SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|X| 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 Pursuant to ss.240.14a-12
INTREORG SYSTEMS, INC.
-------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
__ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
__ Fee paid previously with preliminary materials.
__ 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:
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
Date: June __, 2010
Time: 10:00 a.m.
Place: Hilton Dallas/Southlake Town Square
1400 Plaza Place
Southlake, Texas 76092
817-442-9900
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE, SUITE 314, PMB 106
TROPHY CLUB, TX 76262
(817) 491-8611
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JUNE __, 2010
Dear Stockholder:
Our annual stockholders' meeting will be held on June __, 2010, at 10:00 a.m.
Central Standard Time, at the Hilton Dallas/Southlake Town Square, 1400 Plaza
Place, Southlake, Texas 76092 for the following purposes:
1. To elect three directors to hold office until the next annual meeting
of shareholders and qualification of their respective successors.
2. To appoint Larry O'Donnell, CPA, P.C. of Aurora, Colorado as
independent auditor for fiscal year ended December 31, 2010.
3. To authorize the Board of Directors to approve and adopt the 2010
Stock Option and Award Incentive Plan.
4. To transact such other business as may properly come before the annual
meeting or any postponement of or adjournment thereof.
The Board of Directors has fixed the closing of business on May __, 2010, as the
record date for the determination of shareholders entitled to notice of and to
vote at this meeting or any adjournment thereof. The stock transfer books will
not be closed.
The Company's Annual Report to Stockholders for the year ended December 31, 2009
accompanies this Notice of Annual Meeting and Proxy Statement.
All stockholders, whether or not they expect to attend the Meeting in person,
are requested either to complete, date, sign, and return the enclosed form of
proxy in the accompanying envelope or to record their proxy by other authorized
means. The proxy may be revoked by the person executing the proxy by filing with
the Secretary of the Company an instrument of revocation or duly executed proxy
bearing a later date, or by electing to vote in person at the meeting.
Dated: May __, 2010 By order of the Board of Directors,
-------------------------------------------------
Russell K. Boyd, President, CEO and
Chairman of the Board
PROXY STATEMENT
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE, SUITE 314, PMB 106
TROPHY CLUB, TX 76262
(817) 491-8611
ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
June __, 2010
This Proxy Statement is being furnished to the shareholders of INTREorg Systems,
Inc., a Texas corporation, in connection with the solicitation by the Board of
Directors of proxies to be used at the Annual Meeting of Shareholders to be held
at 10:00 a.m., Central Standard time, June __, 2010 at the Hilton
Dallas/Southlake Town Square, 1400 Plaza Place, Southlake, Texas 76092. The
Proxy Statement is first being sent or given to shareholders on or about June
__, 2010.
PROXIES ARE BEING SOLICITED BY THE BOARD OF DIRECTORS.
WE ARE ASKING YOU FOR A PROXY AND YOU ARE REQUESTED TO SEND US A PROXY.
VOTING RIGHTS
Stockholders of record of the Company as of the close of business on May __,
2010 have the right to receive notice of and to vote at the Annual Meeting. On
May __, 2010, the Company had issued and outstanding 10,320,016 (Ten Million,
Three Hundred Twenty Thousand, Sixteen) shares of Common Stock (the "Common
Stock") outstanding. Each share of Common Stock is entitled to one (1) vote for
as many separate nominees as there are directors to be elected and for or
against all other matters presented. For action to be taken at the Annual
Meeting, a majority of the shares entitled to vote must be represented at the
Annual Meeting in person or by proxy. Shares of stock may not be voted
cumulatively. Abstentions and broker non-votes each will be included in
determining the number of shares present and voting at the Annual Meeting.
Abstentions will be counted in tabulations of the votes cast on proposals,
whereas broker non-votes will not be counted for purposes of determining whether
a proposal has been approved.
EXPENSE OF MAILING
The expense of preparing and mailing of this Proxy Statement to shareholders of
the Company is being paid for by the Company. The Company is also requesting
brokers, custodians, nominees, and fiduciaries to forward this Proxy Statement
to the beneficial owners of the shares of common stock of the Company held of
record by such persons. The Company will not reimburse such persons for the cost
of forwarding.
PROXIES
In voting their Common Stock, stockholders may vote in favor of or against the
proposal to approve the proposals on the agenda or may abstain from voting.
Stockholders should specify their choice on the accompanying proxy card. All
properly executed proxy cards delivered pursuant to this solicitation and not
revoked will be voted at the meeting in accordance with the directions given. If
no specific instruction are given with regard to the matter to be voted upon,
then the shares represented by a signed proxy card will be voted "FOR" the
approval of the agenda item or director(s) and in the discretion of such proxies
to any other procedural matters which may properly come before the meeting or
any adjournments thereof. All proxies delivered pursuant to this solicitation
are revocable at any time before they are voted at the option of the persons
executing them by (i) giving written notice to the Secretary of the Company,
(ii) by delivering a later dated proxy card, or (iii) by voting in person at the
meeting. All written notices of revocation and other communications with respect
to revocations of proxies should be addressed to Russell K. Boyd, President of
-1-
INTREorg Systems, Inc., 501 Trophy Lake Drive, Suite 314, PMB 106, Trophy Club,
Texas 76262.
HOLDERS OF COMMON STOCK ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO THE COMPANY AT INTREorg
SYSTEMS, INC., 501 TROPHY LAKE DRIVE, SUITE 314, PMB 106, TROPHY CLUB, TEXAS
76262.
The person named as proxy is Russell K. Boyd, President, CEO, and Chairman of
the Board of the Company.
In addition to the solicitation of proxies by mail, the Company, through its
directors, officers, and employees, may solicit proxies from stockholders
personally or by telephone or other forms of communication. The Company will not
reimburse anyone for reasonable out-of-pocket costs and expenses incurred in the
solicitation of proxies. The Company also will request brokerage houses,
nominees, fiduciaries, and other custodians to forward soliciting materials to
beneficial owners, and the Company will reimburse such persons for their
reasonable expenses incurred in doing so. All expenses incurred in connection
with the solicitation of proxies will be borne by the Company.
INTEREST OF PERSONS IN MATTERS TO BE ACTED UPON
None. No director or shareholder owning 10% or more of the outstanding shares
has indicated her or his intent to oppose any action to be taken at the meeting.
No officer or director or shareholder has any interest in any matter to be voted
upon.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP
As of the call date of the meeting, May __, 2010, the total number of common
shares outstanding and entitled to vote was 10,320,016 (Ten Million, Three
Hundred Twenty Thousand, Sixteen) shares.
The holders of such shares are entitled to one vote for each share held on the
record date. There is no cumulative voting on any matter on the agenda of this
meeting. No additional shares will be issued subsequent to call date and prior
to meeting.
RECORD DATE
Stock transfer records will remain open. May __, 2010 shall be the record date
for determining shareholders entitled to vote and receive notice of the meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of May __, 2010, with respect to
the shares of common stock of the Company owned by (i) owners of more than 5% of
the outstanding shares of common stock, (ii) each director of the Company, (and
nominees) and (iii) all directors and officers of the Company as a group. Unless
otherwise indicated, all shares are held by the person named and are subject to
sole voting and investment by such person.
-2-
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF CLASS
OF BENEFICIAL OWNER OF BENEFICIAL OWNER (1)
- ---------------------- --------------------------- --------------------- ------------------
Common shares Russell K. Boyd (2) 1,434,000 13.90%
President, CEO and Chairman
501 Trophy Lake Drive,
Suite 314, PMB 106
Trophy Club, Texas 76262
Common shares Malcolm C. Davenport, V 0 0%
Director
501 Trophy Lake Drive,
Suite 314, PMB 106
Trophy Club, Texas 76262
Common shares Redgie T. Green 25,000 2.42%
Director
501 Trophy Lake Drive,
Suite 314, PMB 106
Trophy Club, Texas 76262
Common shares J.H. Brech, LLC (3) 1,009,666 9.78%
1101 E. Duke Street
Hugo, OK 74743
--------------------- ------------------
All Directors and Executive Officers as a Group 1,459,000 16.32%
(3 persons)
- ----------------------
(1) Based upon 10,320,016 shares of common stock issued and outstanding on May
__, 2010.
(2) Mr. Boyd has Proxy Control of 900,000 shares previously held by Mr. Alton
Smith. Mr. Boyd has direct control of 534,000 common shares representing 5.17%
of the outstanding shares of common stock.
(3) J.H. Brech, LLC owns 698,833 shares of common stock. Mr. Charles J. Webb
owns 311,333 shares of INTREorg Systems, Inc. common stock and 553,833 shares
beneficially through J.H. Brech, LLC of which he is a manager.
VOTING REQUIRED FOR APPROVAL
A majority of the shares of common stock outstanding at the record date must be
represented at the Annual Meeting in person or by proxy in order for a quorum to
be present and in order to take action upon all matters to be voted upon, but if
a quorum should not be present, the meeting may be adjourned without further
notice to shareholders, until a quorum is assembled. Each shareholder will be
entitled to cast one vote at the Annual Meeting for each share of common stock
registered in such shareholder's name at the record date.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Each share of
Common Stock entitles the holder thereof to one vote on all matters to come
before the Annual Meeting. Holders of shares of Common Stock are not entitled to
cumulative voting rights.
The favorable vote of a plurality of the votes of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is necessary to
elect the nominees for directors of the Company. To take the other actions at
the meeting a majority of the shares must vote in favor of the proposals present
in person or by Proxy.
-3-
REMUNERATION AND OTHER TRANSACTIONS WITH MANAGEMENT
(a) Cash Compensation.
The table below discusses the compensation of our executive officers for the
fiscal years ended December, 2009, 2008 and 2007.
NON-EQUITY NON-QUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
- -------------------- -------- --------- -------- ----------- ------- ------------- -------------- --------------- ----------
Russell K. Boyd, 2009 0 0 0 0 0 0 0 0
Chief Executive 2008 0 0 0 0 0 0 0 0
Officer and 2007 0 0 0 0 0 0 0 0
President
Denis L. Iler, 2009 0 0 0 0 0 0 0 0
Former President 2008 0 0 $1,000 0 0 0 $250 $1,250
and CEO (1) 2007 0 0 0 0 0 0 0 0
Austin Andres, 2009 0 0 0 0 0 0 0 0
Former COO (2) 2008 0 0 $1,000 0 0 0 0 $1,000
2007 0 0 0 0 0 0 0 0
Jeff Huitt, Former 2009 0 0 0 0 0 0 0 0
CFO (3) 2008 $9,800 0 0 0 0 0 0 $9,800
2007 $15,900 0 0 0 0 0 0 $15,900
- -------------------- --------
(1) Mr. Denis Iler resigned as a director and officer of the Company in March
2009. During the year ended December 31, 2009, he received 100,000 shares
of common stock valued at $1,000 for his services as a director.
(2) Mr. Andres resigned as an officer of the Company in April 2009 and as a
Director on May 26, 2009. During the year ended December 31, 2008, he
received 100,000 shares of the Company's common stock valued at $1,000 for
his consulting services as an officer of the Company.
(3) Mr. Huitt resigned as an officer of the Company in April 2009 and as a
Director on May 7, 2009. The Company paid Huitt Consulting, LLC $50 per
hour for work performed by Jeff Huitt as the Company's contract CFO. During
the year ended December 30, 2008, the Company paid Mr. Huitt cash of $2,850
and accrued $6,950 in connection with his services.
(b) Compensation Pursuant to Plans. None.
(c) Other Compensation.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth certain information concerning outstanding equity
awards held by the President and our most highly compensated executive officers
for the fiscal year ended December 31, 2009 (the "Named Executive Officers"):
-4-
OPTION AWARDS STOCK AWARDS
- --------------------------------------------------------------------------- ------------------------------------------
Equity
incentive
Equity plan
incentive Equity awards:
plan incentive Market
awards: plan or
Number of Number of Number of Number Market awards: payout
securities securities securities of value of Number value of
underlying underlying underlying shares shares of unearned
unexercised unexercised unexercised Option Option or of units unearned shares,
options (#) options (#) unearned exercise expiration units of stock shares, units or
Name exercisable unexercisable options price date of that units or others
(#) ($) stock have not other rights
that vested rights that
have ($) that have not
not have not vested
vested vested ($)
(#) (#)
- -------------- ----------- ------------ ----------- ---------- ------------ --------- ---------- ---------- ----------
Russell K. -0- -0- -0- -0- -0- -0- -0- -0- -0-
Boyd,
President,
CEO and
Chairman
- --------------
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
BOARD OF DIRECTORS
Committees and Meetings
The Board did not hold any formal meetings during the fiscal year ended December
31, 2009, and took actions by unanimous consent, as necessary.
In the ordinary course of business, the board of directors maintains a
compensation committee and an audit committee.
The primary function of the compensation committee is to review and make
recommendations to the board of directors with respect to the compensation,
including bonuses, of our officers and to administer the grants under our stock
option plan.
The functions of the audit committee are to review the scope of the audit
procedures employed by our independent auditors, to review with the independent
auditors our accounting practices and policies and recommend to whom reports
should be submitted, to review with the independent auditors their final audit
reports, to review with our internal and independent auditors our overall
accounting and financial controls, to be available to the independent auditors
during the year for consultation, to approve the audit fee charged by the
independent auditors, to report to the board of directors with respect to such
matters and to recommend the selection of the independent auditors.
In the absence of a separate audit committee our Board of Directors functions as
audit committee and performs some of the same functions of an audit committee,
such as recommending a firm of independent certified public accountants to audit
the annual financial statements; reviewing the independent auditors
independence, the financial statements and their audit report; and reviewing
management's administration of the system of internal accounting controls.
-5-
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives Compensation Table"
during the year ended December 31, 2009:
NONQUALIFIED
NON-EQUITY DEFERRED
FEES INCENTIVE PLAN COMPENSATION ALL OTHER
EARNED STOCK OPTION COMPENSATION EARNINGS COMPENSATION TOTAL
NAME OR PAID AWARDS ($) AWARDS ($) ($) ($) ($) ($)
IN CASH
($)
- ----------------- ---------- ----------- ----------- ---------------- ---------------- ---------------- ----------
Russell K. Boyd $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Malcolm C. $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Davenport, V
Redgie T. Green $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Denis L. Iler $-0- $-0- $-0- $-0- $-0- $-0- $-0-
(1)
Austin Andres(2) $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Jeff Huitt (3) $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Wesley F. $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Whiting (4)
- ---------------
(1) Mr. Denis Iler resigned as a director and officer of the Company in March 2009.
(2) Mr. Andres resigned as an officer of the Company in April 2009 and as a Director on May 26, 2009.
(3) Mr. Huitt resigned as an officer of the Company in April 2009 and as a Director on May 7, 2009.
(4) Wesley F. Whiting has resigned as Director effective January 8, 2009.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Texas Business Corporation Act, the personal liability of
its directors for monetary damages for breach or alleged breach of their duty of
care is very limited. In addition, as permitted by the Texas Business
Corporation Act, the Bylaws of the Company provide generally that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Texas law, including those circumstances in which indemnification would
otherwise be discretionary.
The Company has agreed to indemnify each of its directors and executive officers
to provide the maximum indemnity allowed to directors and executive officers by
the Texas Business Corporation Act and the Bylaws, as well as certain additional
procedural protections. In addition, the indemnification agreements provide
generally that the Company will advance expenses incurred by directors and
executive officers in any action or proceeding as to which they may be
indemnified.
-6-
The indemnification provision in the Bylaws, and the indemnification agreements
entered into between the Company and its directors and executive officers, may
be sufficiently broad to permit indemnification of the officers and directors
for liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act").
