our executive compensation program, values the opinions expressed by shareholders
and will consider the outcome of these votes in making its decisions on executive compensation in the future.
Vote Required
The option of “one year,” “two years,” or
“three years” which receives the highest number of votes will be the option recommended by the shareholders. Abstentions
and broker non-votes will not affect the outcome of this approval.
Recommendation of the Board
The Board recommends
that shareholders vote to hold say-on-pay votes EVERY THREE YEARS (as opposed to every one year or every two years).
PROPOSAL
NO. 5
RATIFICATION
OF SELECTION
OF MALONE BAILEY, LLP
AS
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTANT
The
Board
has
selected
Malone Bailey, LLP (“Malone
Bailey”) as
the Company’s
Independent
Registered
Public
Accounting
Firm
for
the fiscal
year
ended
December 31, 2014 and
has
further
directed
that management
submit
the
selection
of our
Independent
Registered
Public
Accounting
Firm for
ratification
by the
shareholders
at the
Annual
Meeting.
Malone Bailey has
audited
the
Company’s
financial
statements
since
September
2006. Representatives
of Malone Bailey
are expected
to be present
at the
Annual
Meeting.
They
will
have
an opportunity
to make
a statement
if they
so desire
and
will
be available
to respond
to appropriate
questions.
Neither
the
Company’s
Bylaws
nor
other
governing
documents
or law
require
shareholder
ratification
of the
selection
of Malone Bailey
as the
Company’s
Independent
Registered
Public
Accounting
Firm.
However,
the
Board
is submitting
the selection
of Malone Bailey
to the shareholders
for ratification
as a
matter
of good
corporate
practice.
If the
shareholders
fail
to ratify the
selection,
the Board
will reconsider
whether
or not
to retain
that
firm.
Even
if the
selection
is ratified,
the
Board
in its discretion
may
direct the
appointment
of a different
Independent
Registered
Public
Accounting
Firm at
any time
during
the year
if they
determine
that such
a change
would
be in
the best
interests
of the
Company
and
its shareholders.
The
affirmative
vote
of the
holders
of a
majority
of the
shares
present
in person
or represented
by proxy
and
entitled
to vote
at the
annual
meeting
will
be required
to ratify
the selection
of Malone Bailey.
Abstentions
will be
counted
toward
the tabulation
of votes
cast
on proposals
presented
to the shareholders
and
will have
the same
effect
as negative
votes.
Broker
non-votes
are counted
towards
a quorum,
but
are not
counted
for
any purpose
in determining
whether
this
matter
has
been approved.
Independent
Registered
Public
Accounting
Firm
Fees
Audit
Fees. Audit
services
consist
of the
audit
of the
annual
consolidated
financial
statements
of us,
and
other
services
related
to filings
and
registration
statements
filed
by us
and
our
subsidiaries
and
other
pertinent
matters.
The aggregate fees billed for professional services rendered by our principal accounting firm of MaloneBailey were $82,273
and $72,000 for the audit of our annual financial statements for 2013 and 2012, which included the reviews of the financial statements
in our Forms 10-Q for the applicable fiscal years.
Tax
Fees,
Audit
Related
Fees,
and
All Other
Fees. Malone Bailey
had
not provided
any consulting
services
(including
tax consulting
and
compliance
services
or any
financial
information
systems
design
and
implementation
services)
to us in fiscal
years
2013 and
2012.
Subsequent
to year
end,
Malone Bailey was
engaged
to perform
tax compliance
services
for
the Company.
The
Board
considered
and
authorized
all services
provided
by Malone Bailey.
Auditor
Independence
The Board considered
that
the work
done
for
us in
fiscal
2013 by
Malone Bailey was
compatible
with maintaining
Malone Bailey’s independence.
REPORT
OF THE
BOARD OF DIRECTORS
The Board
of Directors oversees
our
financial
reporting
process.
Management
has the
primary
responsibility
for
the financial
statements
and
the reporting
process,
including
the systems
of internal
controls.
We
have
reviewed
and
discussed
with management
our
audited
financial
statements
as of
and
for the
fiscal
year ended
December 31, 2013. We
have
discussed
with
our
independent
registered
public
accountant,
Malone Bailey, LLP, the
matters
that
are required
to be discussed
by U.S.