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the year ended December 31, 2009
(the "Form 10-K") is being furnished simultaneously herewith as Exhibit "A". The
Form 10-K is not considered a part of this Proxy Statement.
The Company will also furnish to any stockholder of the Company a copy of any
exhibit to the Form 10-K as listed thereon, upon request and upon payment of the
Company's reasonable expenses of furnishing such exhibit. Requests should be
directed to Russell K. Boyd, President of INTREorg Systems, Inc., 501 Trophy
Lake Drive, Suite 314, PMB 106, Trophy Club, Texas 76262.
BOARD OF DIRECTORS AND OFFICERS
The persons listed below are currently Officers and the members of the Board of
Directors. Three persons designated with numerals (1), (2) and (3) are nominees
for Director for the following term.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of May __, 2010 are as
follows:
NAME AGE POSITION TERM
- ---------------------------- ------ ---------------------------- -----------
Russell K. Boyd (1) 38 President, Chief Executive Annual
Officer, and Chairman of
the Board
Malcolm C. Davenport, V (2) 58 Director Annual
Redgie T. Green (3) 57 Director Annual
The directors of the Company hold office until the next annual meeting of the
shareholders and until their successors have been duly elected and qualified.
The officers of the Company are elected at the annual meeting of the Board of
Directors and hold office until their successors are chosen and qualified or
until their death, resignation, or removal. The Company presently has no
executive committee.
The principal occupations of each director and officer of the Company for at
least the past five years are as follows:
MANAGEMENT EXPERIENCE
RUSSELL K. BOYD, age 38, has served as Chairman of the Board of Directors for
the Company since November of 2004. In April 2009, he was appointed the Chief
Executive Officer and acting principal accounting officer. He has experience in
the electronic data processing and consulting industries leading and managing
project delivery teams. He currently independently contracts his services to the
government sector. Previous to this, Mr. Boyd was employed by Electronic Data
Systems (EDS) and for a seven year period worked on a variety of service
delivery and consulting projects. Prior to EDS, Mr. Boyd's career consists of
-7-
progressively broader roles and responsibilities with TIER Technologies, Inc. He
holds a Bachelor of Arts Degree in Computer Information Systems from Tarleton
State University.
MALCOLM C. DAVENPORT, V, age 58, was appointed a Director of the Company on
April 21, 2009. Mr. Davenport previously served as a director of ITC Holding
Company, Inc., a West Point, Georgia-based private technology investment
company. Some of the companies which it founded and grew include Powertel, Inc.,
(acquired by Deutche Telkom for $5.89 billion + assumption of $1.2 billion
debt), Mindspring, Inc. (merged with EarthLink {NASDAQ: ELNK}), E-Company Store,
Inc., PreSolutions, Inc., ASYNC, Inc., and Knology, Inc. {symbol NASDAQ: KNOL}.
He also served as a director for ITC DeltaCom, Inc. {OTC BB: ITCD}, a
Competitive Local Exchange Carrier (CLEC) company that is regionally significant
in both the fiber and direct long distance sale business in the southeast United
States. Mr. Davenport is licensed and active as an Attorney in the State of
Georgia, and holds an inactive license in Alabama as both an Attorney and as a
Certified Public Accountant. He also serves as a Director of LeanStream Media,
Inc.
REDGIE T. GREEN, age 57, is Director of INTREorg Services, Inc. He has been
Secretary and Director of Sun River Energy, Inc. since 1998 and in September
2009, became the Chief Executive Officer of Sun River Energy, Inc. Mr. Green has
been co-owner and operator of Green's B&R Enterprises, a wholesale donut baker
since 1983. He has been an active investor in small capital and high-tech
adventures since 1987. Mr. Green was a director of Colorado Gold & Silver, Inc.
in 2000. He was a director for Houston Operating Company during 2004. He served
as a director for Mountains West Exploration, Inc. in 2005. He is a Director of
Concord Ventures, Inc. (2006) and ASPI Inc. (2006 - 2009) and has been appointed
as an officer and director of Captech Financial, Inc. in May 2006. He served as
a director of Baymark Technologies, Inc. 2005-2006.
AUDITORS
GENERAL. Larry O'Donnell, CPA, P.C. ("O'Donnell") is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provisions of audit services is compatible with maintaining
O'Donnell's independence.
The following table represents aggregate fees billed to the Company for the
years ended December 31, 2009 and December 31, 2008, respectively, by Larry
O'Donnell, CPA, P.C.
Years Ended December 31,
2009 2008
------------- ---------------
Audit Fees $5,620 $1,400
Audit-related Fees (a) $0 $0
Tax Fees (b) $0 $0
------------- ---------------
TOTAL FEES $5,620 $1,400
- -----------------------------------------------------------------------------
(a) Primarily review of quarterly financial statements
(b) Primarily tax returns, advice and planning
All audit work was performed by the auditors' full time employees.
PROPOSAL #1
NOMINATION AND ELECTION OF DIRECTORS
The Company's Bylaws currently provide for the number of directors of the
Company to be established by resolution of the Board of Directors and that
number is at least one (1) but no more than nine (9). The Board has nominated
three (3) persons. At this Annual Meeting, a Board of three (3) directors will
be elected. Except as set forth below, unless otherwise instructed, the proxy
holders will vote the proxies received by them for Management's nominees named
below.
The three nominees are presently directors of the Company. The term of office of
each person elected as a director will continue until the next Annual Meeting of
Stockholders, until resignation, or until a successor has been elected and
qualified.
-8-
The proxies solicited hereby cannot be voted for a number of persons greater
than the number of nominees named below. The Articles of Incorporation of the
Company does not permit cumulative voting. A plurality of the votes of the
holders of the outstanding shares of Common Stock represented at a meeting at
which a quorum is presented may elect directors.
THE DIRECTORS NOMINATED BY MANAGEMENT ARE:
Russell K. Boyd
Malcolm C. Davenport, V
Redgie T. Green
The biographical information of all Director Nominees are contained on page 8,
under "Management Experience."
Unless marked to the contrary on the ballot, all proxies will be voted in favor
of the Management's nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" MANAGEMENT'S NOMINEES.
Required Approval
For action to be taken at the Annual Meeting, a quorum must be present, which,
under the Texas Business Corporation Act, is a simple majority. To be considered
approved, the nominees must receive the affirmative vote of the holders of a
majority of the shares represented and voting at the Annual Meeting.
PROPOSAL #2
APPOINTMENT OF LARRY O'DONNELL, CPA., P.C.
Larry O'Donnell, CPA, P.C., Independent Public Accountants, of Aurora, Colorado
have been appointed as the Certifying Accountants for the period through fiscal
year 2010 and shareholders are asked to ratify such appointment. Ratification of
the appointment of Larry O'Donnell, CPA, P.C., as the Company's independent
public accountants for the fiscal year ending December 31, 2010 will require the
affirmative vote of a majority of the shares of Common Stock represented in
person or by proxy and entitled to vote at the Annual Meeting. In the event the
stockholders do not ratify the appointment of Larry O'Donnell, CPA, P.C. for the
forthcoming fiscal year, such appointment will be reconsidered by the Board.
Representatives of Larry O'Donnell, CPA, P.C. are not expected to be present at
the Annual Meeting and will not make statements.
Unless marked to the contrary, proxies received will be voted "FOR" ratification
of the appointment of Larry O'Donnell, CPA, P.C. as independent accountants for
the Company's year ending December 31, 2010.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
PROPOSAL #3
AUTHORIZATION FOR THE BOARD OF DIRECTORS OF THE COMPANY TO APPROVE AND ADOPT THE
2010 STOCK OPTION AND AWARD INCENTIVE PLAN.
THE COMPANY AND THE PLAN
The Company has its executive offices at 501 Trophy Lake Drive, Suite 314, PMB
106, Trophy Club, Texas 76262, and its telephone number is (817) 491-8611. As
described in the accompanying NOTICE OF ANNUAL MEETING OF STOCKHOLDERS, the
Company proposes to adopt the 2010 INTREorg Systems, Inc. Stock Option and Award
Incentive Plan ("Plan") attached hereto as Exhibit "B".
-9-
The Board of Directors believes that the Plan will enable the Company to
compensate management and employees at a level competitive in the industry.
The Board of Directors of the Company voted unanimously to adopt the 2010 Stock
Option and Award Incentive Plan for INTREorg Systems, Inc. The Board of
Directors believes that the adoption of the Plan critical to attracting,
retaining, and motivating employees and other eligible persons of the Company.
The Plan was approved by disinterested members of the Board as well as by the
entire Board.
The following table sets forth information with respect to stock options to
officers and directors of the Company granted pursuant to the Plan through May
__, 2010.
NAME TITLE NUMBER OF EXERCISE EXPIRATION DATE
OPTIONS GRANTED PRICE
- ----------------------------------- --- --------------------- -- ----------------- -- ------------ -- ----------------
Russell K. Boyd President, Chief 0 NA NA
Executive Officer,
and Chairman of the
Board
Malcolm C. Davenport, V Director 0 NA NA
Redgie T. Green Director 0 NA NA
All current Executive Officers as
a Group 0 NA NA
All current Directors who are not
Executive Officers as a Group 0 NA NA
All Employees as Group (not
including Executive Officers and
Directors) 0 NA NA
DESCRIPTION OF THE 2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD INCENTIVE
PLAN ("PLAN")
Below is a summary of the principal provisions of the Plan. The summary is not
necessarily complete, and reference is made to the full text of the Plan
attached as Exhibit "B" to this Proxy Statement. Capitalized terms used, but not
defined herein, have the same meaning as set forth in the Plan.
GENERAL.
The Plan provides for the grant of stock options to directors, officers,
employees, consultants, and advisors of the Company. The Plan is administered by
a committee consisting of members of the Board of Directors (the "Stock Option
Committee"), or in its absence, the Board of Directors.
SHARES SUBJECT TO THE PLAN.
The Plan provides for a total of 2,000,000 shares of common stock to be reserved
for issuance subject to options. As of the date of this Proxy Statement, the
Board has not approved the grant of any options to purchase shares of common
stock.
-10-
ANTI-DILUTION PROTECTION.
Proportionate adjustments will be made to the number of shares of common stock
subject to the Plan in the event of any change in the capitalization of the
Company affecting its common stock (e.g., a stock split, reverse stock split,
stock dividend, combination, recapitalization, or reclassification). The Board
or the Stock Option Committee, subject to Board approval, may also provide
additional anti-dilution protection to a participant under the terms of such
participant's option agreement or otherwise. Shares of common stock subject to
option grants that are canceled, terminated, or forfeited will again be
available for issuance under the Plan.
ADMINISTRATION OF THE PLAN.
The Stock Option Committee (or in its absence, the Board) administers the Plan
and has the authority to modify an existing option, interpret the Plan, adopt
rules and procedures relating to the administration of the Plan, and make such
modifications to the Plan as are necessary to effectuate the intent of the
Option Plan as a result of any changes in the tax, accounting, or securities
laws treatment of participants and the Plan.
STOCK OPTIONS, RESTRICTED STOCK, AND STOCK APPRECIATION RIGHTS.
From time to time, the Stock Option Committee will recommend to the Board
individuals that the Stock Option Committee believes should receive options, the
amount of shares of common stock the Stock Option Committee believes should be
subject to such option, and whether the option should be a qualified or
nonqualified option. The Board will consider, but need not accept, the Stock
Option Committee's grant recommendations.
The Board may grant nonqualified stock option or incentive stock options to
purchase shares of common stock. Any person who is not an employee on the
effective date of the grant of an option to such person may be granted only a
nonstatutory stock option. Moreover, to the extent that options designated as
incentive stock options become exercisable by a participant for the first time
during any calendar year for stock having a fair market value greater than
$100,000, the portions of such options that exceed such amount will be treated
as nonstatutory stock options. The Plan does not provide for stock appreciation
rights.
The Stock Option Committee, subject to approval by the Board, will determine the
number and exercise price of options, and the time or times that the options
become exercisable. The term of an option will also be determined by the Stock
Option Committee, subject to approval by the Board, provided that the term of a
stock option may not exceed ten years from the date of grant.
EXERCISABILITY.
Each Stock Option Agreement shall specify the date when all or any installment
of the Option becomes exercisable. In the case of an Optionee who is not an
officer of the Company, a Director or a Consultant, an Option shall become
exercisable at a rate of no more than 25% per year over a four-year period
commencing on January 1 following the Date of Grant and 25% each year thereafter
on January 1. Subject to the preceding sentence, the exercise provisions of any
Stock Option Agreement shall be determined by the Administrator, in its sole
discretion. The option exercise price may be paid in cash, by check or in such
other form of lawful consideration (including promissory notes or shares of
common stock then held by the participant). Each Option Agreement will specify
the vesting and exercisability, in whole or in part.
CHANGE OF CONTROL.
The Plan provides that in the event of a sale by the Company of all or
substantially all of its assets, a merger of the Company with another company,
the sale or issuance of more than 50% of the total issued and outstanding voting
stock of the Company to another party or parties in a single transaction or in a
series of related transactions, resulting in a change of control of the Company,
or a similar business combination or extraordinary transaction involving the
Company, all outstanding options granted to any officer, director, or employee
of or key consultant to the Company which have not vested will accelerate to a
date at least ten (10) business days prior to the closing date of such sale or
similar business combination or extraordinary transaction. The exercise of
options the vesting of which has accelerated accordingly will not be effective
until the closing date of an above-referenced extraordinary transaction or
business combination. Such vested options will terminate on the date of the
-11-
closing of the event causing the vesting of the options to accelerate. The
vesting of the options is conditioned upon the closing of the transaction that
causes the vesting of the options to accelerate. If said transaction does not
close within 30 days from the acceleration date, then the vesting of the
accelerated options will not be effective, and the options will revert to their
original vesting schedule, subject to acceleration again in accordance with the
Plan if another extraordinary transaction or business combination is proposed
and closed.
TERM.
The Stock Option Agreement shall specify the term of the Option. No Option shall
be exercised after the expiration of ten years after the date the Option is
granted. Unless otherwise provided in the Stock Option Agreement, no Option may
be exercised (i) three months after the date the Optionee's Service with the
Company, its Parent or its Subsidiaries terminates if such termination is for
any reason other than death, Disability or Cause, (ii) one year after the date
the Optionee's Service with the Company, its Parent or its subsidiaries
terminates if such termination is a result of death or Disability, and (iii) if
the Optionee's Service with the Company, its Parent, or its Subsidiaries
terminates for Cause, all outstanding Options granted to such Optionee shall
expire as of the commencement of business on the date of such termination. The
Administrator may, in its sole discretion, waive the accelerated expiration
provided for in (i) or (ii). Outstanding Options that are not exercisable at the
time of termination of employment for any reason shall expire at the close of
business on the date of such termination.
NO TRANSFERABILITY.
Except as provided in the Plan a Participant may not assign, sell or transfer
Rights, in whole or in part, other than by testament or by operation of the laws
of descent and distribution.
PERMITTED TRANSFER OF NON-QUALIFIED OPTION.
The Administrator, in its sole discretion may permit the transfer of a
Non-Qualified Option (but not an ISO or Stock Purchase Right) as follows: (i) by
gift to a member of the Participant's immediate family, or (ii) by transfer by
instrument to a trust providing that the Option is to be passed to beneficiaries
upon death of the Settlor (either or both (i) or (ii) referred to as a
"Permitted Transferee"). For purposes of the Plan, "immediate family" shall mean
the Optionee's spouse (including a former spouse subject to terms of a domestic
relations order); child, stepchild, grandchild, child-in-law; parent,
stepparent, grandparent, parent-in-law; sibling and sibling-in-law, and shall
include adoptive relationships.
CONDITIONS OF PERMITTED TRANSFER.
A permitted transfer may be made only upon written notice to and approval
thereof by Administrator. A Permitted Transferee may not further assign, sell or
transfer the transferred Option, in whole or in part, other than by testament or
by operation of the laws of descent and distribution. A Permitted Transferee
shall agree in writing to be bound by the provisions of the Plan, which a copy
of said agreement shall be provided to the Administrator for approval prior to
the transfer.
STOCKHOLDER RATIFICATION.
The Plan must be approved by the stockholders of the Company within twelve
months after the date of its adoption by the Board. Options granted prior to
stockholder ratification may become exercisable no earlier than the date of
stockholder ratification of the Plan. Options granted to executive officers that
are designated as performance based under Section 162(m) of the Code must be
contingent on stockholder ratification of the material terms of the Plan to the
extent required under Section 162(m) of the Code.
AMENDMENTS TO THE PLAN.
The Board may amend or discontinue the Plan at any time subject to certain
restrictions set forth in the Plan. No amendment or discontinuance may adversely
affect any previously granted option award without the consent of the recipient.
-12-
FEDERAL INCOME TAX CONSEQUENCES.
The following general description of federal income tax consequences is based
upon current statutes, regulations, and interpretations and does not purport to
be complete. Reference should be made to the applicable provisions of the
Internal Revenue Code of 1986 (the "Code"). In addition, state, local and
foreign income tax consequences may be applicable to transactions involving
options. The following description does not address specific tax consequences
applicable to an individual participant who receives an option and does not
address special rules that may be applicable to directors and officers.
Under existing federal income tax provisions, a participant who receives options
will not normally realize any income, nor will the Company normally receive any
deduction for federal income tax purposes, upon the grant of an option.
When a non-qualified stock option granted pursuant to the Plan is exercised, the
employee generally will realize ordinary income (compensation) measured by the
difference between the aggregate purchase price of the common stock as to which
the option is exercised and the aggregate fair market value of the common stock
on the exercise date. The Company generally will be entitled to a deduction in
the year the option is exercised equal to the amount the employee is required to
treat as ordinary income. Any taxable income recognized in connection with a
non-qualified stock option exercised by an Optionee who is also an employee of
the Company will be subject to tax withholding by the Company. The basis for
determining gain or loss upon a subsequent disposition of common stock acquired
upon the exercise of a non-qualified stock option will be the purchase price
paid to the Company for the common stock increased by an amount included in the
Optionee's taxable income resulting from the exercise of such option. The
holding period for determining whether gain or loss on such subsequent
disposition is short-term or long-term generally begins on the date on which the
Optionee acquires the common stock.
An employee generally will not recognize any income upon the exercise of an
incentive stock option, but the exercise may, depending on particular factors
relating to the employee, subject the employee to the alternative minimum tax.
An employee will recognize capital gain or loss in the amount of the difference
between the exercise price and the sale price on the sale or exchange of stock
acquired pursuant to the exercise of an incentive stock option, provided that
the employee does not dispose of such stock within two years from the date of
grant and one year from the date of exercise of the incentive stock option (the
"Required Holding Periods"). An employee disposing of such shares before the
expiration of the Required Holding Periods will recognize ordinary income equal
to the lesser of (i) the difference between the option price and the fair market
value of the stock on the date of exercise, or (ii) the total amount of gain
realized. The remaining gain or loss is generally treated as short term or
long-term gain or loss depending on how long the shares are held. The Company
will not be entitled to a federal income tax deduction in connection with the
exercise of an incentive stock option, except where the employee disposes of the
shares of common stock received upon exercise before the expiration of the
Required Holding Periods.
PROMISSORY NOTE.
To the extent that a Stock Option Agreement or Stock Purchase Agreement so
provides, in the discretion of the Administrator, upon such terms as the
Administrator shall approve, all or a portion of the Exercise Price or Purchase
Price (as the case may be) of shares issued under the Plan may be paid with a
full-recourse promissory note. However, in the event there is a stated par value
of the shares and applicable law requires, the par value of the shares, if newly
issued, shall be paid in cash or cash equivalents. The shares shall be pledged
as security for payment of the principal amount of the promissory note and
interest thereon, and held in the possession of the Company until said amounts
are repaid in full. The interest rate payable under the terms of the promissory
note shall not be less than the minimum rate (if any) required to avoid the
imputation of additional interest under the Code. Subject to the foregoing, the
Administrator (at its sole discretion) shall specify the term, interest rate,
amortization requirements (if any) and other provisions of such note. Unless the
Administrator determines otherwise, shares of Stock having a Fair Market Value
at least equal to the principal amount of the loan shall be pledged by the
holder to the Company as security for payment of the unpaid balance of the loan
and such pledge shall be evidenced by a pledge agreement, the terms of which
shall be determined by the Administrator, in its discretion; provided, however,
that each loan shall comply with all applicable laws, regulations and rules of
the Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
-13-
REPURCHASE RIGHTS.
Following a termination of the Participant's Service, the Company may repurchase
the Participant's Rights.
REPURCHASE PRICE.
Following a termination of the Participant's Service the Repurchase Right shall
be exercisable at a price equal to (i) the Fair Market Value of vested Stock or,
in the case of exercisable options, the Fair Market Value of the Stock
underlying such unexercised options less the Exercise Price, or (ii) the
Purchase Price or Exercise Price, as the case may be, of unvested Stock;
provided, however, the right to repurchase unvested stock as described in the
Plan shall lapse at a rate of at least 33.33% per year over three years from the
date the Right is granted.
EXERCISE OF REPURCHASE RIGHT.
A Repurchase Right may be exercised only within 90 days after the termination of
the Participant's Service (or in the case of Stock issued upon exercise of an
Option or after the date of termination or the purchase of Stock under a Stock
Purchase Agreement after the date of termination, within 90 days after the date
of the exercise or Stock purchase, whichever is applicable) for cash or for
cancellation of indebtedness incurred in purchasing the shares.
TERMINATION OF REPURCHASE AND FIRST REFUSAL RIGHTS.
Each Stock Option Agreement and Stock Purchase Agreement shall provide that the
Repurchase Rights and First Refusal Rights shall have no effect with respect to,
or shall lapse and cease to have effect when the issuer's securities become
publicly traded or a determination is made by counsel for the Company that such
Repurchase Rights and First Refusal Rights are not permitted under applicable
federal or state securities laws.
MARKET STAND-OFF.
Each Stock Option Agreement and Stock Purchase Agreement shall provide that, in
connection with any underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended, including the Company's initial public
offering, the Participant shall agree not to sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the repurchase of, or otherwise
dispose or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to any Stock without the prior written
consent of the Company or its underwriters, for such period of time from and
after the effective date of such registration statement as may be requested by
the Company or such underwriters (the "Market Stand-Off").
STOCK DIVIDENDS, SPLITS, ETC.
If there is any change in the number of outstanding shares of Stock by reason of
a stock split, reverse stock split, stock dividend, recapitalization,
combination or reclassification, then (i) the number of shares of Stock
available for Rights, (ii) the number of shares of Stock covered by outstanding
Rights, and (iii) the Exercise Price or Purchase Price of any Stock Option or
Purchase Right, in effect prior to such change, shall be proportionately
adjusted by the Administrator to reflect any increase or decrease in the number
of issued shares of Stock; provided, however, that any fractional shares
resulting from the adjustment shall be eliminated.
The Company and the Majority Shareholders need not comply with any federal or
state regulatory requirements in connection with ratifying the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND ADOPTION OF THE
2010 STOCK OPTION AND INCENTIVE AWARD PLAN.
-14-
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matter appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission. Should a shareholder intend to present a proposal at next year's
annual meeting, it must be received by Russell K. Boyd, the President of
INTREorg Systems, Inc., 501 Trophy Lake Drive, Suite 314, PMB 106, Trophy Club,
Texas 76262, not later than 30 days prior to fiscal year end, in order to be
included in the Company's proxy statement and form of proxy relating to that
meeting. It is anticipated that the next annual meeting will be held in the
Spring of 2011.
Other Matters. Management knows of no business that will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting. If, however, other matters are properly brought before the Annual
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Dated: May __, 2010 By order of the Board of Directors,
--------------------------------------------
Russell K. Boyd, President, Chief Executive
Officer, and Chairman of the Board
-15-
BALLOT
- --------------------------------------------------------------------------------
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE, SUITE 314, PMB 106
TROPHY CLUB, TX 76262
(817) 491-8611
ANNUAL MEETING OF STOCKHOLDERS, JUNE __, 2010
The undersigned hereby appoints Russell K. Boyd, President, proxy, with full
power of substitution, for and in the name or names of the undersigned, to vote
all shares of Common Stock of INTREorg Systems, Inc. held of record by the
undersigned at the Annual Meeting of Stockholders to be held at the Hilton
Dallas/Southlake Town Square, 1400 Plaza Place, Southlake, Texas 76092, at 10:00
a.m., Central Standard Time, and at any adjournment thereof, upon the matters
described in the accompanying Notice of Annual Meeting and Proxy Statement,
receipt of which is hereby acknowledged, and upon any other business that may
properly come before, and matters incident to the conduct of, the meeting or any
adjournment thereof. Said person is directed to vote on the matters described in
the Notice of Annual Meeting and Proxy Statement as follows, and otherwise in
their discretion upon such other business as may properly come before, and
matters incident to the conduct of, the meeting and any adjournment thereof.
PROXIES ARE BEING SOLICITED BY THE BOARD OF DIRECTORS.
WE ARE ASKING YOU FOR A PROXY AND YOU ARE REQUESTED TO SEND US A PROXY.
1. To elect a Board of three (3) directors to hold office until the next annual
meeting of stockholders or until their respective successors have been elected
and qualified:
Nominees: Russell K. Boyd, Malcolm C. Davenport, V, and Redgie T. Green
[_] FOR: nominees listed above (except as marked to the
contrary below).
[_] WITHHOLD: authority to vote for nominee(s) specified below.
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write
the applicable name(s) in the space provided below.
- --------------------------------------------------------------------------------
2. To appoint Larry O'Donnell, CPA, P.C. of Aurora, Colorado as independent
auditor for fiscal year ended December 31, 2010.
- ---------------------- ------------------------- ---------------------------
[_] FOR [_] AGAINST [_] ABSTAIN
- ---------------------- ------------------------- ---------------------------
3. To authorize board of directors of the Company to approve and adopt the 2010
Stock Option and Award Incentive Plan.
- ---------------------- ------------------------- ---------------------------
[_] FOR [_] AGAINST [_] ABSTAIN
- ---------------------- ------------------------- ---------------------------
4. To transact such other business as may properly come before the Annual
Meeting.
- ---------------------- ------------------------- ---------------------------
[_] FOR [_] AGAINST [_] ABSTAIN
- ---------------------- ------------------------- ---------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND RETURN THIS PROXY CARD
PROMPTLY TO INTREorg SYSTEMS, INC., 501 TROPHY LAKE DRIVE, SUITE 314, PMB 106,
TROPHY CLUB, TEXAS 76262.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE STATED PROPOSALS.
- ------------------------------------ ----------------------------------------
Number of Shares owned Signature of Stockholder
Dated:_______________, 2010
----------------------------------------
Signature if held jointly
IMPORTANT: If shares are jointly owned, both owners should sign. If signing as
attorney, executor, administrator, trustee, guardian or other person signing in
a representative capacity, please give your full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
EXHIBIT "A"
INTREORG SYSTEMS, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _____________
Commission file number: 000-53451
INTREORG SYSTEMS, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Texas 45-0526215
- ------------------------------ ------------------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
501 Trophy Lake Drive, Suite 314, PMB 106, Trophy Club, TX 76262
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
817-491-8611
Securities registered pursuant to Section 12(b) of the Act:
Title of each class registered Name of each exchange
on which registered
- ---------------------------------- ------------------------
Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
|_|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data file required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files)
Yes |_| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
|X|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [___]
Non-accelerated filer [___] Smaller reporting company [_X_]
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $2,512,432 as of April 14, 2010.
There were 10,320,016 shares outstanding of the registrant's Common Stock as of
April 14, 2010.
TABLE OF CONTENTS
PART I
ITEM 1 Business 1
ITEM 1 A. Risk Factors 6
ITEM 1 B. Unresolved Staff Comments 11
ITEM 2 Properties 11
ITEM 3 Legal Proceedings 11
ITEM 4 Removed and Reserved
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 11
ITEM 6 Selected Financial Data 12
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 16
ITEM 8 Financial Statements and Supplementary Data 16
ITEM 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 16
ITEM 9 A. Controls and Procedures 16
ITEM 9 A(T). Controls and Procedures 17
ITEM 9B Other Information 18
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 18
ITEM 11 Executive Compensation 20
ITEM 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 23
ITEM 13 Certain Relationships and Related Transactions, and Director
Independence 24
ITEM 14 Principal Accounting Fees and Services 24
PART IV
ITEM 15 Exhibits, Financial Statement Schedules 26
SIGNATURES 27
FORWARD LOOKING STATEMENTS
This document includes forward-looking statements, including, without
limitation, statements relating to INTREorg plans, strategies, objectives,
expectations, intentions and adequacy of resources. These forward-looking
statements involve known and unknown risks, uncertainties, and other factors
that may cause INTREorg's actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. These factors include,
among others, the following: ability of INTREorg to implement its business
strategy; ability to obtain additional financing; INTREorg's limited operating
history; unknown liabilities associated with future acquisitions; ability to
manage growth; significant competition; ability to attract and retain talented
employees; and future government regulations; and other factors described in
this registration statement or in other of INTREorg filings with the Securities
and Exchange Commission. INTREorg is under no obligation, to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
PART I
ITEM 1. BUSINESS
- ----------------
General
The following is a summary of some of the information contained in this
document. Unless the context requires otherwise, references in this document to
"INTREorg" or the "Company" are to INTREorg Systems, Inc. and its subsidiaries.
About INTREorg Systems, Inc.
INTREorg Systems, Inc. was formed as a Texas corporation on November 3, 2003.
The Company was organized for the purpose of providing internet consulting and
"back office" services to other companies.
BUSINESS PLAN
INTREorg Systems Inc. ("INTREorg" or "The Company") has developed a business
plan to become an integrated provider of outsourced information technology
("IT") services, Software as a Service (SaaS) applications, enterprise support,
and business process outsourcing services. INTREorg's target market is
publicly-traded, emerging growth companies in need of rapidly expanded IT
services. Primarily the Company intends to focus on publicly traded companies to
allow it to evaluate the financial position and business situation of
prospective clients due to the inherent transparency required with publicly
traded firms.
The primary focus of the Company is to provide outsourced, day-to-day IT
operations to emerging companies in need of state-of-the-art IT services, tools
and processes. INTREorg focuses on providing IT services and systems to
emerging, technologically sophisticated companies that have grown beyond their
ability to manage their network. Additionally, the Company intends to provide
infrastructure services and products to meet the specific demands of INTREorg
customers. All of the Company's services will be offered individually or bundled
as a comprehensive solution.
IT OUTSOURCING SYSTEMS
INTREorg Systems plans to provide Information Technology solutions to assist the
Company's clients in assessing their business needs and identifying the IT
solutions to meet these needs. INTREorg intends to deliver services that include
1
the selection and implementation of packaged software and the design,
construction, testing, and integration of new systems.
The primary focus of INTREorg's IT Outsourcing Services will be to assume all of
the responsibility of a client's IT organization. In most cases, INTREorg would
evaluate the client's current personnel and augment that expertise with the
Company's IT experience as well as its industry partners. This approach is
designed to allow INTREorg to help the Company's customers minimize the costs
associated with acquiring and training an IT staff--allowing them to focus their
time and resources on their core business.