Auditing
Standards
as established
by the
Auditing
Standards
Board of
the American
Institute
of Certified
Public
Accountants,
which
includes
a review
of the
findings
of the
independent
registered
public
accountant
during
its examination
of our
financial
statements.
We
have
received
and
reviewed
written
disclosures
and
the
letter
from
Malone Bailey, LLP, which
is required
by Independence
Standard
No. 1,
Independence
Discussions
with
Audit Committees,
as amended,
by the
Independence
Standards
Board,
and
we have
discussed
with
Malone Bailey, LLP their
independence
under
such
standards.
We have
concluded
that
the
independent
registered
public
accountant
is independent
from
us and
our
management.
Based
on our
review
and
discussions
referred
to above,
we have
recommended
that
our audited
financial
statements
be included
in our
Annual
Report
on Form
10-K
for the
fiscal
year
ended
December 31, 2013, for
filing with
the
SEC.
Submitted
by the
Board of Directors:
Richard
Wade
William Mills
Vote
Required
Approval
of the
appointment
of the
Independent
Registered
Public
Accounting
Firm requires
the affirmative
vote
of a majority
of the
shares
present
and
entitled
to vote
at the
annual
meeting.
Recommendation
THE
BOARD
RECOMMENDS
A VOTE
“FOR” APPROVAL
OF THE
SELECTION
OF MALONE
BAILEY, LLP AS THE
COMPANY’S
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM.
PROPOSAL NO. 6
OTHER
MATTERS
Shareholder
Proposals
Proposals
by shareholders
for
possible
inclusion
in the
Company’s
proxy materials
for
presentation
at the
next Annual
Meeting
of Shareholders
must be
received
by the
Secretary
of the
Company
no later
than (x) not later than the close
of business on the Ninetieth (90th) day, nor earlier than the close of business on the One Hundred and Twentieth (120th)
day in advance of the anniversary of the previous year's annual meeting if such meeting is to be held on a day which is not more
than 30 days in advance of the anniversary of the previous year's annual meeting or not later than 70 days after the anniversary
of the previous year's annual meeting; and (y) with respect to any other annual meeting of stockholders, the close of business
on the thirtieth 30th day following the date of public disclosure by the Company of the date of such meeting. All shareholder
proposals must contain the information required in accordance with the Company’s Bylaws and as required by the SEC.
For the purposes of this Annual Meeting, the Board will accept shareholder proposals
through February 15, 2015.
A shareholder’s
notice
to the
Secretary
shall
set
forth
(i) as
to each
person
whom
the
shareholder
proposes
to nominate
for
election
or reelection
as a director
(A)
the name,
age,
business
address
and
residence
address
of such
person,
(B)
the principal
occupation
or employment
of such
person,
(C)
the class
and number
of shares
of the
Company
which
are beneficially
owned
by such
person
on the
date of
such
shareholder’s
notice,
and
(D) any
other
information
relating
to such
person
that
is required
to be disclosed
in solicitations
of proxies
for
election
of directors,
or is
otherwise
required,
in each
case
pursuant
to Regulation
14A under
the Exchange
Act, or
any
successor
statute
thereto
(including
without
limitation
such
person’s
written
consent
to being
named
in the
proxy statement
as a nominee
and
to serving
as a director
if elected);
(ii) as
to the shareholder
giving
the notice
(A)
the
name
and
address, as
they
appear on
the Company’s
(or its
agent’s)
books,
of such
shareholder
and
any other
shareholders
known
by such
shareholder
to be supporting
such
nominee(s),
(B)
the class
and
number
of shares
of the
Company
which
are beneficially
owned
by such
shareholder
on the
date of
such
shareholder’s
notice,
and
(C)
a representation
that
the shareholder
is a holder
of record
of stock
of the
Company
entitled
to vote
at such
meeting
and
intends
to appear in person
or by
proxy at
the
meeting
to nominate
the
person
or persons
specified
in the
notice;
and
(iii) a description
of all
arrangements
or understandings
between
the
shareholder
and
each nominee
and
other
person
or persons
(naming
such person
or persons)
pursuant
to
which
the
nomination
or nominations
are to be
made
by the
shareholder.
Upon reasonable request, the Company shall waive such requirements for this Annual Meeting.