INTREorg's IT Outsourcing Services segment will provide help desk and
infrastructure support around-the-clock for its clients. The Company intends to
maintain and support a full range of its clients' IT and business process
infrastructures from network environments to computing systems, and from
shrink-wrapped applications to advanced proprietary and acquired application
systems.
User Services
INTREorg intends to manage each of the client's assets to ensure that each of
the client's end user's PC and other devices run consistently and at maximum
efficiency. INTREorg provides the staffing, management and processes needed to
manage the whole enterprise, meeting desired service levels while leveraging
clients' existing infrastructure investments. INTREorg intends to help companies
increase end user productivity while decreasing their downtime. End user
services will include:
o Help Desk--call management, problem solving and problem resolution
o Desktop Services--installations, upgrades and software problems
o Procurement and Product Services-- streamlined, controlled and managed
procurement process and certified product reseller
Computing Services
INTREorg intends to help its customers manage all of their computing resources
helping them manage their network resources more effectively. Computing Services
include:
o IT Backup and Recovery Services
o Data Center Outsourcing
o Database Management
o Facility Management
Network Management Services
INTREorg intends to manage its clients' entire Wide Area Network (WAN) for
maximum performance and reliability. The Company will use its internal expertise
in conjunction with its clients' personnel to manage disparate carriers and
providers to provide maximum up time and higher efficiencies. Network Management
Services will include:
o Managed Communication Services--enhancing the performance and
reliability of critical networks and connectivity
o Remote Access Services--Support secure and cost-effective remote
access using the latest in wireless and wired technology
o On site Network Management--maximizing network uptime and device
functionality
2
Security Services
The Company provides custom security solutions for its clients, regardless of
the size or complexity of their system. INTREorg works with its clients to
identify key threats and risks and create customized security policies, and then
install, implement and manage the security solution. Security services include:
o Network Security--intrusion detection, secure VPN access
o Application Security--monitor and protect email and web content
o Security Monitoring--effective monitoring and management of the
client's network
Applications Services
Applications Services include services such as application development and
maintenance, including the development and maintenance of custom and packaged
application software for customers and application systems migration and
testing, which includes the migration of applications from legacy environments
to current technologies, as well as, performing quality assurance functions on
custom applications. INTREorg also intends to provide other applications
services such as application assessment and evaluation, hardware and
architecture consulting, systems integration, and INTREorg-based services.
Software as a Service (SaaS)
INTREorg Systems, Inc. is currently developing a SaaS software delivery as part
of its overall business plan. The Company believes that this model offers
significant advantages over conventional software deployment, as well as,
traditional web-based ASP models. Traditionally, software has been thought of as
a stand-alone product that is purchased separately and installed on individual
computers.
The Company believes that customized software offers no specific advantage to
their business and that it is their delivery processes that are unique. By
offering standard, off-the-shelf software via the web using multi-tenant
architecture, INTREorg intends to offer a variety of applications to its clients
at a fraction of the cost of client purchased software. SaaS software is
network-based and centrally deployed and managed. These applications are
accessed via the web and are available anytime and anywhere there is an Internet
connection. Software updates and patches are handled in one central location
Software delivered via SaaS:
o Customer Relations Management
o Video Conferencing
o Human Resources
o Accounting and Email
o Enterprise Resource Planning
o Document Management
The Company is focusing on marketing the IT outsourcing portion of the business
to drive the SaaS model.
INTREorg's Lines of Business
INTREorg Systems, Inc. offers services under two primary lines of business:
Industry Solutions and Consulting and Applications Solutions. The Company
considers these lines of business to be reportable segments and include
financial information and disclosures about these reportable segments in its
financial statements. Based on a quantitative and qualitative analysis of
3
varying factors, the Company may increase or decrease the amount of ongoing
investment in each of these business areas, make acquisitions that strengthen
its market position, divest, exit, or downsize aspects of a business area.
Infrastructure Solutions
INTREorg's Infrastructure Solutions group will be responsible for defining the
technology strategies for the Company's Industry Solutions customers and
INTREorg while actively enforcing Capability Maturity Model Integration (CMMI)
methodologies. This group identifies new technology offerings and innovations
that deliver value to the Company's customers. It manages updates and maintains
the technology infrastructure for the Company's customers and ourselves,
including networks, data centers, help desks, mainframes, servers, storage, and
workspace computing. It also provides senior technology consultants to assist
the Company's customers with more complex technology transformations. It
manages, resolves and documents problems in the Company's customers' computing
environments. The group will also provide comprehensive monitoring, planning,
and safeguarding of information technology systems against intrusion by
monitoring system and network status, collecting and analyzing data regarding
system and network performance, and applying appropriate corrective actions. All
of these activities are designed to either be performed at customer facilities
or delivered through centralized data processing centers that the Company
intends to maintain.
Consulting and Applications Solutions
The Consulting and Applications Services Group intends to provide global
consulting and integration services, applications development and management
services, and applications outsourcing services to the Company's client base.
These services are designed to be delivered on-site and offshore, providing
innovative industry focused solutions. Leading through domain expertise to
provide performance improvement, business and technology architecture and
transformation these services will include: enterprise applications
implementation and integration; the development and maintenance of custom and
packaged applications; application systems migration; testing; migration of
applications from legacy environments to current technologies; and performing
quality assurance functions on custom applications.
Competitive Features
INTREorg Systems, Inc. intends to offer a unique blend of premium IT services
designed to assist the Company's clients in improving financial and operational
performance across their enterprise. INTREorg intends to develop business
strategies and technology solutions that address their specific needs while
providing them with increased competitive advantage. INTREorg intends that five
core values may differentiate INTREorg from the competition:
1. Delivery Performance
INTREorg's delivery performance is based on a carefully designed
business plan, highly-skilled consultants, technical expertise, and
well designed implementation and support methodologies. INTREorg will
emphasize strong quality assurance and project management to achieve
rapid and successful deployment of the Company's solutions.
2. Flexible application delivery
INTREorg believes it can provide the Company's customers sophisticated
business software at a fraction of the cost of traditional client-based
software delivery. By leveraging the inherent flexibility and cost
savings of the SaaS software delivery model, this is an ideal solution
for rapidly growing customers that must have scalable solutions for
their rapidly changing business environment.
4
3. Vertical Expertise
INTREorg intends to combine vertical-industry knowledge with a proven
core of key strategic technologies to offer to serve customers' needs
and offer tailored and innovative strategies and solutions.
4. Technology Excellence
INTREorg intends to deliver its services by blending proven software
and business practices to build scalable custom solutions. The Company
believes its team of professionals has the technology expertise to
offer comprehensive strategies and solutions.
5. Operational Metrics
INTREorg's intent is to maintain operational excellence, tracking key
performance indicators and well-defined operating metrics to manage the
Company's consulting resources, Company utilization and gross margin.
6. Information Based Sales and Marketing Efforts
INTREorg has developed a set of metrics by which each client's needs
and that client's potential profitability can be assessed. As a result,
INTREorg's intent is to focus its sales and marketing efforts on
growing public companies where publicly reported information is
available to assess the potential needs, revenue and profitability of a
client. This approach allows the Company to be focused in its sales and
marketing efforts, to bring solutions to the accounting, and internal
controls and procedures issues inherent in public financial reporting.
Business Strategy
The Company's business strategy is to position INTREorg's Company as the leading
provider of premium IT services for both the middle market and divisions of
Global 2000 companies. INTREorg believes it can attain this strategic objective
by delivering a range of business and technology offerings. This approach
enables the Company to attain its business strategy objective. INTREorg intends
to maximize the Company's ability to deliver the following capabilities:
o Envision and realize strategic business solutions to serve the
Company's clients by delivering industry-based process re-engineering
services coupled with strategic technology management services.
o Implement Corporate Performance Management solutions to improve
financial performance and operating metrics across a client's
enterprise.
o Optimize business processes to improve the delivery of products and
services
o Provide program and project management.
o Offer a complete range of managed IT services that enable the
Company's middle-market clients to concentrate on their core business,
while being assured their technical infrastructure will support them
as they grow.
o Leverage the Company's blend of industry and technology expertise
across all of the Company's service offerings.
Competition
The Company intends to offer a full spectrum of IT consulting and Software
services and expertise to ensure the success of IT projects to small and middle
market companies. Competitors include IT solutions providers, in-house technical
5
staff, software product companies with extended service organizations,
international outsourcers of IT development, application and Web hosting firms
and specialized providers of CPM/BAM/BI. There is significant competition in the
management and IT consulting services space. INTREorg also believes that the
principle criteria considered by prospective clients when selecting a consulting
firm include skills and capabilities of consultants, cost to value ratios, scope
of services, service model approach, global presence, industry and technical
expertise, reputation and quality of past work, perceived value and a results
orientation.
The following is a representative list of competitors in the IT and management
consulting services space:
o Technical Consulting/Systems integrators: Accenture, Collaborative
Consulting, CMGI, EDS, IBM Global Services, Inforte, Keane Consulting,
LogicaCMG, Perficient, and Sapient;
o Business SaaS providers;
o Email outsourcing firms;
o Management/Business Consulting firms: Bain & Company, Booz-Allen &
Hamilton, Boston Consulting Group, Diamond Management and Technology
Consultants, Inc., and McKinsey & Company;
o Corporate Performance Management (CPM) / Business Activity Monitoring
(BAM) / Business Intelligence (BI) providers: AnswerThink, Hitachi
Consulting Corporation, Informatica Corporation, ISA, Hewlett-Packard,
Longview Solutions, Oracle, Palladium Consulting; and
o Computer hardware, software and service vendors: Dell,
Hewlett-Packard, IBM, Oracle and SAP.
Employees
As of December 31, 2009, INTREorg did not have any full time employees. The
officers and directors currently provide certain services dedicated to current
corporate and business development activities on an as needed part-time basis.
Officers currently serve up to 20 hours per week.
ITEM 1A. RISK FACTORS
- ---------------------
GENERAL BUSINESS RISK FACTORS
DEVELOPMENT STAGE BUSINESS
INTREorg Systems, Inc. commenced operations in November 2003 and is organized as
a corporation under the laws of the State of Texas. Accordingly, INTREorg has
only a limited history upon which an evaluation of its prospects and future
performance can be made. INTREorg's proposed operations are subject to all
business risks associated with new enterprises. The likelihood of INTREorg's
success must be considered in light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with the
6
expansion of a business, operation in a competitive industry, and the continued
development of advertising, promotions and a corresponding customer base. There
is a possibility that INTREorg could sustain losses in the future. There can be
no assurances that INTREorg will even operate profitably.
DEPENDENCE ON MANAGEMENT
In the early stages of development INTREorg's business will be significantly
dependent on INTREorg's management team. INTREorg's success will be particularly
dependent upon Russell K. Boyd, the Company's CEO and sole officer. The loss of
our sole officer or any of our directors could have a material adverse effect on
INTREorg. Management is not working full time for the Company and each devotes
about twenty hours per week to the operations of the Company.
DEPENDENCE UPON OUTSIDE CONTRACTORS OR ADVISORS
To supplement the business experience of its officers and directors, INTREorg
may be required to employ contractors, accountants, technical experts,
appraisers, attorneys, or other consultants or advisors. INTREorg's Management,
without any input from shareholders, will make the selection of any such
advisors. Furthermore, it is anticipated that such persons may be engaged on an
"as needed" basis without a continuing fiduciary or other obligation to
INTREorg. In the event INTREorg considers it necessary to hire outside
contractors or advisors, they may elect to hire persons who are affiliates, if
they are able to provide the required services.
RISKS OF BORROWING
If INTREorg incurs indebtedness, a portion of its cash flow will have to be
dedicated to the payment of principal and interest on such indebtedness. Typical
loan agreements also might contain restrictive covenants, which may impair
INTREorg's operating flexibility. Such loan agreements would also provide for
default under certain circumstances, such as failure to meet certain financial
covenants. A default under a loan agreement could result in the loan becoming
immediately due and payable and, if unpaid, a judgment in favor of such lender
which would be senior to the rights of shareholders of INTREorg. A judgment
creditor would have the right to foreclose on any of INTREorg's assets resulting
in a material adverse effect on INTREorg's business, operating results or
financial condition.
RISK OF NEW VENTURE
INTREorg is a development stage business. The Company has a limited history of
operation and no history of earnings. As a new development it will be subject to
all of the difficulties associated with establishing a new business enterprise,
including the following: hiring and retaining skilled employees or contractors;
licensing, permitting, and operating problems; competing with established
operators; and implementing the business infrastructure and support systems to
effectively carryout the business plan.
GENERAL ECONOMIC CONDITIONS
The financial success of INTREorg may be sensitive to adverse changes in general
economic conditions in the United States such as recession, inflation,
unemployment, and interest rates. Such changing conditions could reduce demand
in the marketplace for the IT Outsourcing services which is INTREorg's business.
Management believes that the services developed by INTREorg will maintain value
long term. Nevertheless, INTREorg has no control over these changes.
NEED FOR ADDITIONAL FINANCING
INTREorg has very limited funds and such funds will not be adequate to carry out
the business plan without borrowing significant funds. The ultimate success of
INTREorg may depend upon its ability to raise additional capital. INTREorg has
not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
7
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to INTREorg. If not available, INTREorg's
operations will be limited to those that can be financed with its modest
capital.
LACK OF REVENUE HISTORY
The Company was incorporated under the laws of the State of Texas on November 3,
2003. The Company was organized for the purpose of providing internet consulting
and "back office" services to other companies. The Company has not earned
significant revenues from limited principal operations. The Company is not
profitable and the business effort is considered to be in an early development
stage. INTREorg Systems, Inc. must be regarded as a new or development venture
with all of the unforeseen costs, expenses, problems, risks and difficulties to
which such ventures are subject.
NO ASSURANCE OF SUCCESS OR PROFITABILITY.
There is no assurance that INTREorg will ever operate profitably. There is no
assurance that it will generate revenues or profits, or that the value of
INTREorg's shares will be increased thereby.
RISK FACTORS RELATING TO THE COMMON STOCK
HIGHLY SPECULATIVE NATURE OF INVESTMENT
Due to the highly speculative nature of INTREorg's business, Investors should
not invest unless they can financially bear the loss of their entire investment.
Investment should, therefore, be limited to that portion of discretionary funds
not needed for normal living purposes or for reserves for disability and
retirement.
THERE ARE LIMITED TRADING MARKETS FOR INTREorg'S COMMON STOCK, THEREBY LIMITING
A SHAREHOLDERS' OPPORTUNITY TO SELL SUCH COMMON STOCK.
Currently, only a limited trading market exists for INTREorg's common stock. The
common stock trades on the Over the Counter Bulletin Board ("OTCBB") under the
symbol "IORG." The OTCBB is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ system. Any
broker/dealer that makes a market in the Company's stock or other person that
buys or sells INTREorg stock could have a significant influence over its price
at any given time. INTREorg cannot assure its shareholders that a greater market
for INTREorg's common stock will be sustained. There is no assurance that
INTREorg's common stock will have any greater liquidity than shares that do not
trade on a public market. A shareholder may be required to retain their shares
for an indefinite period of time, and may not be able to liquidate their shares
in the event of an emergency or for any other reasons.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY
OF INTREorg'S SECURITIES.
INTREorg is a "penny stock" company. INTREorg securities currently trade on the
OTCBB and will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Effectively, this discourages
broker-dealers from executing trades in penny stocks. Consequently, the rule
8
will affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore because it imposes additional
regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because INTREorg securities constitute "penny stocks"
within the meaning of the rules, the rules would apply to INTREorg and to
INTREorg securities. The rules will further affect the ability of owners of
shares to sell INTREorg securities in any market that might develop for them
because it imposes additional regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. INTREorg
management is aware of the abuses that have occurred historically in the penny
stock market. Although INTREorg does not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to INTREorg
securities.
NO FORESEEABLE DIVIDENDS
The Company has not paid dividends on its Common Stock and does not anticipate
paying such dividends in the foreseeable future.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON INTREorg STOCK
PRICE.
All of the outstanding shares of common stock are held by INTREorg present
officers, directors, and affiliate stockholders as "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted Shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for six months may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
non-affiliate after the owner has held the restricted securities for a period of
6 months. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop.
9
INTREorg INVESTORS MAY SUFFER FUTURE DILUTION DUE TO ISSUANCES OF SHARES FOR
VARIOUS CONSIDERATIONS IN THE FUTURE.
There may be substantial dilution to INTREorg shareholders as a result of future
decisions of the Board to issue shares without shareholder approval for cash,
services, or acquisitions.
INTREorg COMMON STOCK MAY BE VOLATILE, WHICH SUBSTANTIALLY INCREASES THE RISK
THAT THE INVESTOR MAY NOT BE ABLE TO SELL THEIR SECURITIES AT OR ABOVE THE PRICE
THAT THE INVESTOR PAID FOR THE SECURITY.
Because of the limited trading market for INTREorg's common stock and because of
the possible price volatility, the investor may not be able to sell its shares
of common stock when the investor desires to do so. The inability to sell the
investors securities in a rapidly declining market may substantially increase
the risk of loss because of such illiquidity and because the price for INTREorg
shares may suffer greater declines because of INTREorg's price volatility.
The price of INTREorg's common stock that will prevail in the market may be
higher or lower than the price the investor may pay. Certain factors, some of
which are beyond INTREorg's control, that may cause INTREorg's share price to
fluctuate significantly include, but are not limited to the following:
o Variations in INTREorg's quarterly operating results;
o Loss of a key relationship or failure to complete significant
transactions;
o Additions or departures of key personnel; and
o Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the
over-the-counter markets in particular, have experienced extreme price and
volume fluctuations. In some cases, these fluctuations are unrelated or
disproportionate to the operating performance of the underlying company. These
market and industry factors may materially and adversely affect INTREorg's stock
price, regardless of its operating performance. In the past, class action
litigation often has been brought against companies following periods of
volatility in the market price of those companies common stock. If INTREorg
becomes involved in this type of litigation in the future, it could result in
substantial costs and diversion of management attention and resources, which
could have a further negative effect on the investor's investment in INTREorg
stock.
RISK FACTORS RELATING TO COMPANY
LIMITED LIQUIDITY CASH FLOWS AND CAPITAL RESOURCES
INTREorg has minimum liquid assets at December 31, 2009, and will be reliant
upon stock offerings to fund any kind of operations. The only capital resources
of INTREorg is its common stock.
The monies raised by any private offering may not be sufficient for the
continued proposed operations of INTREorg. There is no assurance that additional
monies or financing will be available in the future or, if available, will be at
terms favorable to INTREorg.
INTREorg may borrow money to finance its future operations, although it does not
currently contemplate doing so. Any such borrowing will increase the risk of
loss to the investor in the event that INTREorg is unsuccessful in repaying such
loans.
INTREorg has achieved no cash flows to date.
10
ITEM 1B. UNRESOLVED STAFF COMMENTS
- ----------------------------------
Not Applicable.
ITEM 2. PROPERTIES
- ------------------
The Company's principal mailing address is 501 Trophy Lake Dr., Suite 314, PMB
106, Trophy Club, Texas 76262, and the telephone number is (817) 491-8611. The
Company does not currently pay monthly rent for the use of this mailing address.
The Company will office out of the homes of its executive officers until
additional capital is raised.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
INTREorg anticipates that it will from time to time become subject to claims and
legal proceedings arising in the ordinary course of business. It is not feasible
to predict the outcome of any such proceedings and INTREorg cannot assure you
that their ultimate disposition will not have a material adverse effect on
INTREorg business, financial condition, cash flows or results of operations.
ITEM 4. REMOVED AND RESERVED
- ----------------------------
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
- --------------------------------------------------------------------------------
Market Information
There is a limited public trading market for the common stock. The Company's
symbol is "IORG" on the Over The Counter Bulletin Board. The Company began
trading on the Over The Counter Bulletin Board in August 2008.
Quarter Ended: HIGH LOW
- ------------------------ ------------ -----------
March 31, 2009 $1.15 $0.30
June 30, 2009 $0.40 $0.36
September 30, 2009 $0.47 $0.15
December 31, 2009 $0.74 $0.17
Quarter Ended:
December 31, 2008 $1.15 $1.05
September 30, 2008 $1.01 $1.01
Holders
There are approximately 118 holders of record of INTREorg common stock as of
December 31, 2009.
11
Dividend Policy
Holders of INTREorg common stock are entitled to receive such dividends as may
be declared by INTREorg board of directors. INTREorg has not declared or paid
any dividends on INTREorg common shares and it does not plan on declaring any
dividends in the near future. INTREorg currently intends to use all available
funds to finance the operation and expansion of its business.
Recent Sales of Unregistered Securities
We made the following unregistered sales of its securities from January 1, 2009
through December 31, 2009.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
- ----------------------------------------------------------------------------------------------------
9/30/2009 Common shares 15,000 $3,750 in services Business associate
Exemption From Registration Claimed
All of the sales by INTREorg of its unregistered securities were made in
reliance upon Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). The entity listed above that purchased the unregistered securities was an
existing shareholder, known to the Company and its management, through
pre-existing business relationships, as a long standing business associate. The
entity was provided access to all material information, which it requested, and
all information necessary to verify such information and was afforded access to
InTREorg's management in connection with the purchases. The purchaser of the
unregistered securities acquired such securities for investment and not with a
view toward distribution, acknowledging such intent to the Company. All
certificates or agreements representing such securities that were issued
contained restrictive legends, prohibiting further transfer of the certificates
or agreements representing such securities, without such securities either being
first registered or otherwise exempt from registration in any further resale or
disposition.
Issuer Purchases of Equity Securities
INTREorg did not repurchase any shares of its common stock during the year ended
December 31, 2009.
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
CAUTIONARY AND FORWARD LOOKING STATEMENTS
In addition to statements of historical fact, this Form 10-K contains
forward-looking statements. The presentation of future aspects of INTREorg
Systems, Inc. ("INTREorg Systems", the "Company" or "issuer") found in these
statements is subject to a number of risks and uncertainties that could cause
actual results to differ materially from those reflected in such statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof.
Without limiting the generality of the foregoing, words such as "may", "will",
"expect", "believe", "anticipate", "intend", or "could" or the negative
12
variations thereof or comparable terminology are intended to identify
forward-looking statements.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause INTREorg Systems' actual results to be materially
different from any future results expressed or implied by INTREorg Systems in
those statements. Important facts that could prevent INTREorg Systems from
achieving any stated goals include, but are not limited to, the following:
Some of these risks might include, but are not limited to, the following:
a) Limited or no trading of the company shares;
b) volatility or decline of the Company's stock price;
c) potential fluctuation in quarterly results;
d) failure of the Company to earn revenues or profits;
e) inadequate capital to continue or expand its business, inability to
raise additional capital or financing to implement its business plans;
f) failure to commercialize its products and services or to make sales;
g) rapid and significant changes in markets;
h) litigation with or legal claims and allegations by outside parties;
i) insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company may not
be able to successfully develop, manage or market its products and services, the
Company may not be able to attract or retain qualified executives and technology
personnel, the Company's products and services may become obsolete, government
regulation may hinder the Company's business, additional dilution in outstanding
stock ownership may be incurred due to the issuance of more shares, warrants and
stock options, or the exercise of warrants and stock options, and other risks
inherent in the Company's businesses.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the factors described in other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K
filed by the Company and any Current Reports on Form 8-K filed by the Company.
Business Overview
INTREorg Systems Inc. ("INTREorg" or "The Company") has developed a business
plan to become an integrated provider of outsourced information technology
("IT") services, Software as a Service (SaaS) applications, enterprise support,
and business process outsourcing services. INTREorg's target market is
publicly-traded, emerging growth companies in need of rapidly expanded IT
services. Primarily the Company intends to focus on publicly traded companies to
allow it to evaluate the financial position and business situation of
prospective clients due to the inherent transparency required with publicly
traded firms.
The primary focus of the Company is to provide outsourced, day-to-day IT
operations to emerging companies in need of state-of-the-art IT services, tools
and processes. INTREorg focuses on providing IT services and systems to
emerging, technologically sophisticated companies that have grown beyond their
ability to manage their network. Additionally, the Company intends to provide
infrastructure services and products to meet the specific demands of INTREorg
customers. All of the Company's services will be offered individually or bundled
as a comprehensive solution.
13
During the year ended December 31, 2009, the Company focused its efforts on
maintaining its reporting status with the SEC and identify potential financing
opportunities.
In the continuance of INTREorg's business operations it does not intend to
purchase or sell any significant assets and the Company does not expect a
significant change in the number of its employees.
The INTREorg is dependent on raising additional equity and/or, debt to fund any
negotiated settlements with its outstanding creditors and meet the Company's
ongoing operating expenses. There is no assurance that INTREorg will be able to
raise the necessary equity and/or debt that it will need to be able to negotiate
acceptable settlements with its outstanding creditors or fund its ongoing
operating expenses. INTREorg cannot make any assurances that it will be able to
raise funds through such activities.
In addition, the United States and the global business community is experiencing
severe instability in the commercial and investment banking systems which is
likely to continue to have far-reaching effects on the economic activity in the
country for an indeterminable period. The long-term impact on the United States
economy and the Company's operating activities and ability to raise capital
cannot be predicted at this time, but may be substantial.
RESULTS OF OPERATIONS
For the Year Ended December 31, 2009 Compared to December 31, 2008
During the year ended December 31, 2009, the Company did not recognize any
revenues from its operational activities. During the year ended December 31,
2008, the Company recognized $750 in revenue.
During the year ended December 31, 2009, the Company incurred operational
expenses of $97,093 compared to $245,148 during the year ended December 31,
2008. The decrease of $147,305 was a result of the decreases of $121,088 in
consulting expenses combined with a $12,750 decrease in directors' fees, a
$13,101 decrease in traveling expenses and a $9,612 decrease in rent and
utilities during the year ended December 31, 2009. The decreases were a result
of a pull back in general and administrative expenses as the Company focused its
efforts on financing efforts to support operations.
During the year ended December 31, 2009, the Company recognized interest expense
of $61,882 compared to $48,803 during the year ended December 31, 2008.
During the year ended December 31, 2009, the Company recognized a net loss of
$158,975 compared to a net loss of $293,201 during the year ended December 31,
2008. The $134,226 decrease was a result of the $147,305 decrease in operating
expenses offset by a $13,079 increase in interest expense, as discussed above.
During the year ended December 31, 2009, the Company had a net loss of $0.02 per
share compared to $0.03 per share for the year ended December 31, 2008.
LIQUIDITY
At December 31, 2009, the Company total current assets of $13, consisting solely
of cash, and current liabilities of $1,385,738. At December 31, 2009, current
liabilities exceed current assets by $1,385,725.
Net cash used in operating activities during the year ended December 31, 2009
was $3,370, compared to net cash used in operating activities during the year
ended December 31, 2008 of $83,537. During the year ended December 31, 2009, the
14
net cash used represented a net loss of $158,975, which was adjusted for such
non-cash items of $3,750 in stock issued for services, $9,828 in depreciation
expense, $7,261 in doubtful accounts and $1,000 reserve for investment.
During the year ended December 31, 2008, the net cash used represented a net
loss of $293,201 and was not adjusted for any non-cash items.
During the years ended December 31, 2009 and 2008, the Company did not use or
receive cash from its investing activities.
During the year ended December 31, 2009, the Company received $53 in its
financing activities , as a result of a cash over draft. During the year ended
December 31, 2008, the Company received $87,325 from its financing activities
consisting of the receipt of proceeds of $73,500 from notes payable.
During the year ended December 31, 2008, the Company has paid approximately
$5,000 in bridge loans. Prior to January 1, 2008, the Company had raised
$494,386 to be able to continue operations. During the year ended December 31,
2008, the Company raised an additional $73,500 in cash to support operations.
These loans carry interest rates from 6% to 10% per annum and have due dates
between 90 and 180 days. The providers of these loans were also given "equity
kickers" of stock in the amount of 1 share of common stock for each one cent of
loan amount. At renewal time the providers were given an equal amount of stock
while the interest was accrued.
During the year ended December 31, 2008, the Company, pursuant to a vote of the
stockholders approved the conversion of the 247,100 shares of preferred stock to
247,100 shares of restricted common stock was approved. The preferred shares
were convertible at a rate of 1 share of preferred for 1 share for common stock,
at the discretion of the shareholder or the Company. The Company does not pay
dividends on and there are no dividend preferences on its preferred shares.
During the year ended December 31, 2009, the Company issued 15,000 shares of its
common stock for services rendered valued at $3,750.
On October 6, 2009 the Company entered into an investment banking agreement. The
terms of the agreement are such that for any money they raise the Company is
obligated to an 8% commission in cash and a 2% expenses allowance in cash and
10% additional in common stock at a 110% of market price over a 5 day average.
Going Concern
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2009 and 2008 includes a "going concern"
explanatory paragraph that describes substantial doubt about the Company's
ability to continue as a going concern.
INTREorg is dependent on raising additional equity and/or, debt to fund any
negotiated settlements with its outstanding creditors and meet its ongoing
operating expenses. There is no assurance that the Company will be able to raise
the necessary equity and/or debt that INTREorg will need to be able to negotiate
acceptable settlements with its outstanding creditors or fund its ongoing
operating expenses. INTREorg cannot make any assurances that the Company will be
able to raise funds through such activities.
Critical Accounting Policies
INTREorg has identified the policies below as critical to its business
operations and the understanding of the Company's results from operations. The
impact and any associated risks related to these policies on the Company's
business operations is discussed throughout Management's Discussion and Analysis
of Financial Conditions and Results of Operations where such policies affect
15
INTREorg's reported and expected financial results. For a detailed discussion on
the application of these and other accounting policies, see Note 1 in the Notes
to the Financial Statements beginning on page F-6 for the years ended December
31, 2009 and 2008.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period. This number has not been adjusted for outstanding
options since the average would be antidilutive.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
The audited financial statements of INTREorg Systems, Inc. for the year ended
December 31, 2009, period from November 3, 2003 (inception) through December 31,
2009, appear as pages F-1 through F-8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
- --------------------------------
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of
1934, as amended (the "Exchange Act") that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an
evaluation under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period
covered by this report.
16
The Company, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Chief
Financial Officer, performed an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of December
31, 2009. Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were effective of December 31, 2009.
ITEM 9A(T). CONTROLS AND PROCEDURES
- -----------------------------------
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made on in accordance with authorizations
of our management and directors; and
(iii)provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management's assessment of the effectiveness of the registrant's internal
control over financial reporting is as of the year ended December 31, 2009. In
making this assessment, Management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control--Integrated Framework. Management believes that internal control over
financial reporting is effective. The Company has not identified any, current
material weaknesses, considering the nature and extent of the Company's current
operations and any risks or errors in financial reporting under current
operations.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit the Company to provide only management's report in this annual report.
There was no change in our internal control over financial reporting that
occurred during the fiscal year ended December 31, 2009 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
17
ITEM 9B. OTHER INFORMATION
- --------------------------
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
- ---------------------------------------------------------------
The following table sets forth information as to persons who currently serve as
INTREorg directors or executive officers, including their ages as of December
31, 2009.