Communications
to the
Board
of Directors
Our
Board
of Directors
maintains
a process
for
shareholders
and
interested
parties
to communicate
with
the Board.
Shareholders
may
write
to the Board
of Directors,
c/o Richard Wade, Chief of Executive
Officer, Vertical Computer Systems, Inc.,
101 W. Renner Road, Suite 300, Richardson, TX 75082.
Communications
addressed
to individual
Board
members
and
clearly
marked
as shareholder
communications
will be
forwarded
by the
Corporate
Secretary unopened
to the individual
addressees.
Any communications
addressed
only
to the Board
of Directors
and
clearly
marked
as shareholder
communications
will be
forwarded
by the
Corporate Secretary
unopened
to the Nominating
Committee.
WHERE
YOU CAN
FIND
MORE
INFORMATION
We
are subject
to the information
and
reporting
requirements
of the
Exchange
Act
under
which
we file
annual,
quarterly
and
current
reports,
proxy
statements
and other
information
with
the
SEC.
You may
read and
copy
any materials
we have
filed
with
the
SEC at
the
SEC’s
public
reference
room
at 100
F Street,
N.E., Room
1580, Washington,
D.C.
20549. Please
call the
SEC at
1-800-SEC-0330
for
further
information
on the
public
reference
room. Our
SEC filings
are also
available
to the public
from
the SEC’s
Internet
website
at http://www.sec.gov.
You
may
request
a copy
of any
of our
filings
with
the SEC
at no cost,
by writing,
e-mailing,
or telephoning
us at
the following
address,
e-mail
address
or phone
number:
Vertical Computer Systems,
Inc.
101 W.
Renner Road, Suite 300
Richardson, Texas, 75082
Attention:
Richard Wade, Chief
Executive Officer
ir@vcsy.com;
(972) 537-5200
THIS
PROXY
STATEMENT
DOES
NOT CONSTITUTE
THE
SOLICITATION
OF A PROXY
IN ANY JURISDICTION
TO OR
FROM
ANY PERSON
TO WHOM
OR FROM
WHOM
IT IS
UNLAWFUL
TO MAKE
SUCH PROXY
SOLICITATION.
YOU SHOULD
RELY
ONLY
ON THE
INFORMATION
CONTAINED
IN THIS
PROXY
STATEMENT
TO VOTE
YOUR SHARES
AT THE
ANNUAL MEETING.
WE HAVE
NOT AUTHORIZED
ANYONE TO
PROVIDE
YOU WITH
INFORMATION
THAT
IS DIFFERENT
FROM
WHAT IS
CONTAINED
IN THIS
PROXY
STATEMENT.
THIS
PROXY STATEMENT
IS DATED
JANAURY __, 2015. YOU
SHOULD
NOT ASSUME
THAT
THE INFORMATION
CONTAINED
IN THIS
PROXY
STATEMENT
IS ACCURATE
AS OF
ANY DATE OTHER
THAN
THAT
DATE,
AND THE
MAILING
OF THIS
PROXY
STATEMENT
TO SHAREHOLDERS
DOES
NOT
CREATE
ANY IMPLICATION
TO THE
CONTRARY.
PROXY
– VERTICAL COMPUTER SYSTEMS, INC.
THIS
PROXY
IS SOLICITED
ON BEHALF
OF
THE
BOARD
OF DIRECTORS
OF VERTICAL COMPUTER SYSTEMS,
INC.
Richard S. Wade
or William K. Mills,
or any
of them,
each with
the power
of substitution,
are hereby
authorized
to represent
and vote
on the
shares
of the
undersigned,
with
all the
powers
which
the undersigned
would
possess
if personally
present,
at the
annual
meeting
of shareholders
to be held
on February
25, 2015, and any
adjournments
thereof.
This
proxy,
when
properly
executed,
will be
voted in
the manner
directed herein
by the undersigned
shareholder.
If no directions
are given,
this proxy
will be
voted for
the matters
set
forth
below.
The proxy
holders named
will vote
in their
discretion
on any
other
matter
that
may
properly
come
before the
meeting.