Name Age Position
- ------------------------- --- ---------------------------------
Russell K. Boyd 38 Chief Executive Officer,
President and Chairman of the
Board
Malcolm C. Davenport, V 58 Director
Redgie T. Green 57 Director
INTREorg officers are elected by the board of directors at the first meeting
after each annual meeting of INTREorg shareholders and hold office until their
successors are duly elected and qualified under INTREorg bylaws.
The directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the board of directors absent any employment agreement. There is no
arrangement or understanding between the directors and officers of the Company
and any other person pursuant to which any director or officer was or is to be
selected as a director or officer.
The directors and officers of the Company will not devote full time to the
Company's affairs, but will devote sufficient time (up to 20 hours weekly) until
the operations and working capital of the Company require more time to be
devoted.
Biographical Information
Management will not devote full time to the Company's affairs, but will devote
sufficient time until the operations and working capital of the Company require
more time to be devoted and any time spent will be devoted to screening and
assessing and, if warranted, negotiating to acquire business opportunities.
Russell K. Boyd, age 38, has served as Chairman of the Board of Directors for
the Company since November of 2004. In April 2009, he was appointed the Chief
Executive Officer and acting principal accounting officer. He has experience in
the electronic data processing and consulting industries leading and managing
project delivery teams. He currently independently contracts his services to the
government sector. Previous to this, Mr. Boyd was employed by Electronic Data
Systems (EDS) and for a seven year period worked on a variety of service
delivery and consulting projects. Prior to EDS, Mr. Boyd's career consists of
progressively broader roles and responsibilities with TIER Technologies, Inc. He
holds a Bachelor of Arts Degree in Computer Information Systems from Tarleton
State University.
Malcolm C. Davenport, V, age 58, was appointed a Director of the Company on
April 21, 2009. Mr. Davenport previously served as a director of ITC Holding
Company, Inc., a West Point, Georgia-based private technology investment
18
company. Some of the companies which it founded and grew include Powertel, Inc.,
(acquired by Deutche Telkom for $5.89 billion + assumption of $1.2 billion
debt), Mindspring, Inc. (merged with EarthLink {NASDAQ: ELNK}), E-Company Store,
Inc., PreSolutions, Inc., ASYNC, Inc., and Knology, Inc. {symbol NASDAQ: KNOL}.
He also served as a director for ITC DeltaCom, Inc. {OTC BB: ITCD}, a
Competitive Local Exchange Carrier (CLEC) company that is regionally significant
in both the fiber and direct long distance sale business in the southeast United
States. Mr. Davenport is licensed and active as an Attorney in the State of
Georgia, and holds an inactive license in Alabama as both an Attorney and as a
Certified Public Accountant. He also serves as a Director of LeanStream Media,
Inc.
Redgie Green, age 57, is Director of INTREorg Services, Inc. He has been
Secretary and Director of Sun River Energy, Inc. since 1998 and in September
2009, became the Chief Executive Officer of Sun River Energy, Inc. Mr. Green has
been co-owner and operator of Green's B&R Enterprises, a wholesale donut baker
since 1983. He has been an active investor in small capital and high-tech
adventures since 1987. Mr. Green was a director of Colorado Gold & Silver, Inc.
in 2000. He was a director for Houston Operating Company during 2004. He served
as a director for Mountains West Exploration, Inc. in 2005. He is a Director of
Concord Ventures, Inc. (2006) and ASPI Inc. (2006 - 2009) and has been appointed
as an officer and director of Captech Financial, Inc. in May 2006. He served as
a director of Baymark Technologies, Inc. 2005-2006.
Annual Meeting
The annual meeting of INTREorg stockholders is expected to be held at a future
date as soon as practicable. This will be an annual meeting of stockholders for
the election of directors. The annual meeting will be held at the INTREorg's
principal office or at such other place as permitted by the laws of the State of
Texas and on such date as may be fixed from time to time by resolution of
INTREorg's board of directors.
Committees of the Board of Directors
INTREorg is managed under the direction of its board of directors. INTREorg's
board of directors plans to establish an audit committee as soon as practicable.
Executive Committee
INTREorg does not have an executive committee.
Audit Committee
INTREorg currently does not have an audit committee. When formed, the audit
committee will be comprised solely of directors who are independent and
financially literate, as required by the Securities Exchange Act of 1934, as
amended, which INTREorg refers to as the Securities Exchange Act. At least one
member of the committee will have accounting or related financial management
expertise.
Previous "Blank Check" or "Shell" Company Involvement
Management of INTREorg has not been involved in prior private "blank-check" or
"shell" companies.
Conflicts of Interest
The officers and directors of the Company will not devote more than a portion of
their time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of their other
19
business and investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that the services
of such persons will be available or that they can be obtained upon terms
favorable to the Company.
Conflicts of Interest - General.
Certain of the officers and directors of the Company may be directors and/or
principal shareholders of other companies and, therefore, could face conflicts
of interest with respect to potential acquisitions. In addition, officers and
directors of the Company may in the future participate in business ventures,
which could be deemed to compete directly with the Company. Additional conflicts
of interest and non-arms length transactions may also arise in the future in the
event the Company's officers or directors are involved in the management of any
firm with which the Company transacts business. The Company's Board of Directors
has adopted a policy that the Company will not seek a merger with, or
acquisition of, any entity in which management serve as officers or directors,
or in which they or their family members own or hold a controlling ownership
interest. Although the Board of Directors could elect to change this policy, the
Board of Directors has no present intention to do so. In addition, if the
Company and other companies with which the Company's officers and directors are
affiliated both desire to take advantage of a potential business opportunity,
then the Board of Directors has agreed that said opportunity should be available
to each such company in the order in which such companies registered or became
current in the filing of annual reports under the Exchange Act subsequent to
January 1, 1997.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
The following table sets forth the compensation paid to officers and board
members during the fiscal years ended December 31, 2009, 2008 and 2007. The
table sets forth this information for INTREorg, including salary, bonus, and
certain other compensation to the Board members and named executive officers for
the past three fiscal years and includes all Board Members and Officers as of
December 31, 2009.
SUMMARY EXECUTIVES COMPENSATION TABLE
Non-equity Non-qualified
incentive deferred
Stock Option plan compensation All other
Salary Bonus awards awards compensation earnings compensation Total
Name & Position Year ($) ($) ($) ($) ($) ($) ($) ($)
- -------------------- -------- --------- -------- ----------- ------- ------------- -------------- --------------- ----------
Russell K. Boyd,
Chief Executive 2009 0 0 0 0 0 0 0 0
Officer and 2008 0 0 0 0 0 0 0 0
President 2007 0 0 0 0 0 0 0 0
Denis L. Iler, 2009 0 0 0 0 0 0 0 0
Former President 2008 0 0 $1,000 0 0 $250 0 $1,250
and CEO (1) 2007 0 0 0 0 0 0 0 0
Austin Andres, 2009 0 0 0 0 0 0 0 0
Former COO (2) 2008 0 0 $1,000 0 0 0 0 $1,000
2007 0 0 0 0 0 0 0 0
Jeff Huitt, Former 2009 0 0 0 0 0 0 0 0
CFO (3) 2008 $9,800 0 0 0 0 0 0 $9,800
2007 $15,900 0 0 0 0 0 0 $15,900
- -------------------- -------- --------- -------- ----------- ------- ------------- -------------- --------------- ----------
20
(1) Mr. Denis Iler resigned as a director and officer of the Company in March
2009. During the year ended December 31, 2009, he received 100,000 shares
of common stock valued at $1,000 for his services as a director.
(2) Mr. Andres resigned as an officer of the Company in April 2009 and as a
Director on May 26, 2009. During the year ended December 31, 2008, he
received 100,000 shares of the Company's common stock valued at $1,000 for
his consulting services as an officer of the Company.
(3) Mr. Huitt resigned as an officer of the Company in April 2009 and as a
Director on May 7, 2009. The Company paid Huitt Consulting, LLC $50 per
hour for work performed by PersonNameJeff Huitt as the Company's contract
CFO. During the year ended December 30, 2008, the Company paid Mr. Huitt
cash of $2,850 and accrued $6,950 in connection with his services.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
INTREorg does not have a stock option plan as of December 31, 2009. There was no
grant of stock options to the Chief Executive Officer and other named executive
officers during the fiscal year ended December 31, 2009.
Employment Agreements and Termination of Employment and Change-In-Control
Arrangements
None of the Company's officers, directors, advisors, or key employees is
currently party to employment agreements with the Company. The Company has no
pension, health, annuity, bonus, insurance, stock options, profit sharing or
similar benefit plans; however, the Company may adopt such plans in the future.
There are presently no personal benefits available for directors, officers, or
employees of the Company.
Compensation Committee Interlocks and Insider Participation
The INTREorg board of directors in its entirety acts as the compensation
committee for INTREorg. Mr. Russell K. Boyd is the Chief Executive Officer and
Chairman of the Company.
Stock Option Plan
The Company does not have a stock option plan at the time of this filing.
Director Compensation
The Company pays $500 for Directors fees for meeting attendance, unless the fee
is waived. The Company's directors waived the fee during the year ended December
31, 2009.
21
The following table sets forth certain information concerning compensation paid
to the Company's directors during the year ended December 31, 2009:
Nonqualified
Non-equity deferred
Fees incentive compensation All other
earned or Stock Option plan earnings compensation Total
Name paid in awards ($) awards ($) compensation ($) ($) ($)
cash ($)
($)
- -------------- ----------- ----------- ----------- --------------- --------------- ---------------- ---------
Russell K. $-0- $ $-0- $-0- $-0- $-0- $
Boyd
Malcolm C. $-0- $ $-0- $-0- $-0- $-0- $
Davenport, V
Redgie T. $-0- $ $-0- $-0- $-0- $-0- $
Green
Denis L. $-0- $ $-0- $-0- $-0- $ $
Iler(1)
Austin $-0- $-0- $-0- $-0- $-0- $ $
Andres(2)
Jeff Huitt $-0- $-0- $-0- $-0- $-0- $ $
(3)
Wesley F. $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Whiting (4)
(1) Mr. Denis Iler resigned as a director and officer of the Company in
March 2009.
(2) Mr. Andres resigned as an officer of the Company in April 2009 and as
a Director on May 26, 2009.
(3) Mr. Huitt resigned as an officer of the Company in April 2009 and as a
Director on May 7, 2009.
(4) Wesley F. Whiting has resigned as Director effective January 8, 2009.
Limitation on Liability and Indemnification
INTREorg is a Texas corporation. The Texas Business Corporation Act (TBCA)
provides that the articles of incorporation of a Texas corporation may contain a
provision eliminating or limiting the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except that any such provision may not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the corporation or its shareholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
acts specified in TBCA (concerning unlawful distributions), or (iv) any
transaction from which a director directly or indirectly derived an improper
personal benefit. INTREorg's articles of incorporation contain a provision
eliminating the personal liability of directors to INTREorg or INTREorg
shareholders for monetary damages to the fullest extent provided by the TBCA.
The TBCA provides that a Texas corporation must indemnify a person who was
wholly successful, on the merits or otherwise, in defense of any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal (a
"Proceeding"), in which he or she was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection with
the Proceeding, unless such indemnity is limited by the corporation's articles
of incorporation. INTREorg articles of incorporation do not contain any such
limitation.
22
The TBCA provides that a Texas corporation may indemnify a person made a party
to a Proceeding because the person is or was a director against any obligation
incurred with respect to a Proceeding to pay a judgment, settlement, penalty,
fine (including an excise tax assessed with respect to an employee benefit plan)
or reasonable expenses incurred in the Proceeding if the person conducted
himself or herself in good faith and the person reasonably believed, in the case
of conduct in an official capacity with the corporation, that the person's
conduct was in the corporation's best interests and, in all other cases, his or
her conduct was at least not opposed to the corporation's best interests and,
with respect to any criminal proceedings, the person had no reasonable cause to
believe that his or her conduct was unlawful. The Company's articles of
incorporation and bylaws allow for such indemnification. A corporation may not
indemnify a director in connection with any Proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or, in
connection with any other Proceeding charging that the director derived an
improper personal benefit, whether or not involving actions in an official
capacity, in which Proceeding the director was judged liable on the basis that
he or she derived an improper personal benefit. Any indemnification permitted in
connection with a Proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with such Proceeding.
The TBCA, unless otherwise provided in the articles of incorporation, a Texas
corporation may indemnify an officer, employee, fiduciary, or agent of the
corporation to the same extent as a director and may indemnify such a person who
is not a director to a greater extent, if not inconsistent with public policy
and if provided for by its bylaws, general or specific action of its board of
directors or shareholders, or contract. INTREorg articles of incorporation
provide for indemnification of directors, officers, employees, fiduciaries and
agents of INTREorg to the full extent permitted by Texas law.
INTREorg articles of incorporation also provide that INTREorg may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of INTREorg or who is or was serving at the request of INTREorg as a director,
officer or agent of another enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity or arising out of his
or her status as such, whether or not INTREorg would have the power to indemnify
him or her against such liability.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not established an equity compensation plan or Incentive Stock
Option Plan at this time.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
- --------------------------------------------------------------------------------
The following table sets forth information with respect to the beneficial
ownership of INTREorg outstanding common stock by:
o each person who is known by INTREorg to be the beneficial owner of
five percent (5%) or more of INTREorg common stock;
o INTREorg's chief executive officer, its other executive officers, and
each director as identified in the "Management -- Executive
Compensation" section; and
o all of the Company's directors and executive officers as a group.
23
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock and options, warrants
and convertible securities that are currently exercisable or convertible within
60 days of the date of this document into shares of INTREorg common stock are
deemed to be outstanding and to be beneficially owned by the person holding the
options, warrants or convertible securities for the purpose of computing the
percentage ownership of the person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of INTREorg common stock
that INTREorg believes was beneficially owned by each person or entity as of
December 31, 2009.
Number of Shares of
Common Stock Percent of Class
Name and Address of Beneficial Owner (1) Beneficially Owned Beneficially Owned (4)
- --------------------------------------------------------- ------------------------ -----------------------
J.H. Brech, LLC (2) 1,009,666 9.78%
Russell K. Boyd, Chief Executive Officer, President and 1,434,000 13.90%
Chairman of the Board (3)
Malcolm C. Davenport, V, Director 0 0%
Redgie T. Green, Director 25,000 2.42%
------------------------ -----------------------
All directors and executive officers as a group (3 1,459,000 14.13%
persons)
(1)Except as noted above the business address for all listed individuals or
entities is c/o INTREorg Systems, Inc.,501 Trophy Lake Dr., Suite 314, PMB 106,
Trophy Club, TX 76262.
(2) J.H. Brech, LLC owns 698,833 shares of common stock. Mr. Charles J. Webb
owns 311,333 shares of ISI common stock and 553,833 shares beneficially through
J.H. Brech, LLC of which he is a manager.
(3) Mr. Boyd has Proxy Control of 900,000 shares previously held by Mr. Alton
Smith. Mr. Boyd has direct control of 534,000 common shares representing 5.17%
of the outstanding shares of common stock.
(4) Based on 10,320,016 shares of common stock issued and outstanding on
December 31, 2009.
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination
of beneficial ownership of securities. That rule provides that a beneficial
owner of a security includes any person who directly or indirectly has or shares
voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has
the right to acquire beneficial ownership of such security within sixty days,
including through the exercise of any option, warrant or conversion of a
security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person. Included in
this table are only those derivative securities with exercise prices that
INTREorg believes have a reasonable likelihood of being "in the money" within
the next sixty days.
24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
No officer or director of the Company has or proposes to have any direct or
indirect material interest in any asset proposed to be acquired by the Company
through security holdings, contracts, options, or otherwise.
The following table shows the issuances of stock, in lieu for services for
compensation to officers or directors or affiliates in 2008 and 2009:
Name Date of Issuance Number of Shares Position
- -------------------- ---------------- ---------------- --------------------------
Austin Andres 03/14/2008 100,000 Former Chief Operating
Officer & Former Director
Russell K. Boyd 03/14/2008 200,000 Chief Executive Officer,
President and Chairman of
the Board
Redgie Green 03/14/2008 25,000 Director
Denis L. Iler 03/14/2008 125,000 Former Chief Executive
Officer & Former Director
Wesley F. Whiting 03/14/2008 25,000 Former Director
In January 2009, Mr. Wesley F. Whiting resigned as a director of INTREorg.
In March 2009, Mr. Denis L. Iler resigned as the Chief Executive Officer,
President and Director of INTREorg. In March 2009, Mr. Boyd was appointed the
Chief Executive Officer of INTREorg.
In April 2009, Mr. Huitt resigned as the Chief Financial Officer of INTREorg and
on May 7, 2009 he resigned as a Director.
In April 2009, Mr. Andres resigned as the Chief Operating Officer of INTREorg
and on May 26, 2009 he resigned as a Director.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
- -----------------------------------------------
GENERAL. Larry O'Donnell, CPA, P.C. ("O'Donnell") is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provisions of audit services are compatible with maintaining
O'Donnell's independence.
25
The following table represents aggregate fees billed to the Company for the
years ended December 31, 2009 and December 31, 2008 by Larry O'Donnell, CPA,
P.C.
Year Ended December 31,
2009 2008
------------------------- ----------------------
Audit Fees $5,620 $1,400
Audit-related Fees $0 $0
Tax Fees $0 $0
All Other Fees $0 $0
------------------------- ----------------------
Total Fees $5,620 $1,400
All audit work was performed by the auditors' full time employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following is a complete list of exhibits filed as part of this Form 10K.
Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of
Regulation S-K.
(a) Audited financial statements for years ended December 31, 2009 and 2008
(b) Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (1)
3.2 Articles of Amendment (1)
3.7 Bylaws of INTREorg Systems, Inc. (1)
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
(1) Incorporated by reference from the exhibits included in the Company's Form
10 filed with the Securities and Exchange Commission (www.sec.gov), dated May
29, 2008. A copy can be provided by mail, free of charge, by sending a written
request to INTREorg Systems, Inc., 501 Trophy Lake Dr, Suite 314, PMB 106,
Trophy Club, TX 76262.
26
O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2228 South Fraser Street
Fax (303) 369-9384 Unit I
Email larryodonnellcpa@msn.com Aurora, Colorado 80014
www.larryodonnellcpa.com
INDEPENDENT AUDITOR'S REPORT
Board of Directors
INTREorg Systems, Inc.
I have audited the accompanying balance sheets of INTREorg Systems, Inc. as of
December 31, 2009 and 2008, and the related statements of loss, changes in
stockholders' equity, and cash flows for the years then ended and the period
from inception, November 3, 2003 to December 31, 2009. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of INTREorg Systems, Inc. as of
December 31, 2009 and 2008, and the results of its operations and cash flows for
the years then ended and the period from inception, November 3, 2003 to December
31, 2009 in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has an
accumulated deficit of $2,416,003 at December 31, 2009. Additionally, for the
year ended December 31, 2009, they had a net loss of $158,975. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Larry O'Donnell, CPA, P.C.
Larry O'Donnell, CPA, P.C.
April 14, 2010
F-1
INTREorg Systems, Inc.
(A Development Stage Company)
Balance Sheets
December 31,
2009 2008
------------------- -------------------
(Audited) (Audited)
ASSETS:
Current Assets:
Cash $ 13 $ 3,330
Accounts Receivable - 7,261
------------------- -------------------
Total Current Assets 13 10,591
Furniture and fixtures - net 379 10,207
Investment - Fusion Equity - 1,000
------------------- -------------------
TOTAL ASSETS $ 392 $ 21,798
=================== ===================
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Cash overdraft $ 54 $ -
Accounts payable 221,035 581,295
Accrued expenses and liabilities 643,649 563,940
Notes Payable 521,000 577,886
------------------- -------------------
Total Current Liabilities 1,385,738 1,723,121
Long-Term Liabilities
Convertible promissory notes 471,202 -
------------------- -------------------
Total Liabilities 1,856,940 1,723,121
Stockholders' Deficit
Preferred Stock, no par value; 2,000,000 shares authorized
none and 247,100 shares issued and outstanding
at December 31, 2009 and 2008, respectively - -
Common Stock, no par value; 10,000,000 shares authorized
10,320,016 and 10,305,016 shares issued and outstanding
at December 31, 2009 and 2008, respectively 559,455 555,705
Deficit accumulated during the development stage (2,416,003) (2,257,028)
------------------- -------------------
Total Stockholders' deficit (1,856,548) (1,701,323)
------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 392 $ 21,798
=================== ===================
The accompanying notes are an integral part of these financial statements.
F-2
INTREorg Systems, Inc.
(A Development Stage Company)
Statements of Operations
(Audited)
November 3, 2003
For the Year Ended (Inception) to
December 31, December 31,
2009 2008 2009
----------------- ----------------- ---------------------
Revenue $ - $ 750 $ 750
Depreciation 9,031 - 15,206
Consulting expense 121,088 836,005
Director's fees - 12,750 48,870
General and administrative 31,437 32,198 88,834
Professional fees 52,192 52,146 434,907
Payroll expense - - 724,630
Rent and utilities - 9,612 111,858
Travel expense 4,433 17,354 98,000
----------------- ----------------- ---------------------
Total Expenses 97,093 245,148 2,358,310
----------------- ----------------- ---------------------
Net Operating Loss (97,093) (244,398) (2,357,560)
----------------- ----------------- ---------------------
Other Revenue / (Expense)
Forgiveness of debt - - 135,750
Settlement agreements - - 36,653
Interest Income - - 356
Miscellaneous expense - - (5,857)
Interest Expense (61,882) (48,803) (225,345)
----------------- ----------------- ---------------------
Total other revenue / (expense) (61,882) (48,803) (58,443)
----------------- ----------------- ---------------------
Net Loss $ (158,975) $ (293,201) $ (2,416,003)
================= ================= =====================
Net Income/Loss per share of common
stock $ (0.02) $ (0.03)
================= =================
Weighted average number of common
shares outstanding 10,327,679 9,667,745
================= =================
The accompanying notes are an integral part of these financial statements.
F-3
INTREorg Systems, Inc.
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
November 3, 2003
For the year ended (Inception) to
December 31, December 31,
2009 2008 2009
---------------- ----------------- --------------------
Cash Flows from Operating Activities
Net Loss $ (158,975) $ (293,201) $ (2,416,003)
Adjustments to reconcile net loss to net cash used
by operating activities
Common stock issued for services 3,750 3,750
Depreciation 9,828 - 15,993
Allowance for doubtful accounts 7,261 7,261
Reserve for investment 1,000 1,000
Changes in operating assets and liabilities
Increase in Accounts Receivable and Advances - 13,394 (7,261)
Increase in Accounts Payable and accrued liabilities 133,766 189,370 1,279,000
(Increase) Decrease in deposits - 6,900 -
---------------- ----------------- --------------------
Net Cash Flows Used by Operating Activities (3,370) (83,537) (1,116,260)
---------------- ----------------- --------------------
Cash Flows from Investing Activities
Acquisition of Fixed Assets - - (16,372)
Acquisition of Investments - - (1,000)
---------------- ----------------- --------------------
Net Cash Flows Provided (Used) by Investing Activities - - (17,372)
---------------- ----------------- --------------------
Cash Flows from Financing Activities
Cash overdraft 53 53
Increase / (decrease) in loans payable 73,500 577,886
Issuance of Preferred A Stock - - 247,100
Issuance of Common Stock - 13,825 308,605
---------------- ----------------- --------------------
Net Cash Flows Provided by Financing Activities 53 87,325 1,133,644
---------------- ----------------- --------------------
Net (Decrease) Increase in Cash (3,317) 3,788 13
---------------- ----------------- --------------------
Cash at Beginning of Period 3,330 (458) -
---------------- ----------------- --------------------
Cash at End of Period $ 13 $ 3,330 $ 13
================ ================= ====================
Supplemental Disclosure of Cash Flow Informantion
Cash paid for interest $ - $ - $ 32,008
================ ================= ====================
Cash paid for taxes $ - $ - $ -
================ ================= ====================
Supplemental Disclosure of Non-Cash Flow Information
Debt converted to Convertible Notes Payable $ 471,202 $ - $ 471,202
================ ================= ====================
The accompanying financial statements are an integral part of these financial statements.
F-4
INTREorg SYSTEMS, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity (Deficit)
From November 3, 2003 (Inception) through September 30, 2009
Deficit
Accum. During
Comon Stock Preferred A Stock the Development
# of Shares Amount # of Shares Amount Stage Totals
----------- ------------ ---------- ---------- -------------- --------------
Balance - November 3, 2003 - $ - $ - $ - $ -
Stock issued for cash 1,000,000 5,000 5,000
Net Loss for period - (3,325) (3,325)
----------- ------------ ---------- ---------- -------------- --------------
Balance - December 31, 2003 1,000,000 5,000 - - (3,325) 1,675
----------- ------------ ---------- ---------- -------------- --------------
Stock issued for cash 33,000 16,500 169,100 169,100 185,600
Stock issued for services 145,833 729 729
Stock issued for compensation 448,333 13,518 13,518
Net Loss for period (605,823) (605,823)
----------- ------------ ---------- ---------- -------------- --------------
Balances - December 321, 2004 1,627,166 35,747 169,100 169,100 (609,148) (404,301)
Stock issued for cash 64,000 32,000 76,000 76,000 108,000
Stock issued for services 297,000 8,850 8,850
Stock issued for compensation 61,000 30,500 30,500
Stock issued for interest 990,000 9,900 2,000 2,000 11,900
Net Loss for period (657,305) (657,305)
----------- ------------ ---------- ---------- -------------- --------------
Balances - December 31, 2005 3,039,166 116,997 247,100 247,100 (1,266,453) (902,356)
Stock issued for services 250,000 125,000 125,000
Stock issued for interest 1,831,250 18,313 18,313
Net Loss for period (313,399) (313,399)
----------- ------------ ---------- ---------- -------------- --------------
Balances - December 31, 2006 5,120,416 260,310 247,100 247,100 (1,579,852) (1,072,442)
Stock issued for services 812,000 8,120 8,120
Stock issued for interest 2,635,000 26,350 26,350
Net Loss for period (383,975) (383,975)
----------- ------------ ---------- ---------- -------------- --------------
Balances - December 31, 2007 8,567,416 294,780 247,100 247,100 (1,963,827) (1,421,947)
Stock issued for services 625,000 6,250 6,250
Stock issued for interest 757,500 7,575 7,575
Convert preferred to common 247,100 247,100 (247,100) (247,100) -
Reconciliation differences 108,000 -
Net Loss for period (293,201) (293,201)
----------- ------------ ---------- ---------- -------------- --------------
Balances - December 31, 2008 10,305,016 555,705 - - (2,257,028) (1,701,323)
Stock issued for services 15,000 3,750 3,750
Net Loss for period (158,975) (158,975)
----------- ------------ ---------- ---------- -------------- --------------
Balances - December 31, 2009 10,320,016 $ 559,455 - $ - $ (2,416,003) $ (1,856,548)
=========== ============ ========== ========== ============== ==============
The accompanying notes are an integral part of these financial statements.
F-5
INTREORG SYSTEMS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the year end December 31, 2009
Note 1. Organization, Basis of Presentation and Summary of Significant
- --------------------------------------------------------------------------------
Accounting Policies
- -------------------
Organization
Intreorg Systems, Inc. (the Company) was incorporated under the laws of the
State of Texas on November 3, 2003. The Company was organized for the purpose of
providing internet consulting and "back office" services to companies. As well
as, to pursue any other lawful business opportunity as decided upon by the board
of directors. The Company's fiscal year end is December 31st.
On March 25, 2009, Mr. Denis Iler resigned as the Chief Executive Officer and a
Director of the Company. On March 25, 2009, Mr. Russell K. Boyd, a director of
the Company, was appointed the Chief Executive Officer of the Company.
On April 11, 2009, Mr. Jeff Huitt resigned as the Chief Financial Officer of the
Company and Mr. Austin Andres resigned as the Chief Operating Officer. On May 7,
2009, Mr. Huitt resigned as director of the Company.
Basis of Presentation
Development Stage Company
The Company has not earned significant revenues from limited principal
operations. Accordingly, the Company's activities have been accounted for as
those of a Development Stage Enterprise. Among the disclosures required are that
the Company's financial statements be identified as those of a development stage
company, and that the statements of operations, stockholders' equity (deficit)
and cash flows disclose activity since the date of the Company's inception.
Going Concern
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company's current
liabilities exceed the current assets by $1,385,359 at December 31, 2009.
During the year ended December 31, 2009, the Company did not generate any
revenues. At December 31, 2009, the Company had a deficit accumulated during its
development stage of $2,416,003.
The Company is in the development stage and has not earned revenues from
operations. The Company's ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital or locate a merger
candidate and ultimately, achieve profitable operations. There can be no
assurance that the Company will be successful in obtaining such financing, or
that it will attain positive cash flow from operations. Management believes that
actions presently being taken provide the opportunity for the Company to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of these
uncertainties. Management is seeking new capital to carry forward the purposes
of the Company.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly-liquid debt instruments, with an original
maturity of three months, to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
F-6
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period. This number has not been adjusted for outstanding
options since the average would be anti-dilutive.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided for using the straight-line method over the useful life
of the assets.
Other Comprehensive Income
INTREorg Systems, Inc. has no material components of other comprehensive income
(loss), and accordingly, net loss is equal to comprehensive loss in all periods.
Federal Income Tax
The Company has made no provision for income taxes because there have been no
operations to date causing income for financial statement or tax purposes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and liabilities.
2009
----
Deferred tax assets:
Net operating loss carryforwards $ 2,416,003
Valuation allowance (2,416,003)
------------
Net deferred tax assets $ -
At December 31, 2009, the Company had net operating loss carry forwards of
approximately $2,416,003 for federal income tax purposes. These carryforwards if
not utilized to offset taxable income will begin to expire in 2019.
Recent Accounting Pronouncements
In June 2009, the FASB issued ASC 860 "Transfers and Servicing" which improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor's continuing
involvement, if any, in transferred financial assets. ASC 860 is effective as of
the beginning of each reporting entity's first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of ASC 860 will have on its
financial statements.
In June 2009, the FASB issued ASC 810 which improves financial reporting by
enterprises involved with variable interest entities. ASC 810 is effective as of
the beginning of each reporting entity's first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of ASC 810 will have on its
financial statements.
In June 2009, the FASB issued ASC No. 105 "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles--a
replacement of FASB Statement No. 162." The FASB Accounting Standards
Codification ("Codification") will be the single source of authoritative
nongovernmental U.S. generally accepted accounting principles. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. ASC 105 is effective for
interim and annual periods ending after September 15, 2009. All existing
accounting standards are superseded as described in ASC 105. All other
accounting literature not included in the Codification is non-authoritative. The
Company is evaluating the impact the adoption of ASC 105 will have on its
financial statements.
F-7
Note 2 - Notes Payable
- ----------------------
Prior to the year ended December 31, 2008, the Company raised $577,886 in bridge
loans in order to be able to continue operations. These loans carry interest
rates from 6% to 10% per annum and have due dates between 909 and 180 days. The
providers of these loans were also given "equity kickers" of stock in the amount
of 1 share of common stock for each one cent of loan amount. Prior to January 1,
2009, the holders were issued shares of the Company's common stock in equal
amount to the interest accrued for extensions on the payment of the notes.