1. ELECTION
OF THREE DIRECTORS
– The
Board
of Directors
recommends
a vote
FOR the
listed
nominees.
|
FOR |
WITHHOLD |
Richard Wade |
[ ] |
[ ] |
William Mills. |
[ ] |
[ ] |
|
|
|
2. |
ADOPTION OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT THE INCREASED OF THE AUTHORIZED SHARES OF COMMON STOCK FROM 1,000,000,000 TO 2,000,000,000. The Board of Directors recommends a vote FOR the proposal |
FOR |
|
AGAINST |
ABSTAIN |
[ ] |
|
[ ] |
[ ] |
3. |
RESOLVED, THAT THE SHAREHOLDERS OF VERTICAL COMPUTER SYSTEMS, INC. APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE PROXY STATEMENT FOR THE ANNUAL MEETING TO BE HELD FEBRUARY __, 2015, PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, THE ACCOMPANYING TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER COMPENSATION AND THE CORRESPONDING NARRATIVE DISCLOSURE AND FOOTNOTES. The Board of Directors recommends a vote FOR the resolution. |
FOR |
|
AGAINST |
ABSTAIN |
[ ] |
|
[ ] |
[ ] |
4. |
RESOLVED, THAT THE HIGHEST NUMBER OF VOTES CAST BY THE SHAREHOLDERS OF VERTICAL COMPUTER SYSTEMS, INC. FOR THE FOLLOWING OPTIONS SHALL BE THE PREFERRED FREQUENCY WITH WHICH VERTICAL COMPUTER SYSTEMS, INC. IS TO HOLD AN ADVISORY VOTE ON THE APPROVAL OF THE COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS INCLUDED IN THE PROXY STATEMENT: (A) YEARLY, OR (B) EVERY TWO YEARS OR (C) EVERY THREE YEARS. The Board of Directors recommends such a vote be held every three years (triennially). |
Annually |
Bi-Annually |
Tri-Annually |
Abstain |
(1 Year) |
(2 Years) |
(3 Years) |
|
|
|
|
|
FOR |
FOR |
FOR |
|
[ ] |
[ ] |
[ ] |
[ ] |
5. |
RATIFICATION OF SELECTION OF MALONE BAILEY, LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY. The Board of Directors recommends a vote FOR the proposal. |
FOR |
AGAINST |
ABSTAIN |
[ ] |
[ ] |
[ ] |
6. |
In their discretion, to transact such other business as may properly come before the meeting and any adjournments thereof. |
FOR |
AGAINST |
ABSTAIN |
[ ] |
[ ] |
[ ] |
NOTE: The shares
represented by this proxy will be voted in accordance with the instructions given. If no such instructions are given, the shares
represented by this proxy will be voted in favor of the: (1) election of all of the nominees for directors designated by the board
of directors; (2) amendment to certificate of incorporation; (3) approval of executive compensation; (4) for 3 years for Proposal
4, and (5) such other business as may properly come before the meeting.
Please sign exactly
as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title
as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full
corporate or partnership name by authorized officer.
|
|
|
|
|
Signature 1 [PLEASE SIGN WITHIN BOX] |
Date |
|
Signature [JOINT OWNERS] |
Date |
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/are available at www.proxyvote.com.
APPENDIX I
[FORM OF]
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VERTICAL COMPUTER SYSTEMS, INC.
Vertical Computer Systems, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
FIRST: That pursuant
to the recommendation of the Board of Directors of Vertical Computer Systems, Inc., the following resolution amending the Certificate
of Incorporation of said corporation has been adopted by the vote of stockholders of said corporation holding a majority of the
outstanding stock entitled to vote thereon. The resolution setting forth the amendment is as follows:
RESOLVED, that Article IV of the
Certificate of Incorporation shall be amended to read in its entirety as follows:
"The aggregate number of
shares which the Corporation shall have the authority to issue is: 2,000,000,000 shares of Common Stock having a par value of $.0000l
per share ("Common Stock"'); 1,000,000 shares of Series "A" Preferred Stock having a par value of $.001 per
share; 375,000 shares of Series "B" Preferred Stock having a par value of$.00 I per share; 375,000 shares of Series "C"
Preferred Stock having a par value of $.00l per share; and 300,000 shares of Series "D" Preferred Stock having a par
value of $.001 per share (collectively "Preferred Stock"). "
The Board of Directors is authorized
subject to limitations prescribed by law and the provisions of this Article Fourth, to provide by resolution or resolutions for
the issuance of the shares of Preferred Stock in one or more series, and by filing a certificate pursuant to the applicable laws
of Delaware, to establish from time to time the number of shares included in any such series, and to fix the designation, powers,
preferences and rights of the shares of any such series and the qualifications, limitations or restrictions thereof
SECOND: That these
resolutions have been adopted by written consent of stockholders holding a majority of the outstanding stock entitled to vote thereon
in accordance with Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That said
amendment was duly adopted in accordance with the provisions of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF,
said Vertical Computer Systems, Inc., has caused this certificate to be signed by its President, this __th day of ________, 2015.
|
|
|
|
|
|
VERTICAL COMPUTER SYSTEMS, INC.
|
|
|
By: |
Richard Wade, President
and CEO |
|
APPENDIX
II
The below table shows information of compensation
of the named officers for fiscal years ended December 31, 2013 and December 31, 2014 :
|
|
|
Annual Compensation |
|
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
|
|
|
|
Payouts |
|
|
|
|
|
Name and
Principal
Position |
|
|
Year |
|
|
Salary |
|
|
Bonus(6) |
|
|
Other
Annual
Compensation |
|
|
Restricted
Stock
Award(s) |
|
|
Options/
SARs |
|
|
LTIP
Payouts |
|
|
All
Other
Comp-
ensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Wade(1) |
|
|
2014 |
|
$ |
300,000 |
(1) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
President and |
|
|
2013 |
|
$ |
300,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Chief |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luiz Valdetaro (2) |
|
|
2014 |
|
$ |
200,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Chief Technology |
|
|
2013 |
|
$ |
200,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laurent Tetard (3) |
|
|
2014 |
|
$ |
178,540 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Chief Operating |
|
|
2013 |
|
$ |
165,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Officer-SaaS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Salz (4) |
|
|
2014 |
|
$ |
165,000 |
|
|
|
|
|
- |
|
$ |
3,200 |
|
|
- |
|
|
- |
|
|
- |
|
|
Corporate |
|
|
2013 |
|
$ |
110,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Counsel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________
No stock options were exercised by the named
executive officers during the fiscal year ended December 31, 2014 or 2013.
(1) | | Mr. Wade deferred $881,688 of salary earned during the period from 2002 through 2008,
as adjusted in connection with an agreement to defer payroll claims between the Company and certain employees of the Company executed
in 2010. For 2012, 2013, and 2014, the Company accrued unpaid salary for Mr. Wade of $63,500, $37,500, and $25,000 respectively. |
(2) | | Mr. Valdetaro deferred $467,071 of salary earned during the period from 2002 through
2007, as adjusted in connection with an agreement to defer payroll claims between the Company and certain employees of the Company
executed in 2010. For 2012, 2013, and 2014, the Company accrued unpaid salary for Mr. Valdetaro of $41,667, $66,667, and $41,667
respectively. |
(3) | | Prior to 2012, Mr. Tetard served as the Executive Vice President of International
Operations of NOW Solutions. Mr. Tetard deferred $98,438 of salary earned during the period from 2002 through 2007, as
adjusted in connection with an agreement to defer payroll claims between the Company and certain employees of the Company executed
in 2010. For 2012, 2013, and 2014., the Company accrued unpaid salary for Mr. Tetard of $20,625. Mr. Tetard was granted 600,000
unregistered shares of VCSY common stock (at a fair market value of $13,500 based upon the total number of shares issued and the
share price on the date of the issuance), vesting in equal installments over a two-year period, of which 600,000 shares had vested
as of December 31, 2014. Mr. Tetard was also granted 15,000 shares of Series B Preferred Shares of VHS which vest over a two year
period in equal installments (at a fair market value which is nominal). |
(4) | | Mr. Salz deferred $185,914 of salary earned during the period from 2002 through 2007,
as adjusted in connection with an agreement to defer payroll claims between the Company and certain employees of the Company executed
in 2010. For 2012, 2013, and 2014, the Company accrued unpaid salary for Mr. Salz of $27,498, $55,000, and $73,336, respectively.
Pursuant to a restricted stock agreement with the Company in March 2012, Mr. Salz was granted 600,000 unregistered shares of VCSY
common stock (at a fair market value of $10,200) based upon the total number of shares issued and the share price on the date
of the issuance), vesting in equal installments over a two-year period, of which 600,000 shares had vested as of December 31,
2014. Mr. Salz was also granted 15,000 shares of Series B Preferred Shares of VHS which vest over a two year period in equal installments
(at a fair market value which is nominal). Mr. Salz was granted 200,000 shares of unregistered shares of VCSY common stock (at
a fair market value of $3,200 based upon the total number of shares issued and the share price on the date of the issuance) that
have vested. |
No options
or warrants
held
by executive
officers
or directors
were
granted or exercised
during
the fiscal
years
ended
December 31, 2014 and
2013.
In December 2001, we executed an employment
agreement with Richard Wade pursuant to which Mr. Wade serves as Chief Executive Officer and President of the Company. The agreement
currently renews on annual basis unless terminated by either party. Under the agreement, Mr. Wade receives an annual base salary
of $300,000 In the event the agreement is terminated by Mr. Wade’s death, his estate shall be entitled to compensation accrued
to the time of death plus the lesser of one year’s base compensation or the compensation due through the remainder of the
employment term. In the event of termination by the Company without cause, Mr. Wade would receive base compensation for the remainder
of the employment term.
In January 2012, we executed an employment
agreement with Luiz Valdetaro to serve as Chief Technology Officer of the Company and its subsidiaries. The initial term of the
agreement was 2 years and renews on annual basis unless terminated by either party. Under the agreement, Mr. Valdetaro receives
an annual base salary of $200,000. In the event the employment agreement is terminated by Mr. Valdetaro’s death, his estate
shall be entitled to compensation accrued to the time of death plus the lesser of one year’s base compensation or the compensation
due for the lesser of 12 months or through the remainder of the employment term. In the event of termination by the Company without
cause, Mr. Valdetaro would receive base compensation for no less than six months of the remainder of the employment term. Mr. Valdetaro
may also terminate his employment for good reason and shall be entitled to continued health insurance benefits and base compensation
at the rate in effect at the time of his termination for good reason through the end of twelve months after which his employment
is terminated for good reason.
In February 2012, we executed an employment
agreement with Laurent Tetard to serve as Chief Operating Officer-SaaS of the Company and its subsidiaries. The initial term of
the agreement was 2 years and renews on annual basis unless terminated by either party. Under the agreement, Mr. Tetard receives
an annual base salary of $165,000. In the event the employment agreement is terminated by Mr. Tetard’s death, his estate
shall be entitled to compensation accrued to the time of death plus the lesser of one year’s base compensation or the compensation
due for the lesser of 12 months or through the remainder of the employment term. In the event of termination by the Company without
cause, Mr. Tetard would receive base compensation for no less than six months of the remainder of the employment term. Mr. Tetard
may also terminate his employment for good reason and shall be entitled to continued health insurance benefits and base compensation
at the rate in effect at the time of his termination for good reason through the end of twelve months after which his employment
is terminated for good reason. In connection with the employment agreement, the Company issued Mr. Tetard 600,000 shares of its
common stock at a fair market value of $13,500 and VHS issued 15,000 shares of Series B Preferred Stock of VHS at a fair market
value which is nominal.
All executives are entitled to an annual bonus
from a bonus pool for executives equal to 5% of the Company taxable income before net operating loss deduction and special deductions
from the federal tax return filed. Each executive’s share of the bonus pool is equal to the percentage of their annual base
compensation to the total of the combined annual base compensation of all executives in the pool.
Outstanding
Equity Awards
There were no outstanding equity awards of
the named officers at the end of 2014
Narrative Disclosure to Outstanding Equity Awards at Fiscal Year
End
Stock Option Plan. The Company has no
formal stock option plan and has issued no stock options or warrants to any employees or to any other parties and do not have any
stock options outstanding.
Stock Awards. The Company’s restricted
stock agreements generally provide for the stock to vest over a 1 or 3 year period. In the event the employee is terminated without
cause, a portion of the remaining unvested stock will vest on a pro-rata basis.
COMPENSATION
OF DIRECTORS
We
do not
pay any
compensation
to our
employee
directors
for
their
service
on the
Board.
However,
we do
pay our
non-employee
directors
as indicated
below.
The below table provides compensation for all
non-employee directors in 2014:
DIRECTOR COMPENSATION | |
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Stock Awards | |
Option Awards | |
Non-Equity Incentive Plan Compensation | |
Nonqualified Deferred Compensation Earnings | |
All Other Compensation | |
Total |
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William Mills | |
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Narrative Disclosure to Director Compensation
Table
Non-employee directors are entitled to receive $3,500 per month
in 2014 and 2013.
Reimbursement
of Expenses
The Company reimburses travel expenses of members for their attendance
at Board meetings.
Compensation
Risks
Assessment
As required by rules adopted by the SEC, management
has made an assessment of the Company’s compensation policies and practices with respect to all employees to determine whether
risks arising from those policies and practices are reasonably likely to have a material adverse effect on the Company. In doing
so, management considered various features and elements of the compensation policies and practices that discourage excessive or
unnecessary risk taking. As a result of the assessment, the Company has determined that its compensation policies and practices
do not create risks that are reasonably likely to have a material adverse effect on the Company.
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VOTE BY INTERNET - www.proxyvote.com |
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Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy
card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting
instruction form. |
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Vertical Computer Systems, Inc.
101 W. Renner Road,
Suite 300
Richardson, TX 75082
ATTN: Richard Wade, CEO |
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ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS |
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If you would like to reduce the costs incurred by our company in
mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. |
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VOTE BY PHONE - 1-800-690-6903 |
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Use any touch-tone telephone to transmit your voting instructions
up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call
and then follow the instructions. |
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VOTE BY MAIL |
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Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
KEEP
THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN
THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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For
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All
Except |
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To
withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the
nominee(s) on the line below. |
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The Board of Directors recommends you vote |
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FOR the following: |
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1. |
Election of Directors |
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01 |
Richard S. Wade |
02 |
William K. Mills |
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The Board of Directors recommends you vote FOR proposals
2 and 3. |
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2 |
Amendment of Certificate of Incorporation to increase
authorized common stock from 1,000,000,000 to 2,000,000,000 |
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3 |
Advisory vote on approval of executive compensation |
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The Board of Directors recommends you vote 3 YEARS
on the following proposal: |
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1 year |
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2 years |
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3 years |
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4 |
Advisory vote on the frequency of future advisory votes
on executive compensation |
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The Board of Directors recommends you vote FOR proposals
5 and 6. |
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To ratify the selection of Malone & Bailey, LLP
as our independent registered public accountant for the year ended December 31, 2014 |
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In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting. |
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NOTE: The shares represented by this proxy will
be voted in accordance with the instructions given. If no such instructions are given, the shares represented by this proxy
will be voted in favor of the: (1) election of all of the nominees for directors designated by the board of directors; (2)
amendment to certificate of incorporation; (3) approval of executive compensation; (4) for 3 years for Proposal 4, and (5)
such other business as may properly come before the meeting. |
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Please sign exactly as your name(s) appear(s) hereon.
When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should
each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership
name by authorized officer. |
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Signature [PLEASE
SIGN WITHIN BOX] |
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Date |
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Signature (Joint Owners) |
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Date |
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0000224547_1
R1.0.0.51160
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/are available at www.proxyvote.com
. |
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VERTICAL COMPUTER SYSTEMS, INC. |
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PROXY SOLICITED BY THE BOARD OF DIRECTORS |
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FOR THE ANNUAL MEETING OF SHAREHOLDERS |
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THE UNDERSIGNED, revoking all previous
proxies, hereby appoints RICHARD WADE and/or WILLIAM MILLS, as attorney, agent and proxy with power of substitution, and with
all powers the undersigned would possess if personally present, to vote all shares of Common Stock and/ or the Series A Preferred
Stock of Vertical Computer Systems, Inc. (the “Company”) which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of the Company, to be held on February 25, 2015 at 11:00 A.M. local time at the Company’s offices
located at 101 W. Renner Road, Richardson, Texas 75082, and at all adjournments thereof. |
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(CONTINUED AND TO BE SIGNED ON THE
REVERSE SIDE) |
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0000224547_1
R1.0.0.51160