During the year ended December 31, 2009, holders of notes totaling $56,866
(principal and outstanding interest on the date of conversion) converted their
notes into Commercial Convertible Promissory Notes (Convertible Promissory
Notes). The Convertible Promissory Notes are unsecured, have an interest rate of
6% and a due date of April 10, 2011. For further details, see Note 3 -
Convertible Promissory Notes.
Note 3 -Convertible Notes Payable
- ---------------------------------
On April 10, 2009, a vendor owed $406,961 agreed to convert the amount owed to
it into long-term debt in the form of a Convertible Promissory Note.
On April 10, 2009, holders of outstanding promissory notes totaling $56,866 and
accrued interest of $7,375, agreed to convert the amounts owed to them into
long-term Convertible Promissory Notes.
The Convertible Promissory notes are unsecured, have an interest rate of 6% and
a due date of April 10, 2011. The promissory notes provide the holders with the
right to convert in part or all of the outstanding principal and/or interest
into shares of the Company's common stock at a rate of $1 per share. At December
31, 2009, $471,202 was outstanding.
Note 4 - Capital Stock Transactions
- -----------------------------------
During the year ended December 31, 2009, the Company issued 15,000 shares of
common stock valued at $3,750 for consulting services.
On October 6, 2009 the Company entered into an investment banking agreement. The
terms of the agreement are a such. For any money they raise the Company is
obligated to an 8% commission in cash and a 2% expenses allowance in cash and
10% additional in common stock at a 110% of market price over a 5 day average.
Note 5 - Subsequent Events
- --------------------------
The Company evaluated events through April 14, 2010 for subsequent events to be
included in its December 31, 2009 financial statements herein.
F-8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April 15, 2010
INTREorg Systems, Inc.
/s/Russell K. Boyd
--------------------------------------
Russell K. Boyd, President, CEO,
(Principal Accounting Officer)
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: April 15, 2010
INTREorg Systems, Inc.
/s/ Russell K. Boyd
--------------------------------------
Russell K. Boyd, Chairman of the Board
/s/ Malcolm C. Davenport, V
--------------------------------------
Malcolm C. Davenport, V, Director
/s/Redgie T. Green
--------------------------------------
Redgie T. Green, Director
27
EXHIBIT "B"
2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD INCENTIVE PLAN
SECTION 1: GENERAL PURPOSE OF PLAN
The name of this plan is the 2010 INTREORG SYSTEMS, INC. STOCK OPTION
AND AWARD INCENTIVE PLAN (the "Plan"). The purpose of the Plan is to enable
INTREORG SYSTEMS, INC., a Texas company (the "Company"), and any Parent or any
Subsidiary to obtain and retain the services of the types of Employees,
Consultants and Directors who will contribute to the Company's long range
success and to provide incentives which are linked directly to increases in
share value which will inure to the benefit of all stockholders of the Company.
SECTION 2: DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Administrator" shall have the meaning as set forth in Section 3,
hereof.
"Board" means the Board of Directors of the Company.
"Cause" means (i) failure by an Eligible Person to substantially
perform his or her duties and obligations to the Company (other than any such
failure resulting from his or her incapacity due to physical or mental illness);
(ii) engaging in misconduct or a fiduciary breach which is or potentially is
materially injurious to the Company or its stockholders; (iii) commission of a
felony; (iv) the commission of a crime against the Company which is or
potentially is materially injurious to the Company; or (v) as otherwise provided
in the Stock Option Agreement or Stock Purchase Agreement. For purposes of this
Plan, the existence of Cause shall be determined by the Administrator in its
sole discretion.
"Change in Control" shall mean:
The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than 50% of
the combined voting power (which voting power shall be calculated by assuming
the conversion of all equity securities convertible (immediately or at some
future time) into shares entitled to vote, but not assuming the exercise of any
warrant or right to subscribe to or purchase those shares) of the continuing or
Surviving Entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned, directly or indirectly, by
persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization; provided, however, that in making
the determination of ownership by the stockholders of the Company, immediately
after the reorganization, equity securities which persons own immediately before
the reorganization as stockholders of another party to the transaction shall be
disregarded; or
The sale, transfer or other disposition of all or substantially all of
the Company's assets.
A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.
-1-
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of the Board designated by the Board to
administer the Plan.
"Company" means INTREORG SYSTEMS, INC., a corporation organized under
the laws of the State of Texas (or any successor corporation).
"Consultant" means a consultant or advisor who is a natural person or a
legal entity and who provides bona fide services to the Company, a Parent or a
Subsidiary; provided such services are not in connection with the offer or sale
of securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities.
"Date of Grant" means the date on which the Administrator adopts a
resolution expressly granting a Right to a Participant or, if a different date
is set forth in such resolution as the Date of Grant, then such date as is set
forth in such resolution.
"Director" means a member of the Board.
"Disability" means that the Optionee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment; provided, however, for purposes of determining the term of an
ISO pursuant to Section 6.6 hereof, the term Disability shall have the meaning
ascribed to it under Code Section 22(e)(3). The determination of whether an
individual has a Disability shall be determined under procedures established by
the Plan Administrator.
"Eligible Person" means an Employee, Consultant or Director of the
Company, any Parent or any Subsidiary.
"Employee" shall mean any individual who is a common-law employee
(including officers) of the Company, a Parent or a Subsidiary.
"Exercise Price" shall have the meaning set forth in Section 6.3
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the fair market value of a Share,
determined as follows: (i) if the Stock is listed on any established stock
exchange or a national market system, including without limitation, the NASDAQ
National Market, the Fair Market Value of a share of Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in the Stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Administrator deems reliable; (ii) if the Stock is quoted on the NASDAQ
System (but not on the NASDAQ National Market) or any similar system whereby the
stock is regularly quoted by a recognized securities dealer but closing sale
prices are not reported, the Fair Market Value of a share of Stock shall be the
mean between the bid and asked prices for the Stock on the last market trading
day prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Administrator deems reliable; or (iii) in the absence
of an established market for the Stock, the Fair Market Value shall be
determined in good faith by the Administrator and such determination shall be
conclusive and binding on all persons.
-2-
"First Refusal Right" shall have the meaning set forth in Section 8.7
hereof.
"ISO" means a Stock Option intended to qualify as an "incentive stock
option" as that term is defined in Section 422(b) of the Code.
"Non-Employee Director" means a member of the Board who is not an
Employee of the Company, a Parent or Subsidiary, who satisfies the requirements
of such term as defined in Rule 16b-3(b)(3)(i) promulgated by the Securities and
Exchange Commission.
"Non-Qualified Stock Option" means a Stock Option not described in
Section 422(b) of the Code.
"Offeree" means a Participant who is granted a Purchase Right pursuant
to the Plan.
"Optionee" means a Participant who is granted a Stock Option pursuant
to the Plan.
"Outside Director" means a member of the Board who is not an Employee
of the Company, a Parent or Subsidiary, who satisfies the requirements of such
term as defined in Treasury Regulations (26 Code of Federal Regulation Section
1.162-27(e)(3)).
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.
"Participant" means any Eligible Person selected by the Administrator,
pursuant to the Administrator's authority in Section 3, to receive grants of
Rights.
"Plan" means this 2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD
INCENTIVE PLAN, as the same may be amended or supplemented from time to time.
"Purchase Price" shall have the meaning set forth in Section 7.3.
"Purchase Right" means the right to purchase Stock granted pursuant to
Section 7.
"Rights" means Stock Options and Purchase Rights.
"Repurchase Right" shall have the meaning set forth in Section 8.8 of
the Plan.
"Service" shall mean service as an Employee, Director or Consultant.
"Stock" means Common Stock of the Company.
"Stock Option" or "Option" means an option to purchase shares of Stock
granted pursuant to Section 6.
"Stock Option Agreement" shall have the meaning set forth in Section
6.1.
"Stock Purchase Agreement" shall have the meaning set forth in Section
7.1.
-3-
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
"Surviving Entity" means the Company if immediately following any
merger, consolidation or similar transaction, the holders of outstanding voting
securities of the Company immediately prior to the merger or consolidation own
equity securities possessing more than 50% of the voting power of the
corporation existing following the merger, consolidation or similar transaction.
In all other cases, the other entity to the transaction and not the Company
shall be the Surviving Entity. In making the determination of ownership by the
stockholders of an entity immediately after the merger, consolidation or similar
transaction, equity securities which the stockholders owned immediately before
the merger, consolidation or similar transaction as stockholders of another
party to the transaction shall be disregarded. Further, outstanding voting
securities of an entity shall be calculated by assuming the conversion of all
equity securities convertible (immediately or at some future time) into shares
entitled to vote.
"Ten Percent Stockholder" means a person who on the Date of Grant owns,
either directly or through attribution as provided in Section 424 of the Code,
Stock constituting more than 10% of the total combined voting power of all
classes of stock of his or her employer corporation or of any Parent or
Subsidiary.
SECTION 3: ADMINISTRATION
3.1 Administrator. The Plan shall be administered by either (i) the
Board, or (ii) a Committee appointed by the Board (the group that administers
the Plan is referred to as the "Administrator").
3.2 Powers in General. The Administrator shall have the power and
authority to grant to Eligible Persons, pursuant to the terms of the Plan, (i)
Stock Options, (ii) Purchase Rights or (iii) any combination of the foregoing.
3.3 Specific Powers. In particular, the Administrator shall have the
authority: (i) to construe and interpret the Plan and apply its provisions; (ii)
to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to determine whether
each Stock Option is to be an ISO or a Non-Qualified Stock Option; (viii) to
prescribe the terms and conditions of each Stock Option and Purchase Right,
including, without limitation, the Purchase Price and medium of payment, vesting
provisions and repurchase provisions, and to specify the provisions of the Stock
Option Agreement or Stock Purchase Agreement relating to such grant or sale;
(ix) to amend any outstanding Rights for the purpose of modifying the time or
manner of vesting, the Purchase Price or Exercise Price, as the case may be,
subject to applicable legal restrictions and to the consent of the other party
to such agreement; (x) to determine the duration and purpose of leaves of
absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan; (xi) to make decisions with
-4-
respect to outstanding Stock Options that may become necessary upon a change in
corporate control or an event that triggers anti-dilution adjustments; and (xii)
to make any and all other determinations which it determines to be necessary or
advisable for administration of the Plan.
3.4 Decisions Final. All decisions made by the Administrator pursuant
to the provisions of the Plan shall be final and binding on the Company and the
Participants.
3.5 The Committee. The Board may, in its sole and absolute discretion,
from time to time, and at any period of time during which the Company's Stock is
registered pursuant to Section 12 of the Exchange Act, delegate any or all of
its duties and authority with respect to the Plan to the Committee whose members
are to be appointed by and to serve at the pleasure of the Board. From time to
time, the Board may increase or decrease the size of the Committee, add
additional members to, remove members (with or without cause) from, appoint new
members in substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the majority of its
members or, in the case of a committee comprised of only two members, the
unanimous consent of its members, whether present or not, or by the unanimous
written consent of the majority of its members and minutes shall be kept of all
of its meetings and copies thereof shall be provided to the Board. Subject to
the limitations prescribed by the Plan and the Board, the Committee may
establish and follow such rules and regulations for the conduct of its business
as it may determine to be advisable. During any period of time during which the
Company's Stock is registered pursuant to Section 12 of the Exchange Act, all
members of the Committee shall be Non-Employee Directors and Outside Directors.
3.6 Indemnification. In addition to such other rights of
indemnification as they may have as Directors or members of the Committee, and
to the extent allowed by applicable law, the Administrator and each of the
Administrator's consultants shall be indemnified by the Company against the
reasonable expenses, including attorney's fees, actually incurred in connection
with any action, suit or proceeding or in connection with any appeal therein, to
which the Administrator or any of its consultants may be party by reason of any
action taken or failure to act under or in connection with the Plan or any
option granted under the Plan, and against all amounts paid by the Administrator
or any of its consultants in settlement thereof (provided that the settlement
has been approved by the Company, which approval shall not be unreasonably
withheld) or paid by the Administrator or any of its consultants in satisfaction
of a judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such Administrator or any of its consultants did not act in good faith and in a
manner which such person reasonably believed to be in the best interests of the
Company, or was grossly negligent, and in the case of a criminal proceeding, had
no reason to believe that the conduct complained of was unlawful; provided,
however, that within 60 days after institution of any such action, suit or
proceeding, such Administrator or any of its consultants shall, in writing,
offer the Company the opportunity at its own expense to handle and defend such
action, suit or proceeding.
SECTION 4: STOCK SUBJECT TO THE PLAN
4.1 Stock Subject to the Plan. Subject to adjustment as provided in
Section 9, Two Million (2,000,000) shares of Common Stock shall be reserved and
available for issuance under the Plan. Stock reserved hereunder may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
-5-
4.2 Basic Limitation. The number of shares that are subject to Rights
under the Plan shall not exceed the number of shares that then remain available
for issuance under the Plan. The Company, during the term of the Plan, shall at
all times reserve and keep available a sufficient number of shares to satisfy
the requirements of the Plan.
4.3 Additional Shares. In the event that any outstanding Option or
other right for any reason expires or is canceled or otherwise terminated, the
shares allocable to the unexercised portion of such Option or other right shall
again be available for the purposes of the Plan. In the event that shares issued
under the Plan are reacquired by the Company pursuant to the terms of any
forfeiture provision, right of repurchase or right of first refusal, such shares
shall again be available for the purposes of the Plan.
SECTION 5: ELIGIBILITY
Eligible Persons who are selected by the Administrator shall be
eligible to be granted Rights hereunder subject to limitations set forth in this
Plan; provided, however, that only Employees shall be eligible to be granted
ISOs hereunder.
SECTION 6: TERMS AND CONDITIONS OF OPTIONS.
6.1 Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Administrator deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
6.2 Number of Shares. Each Stock Option Agreement shall specify the
number of shares of Stock that are subject to the Option and shall provide for
the adjustment of such number in accordance with Section 9, hereof. The Stock
Option Agreement shall also specify whether the Option is an ISO or a
Non-Qualified Stock Option.
6.3 Exercise Price.
6.3.1 In General. Each Stock Option Agreement shall state the
price at which shares subject to the Stock Option may be purchased (the
"Exercise Price"), which shall, with respect to Incentive Stock
Options, be not less than 100% of the Fair Market Value of the Stock on
the Date of Grant. In the case of Non-Qualified Stock Options, the
Exercise Price shall be determined in the sole discretion of the
Administrator.
6.3.2 Payment. The Exercise Price shall be payable in a form
described in Section 8 hereof.
6.4 Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Board may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise or with the disposition of
shares acquired by exercising an Option.
6.5 Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option becomes exercisable. In the case of an
Optionee who is not an officer of the Company, a Director or a Consultant, an
Option shall become exercisable at a rate of no more than 25% per year over a
four-year period commencing on January 1 following the Date of Grant and 25%
-6-
each year thereafter on January 1. Subject to the preceding sentence, the
exercise provisions of any Stock Option Agreement shall be determined by the
Administrator, in its sole discretion.
6.6 Term. The Stock Option Agreement shall specify the term of the
Option. No Option shall be exercised after the expiration of ten years after the
date the Option is granted. Unless otherwise provided in the Stock Option
Agreement, no Option may be exercised (i) three months after the date the
Optionee's Service with the Company, its Parent or its Subsidiaries terminates
if such termination is for any reason other than death, Disability or Cause,
(ii) one year after the date the Optionee's Service with the Company, its Parent
or its subsidiaries terminates if such termination is a result of death or
Disability, and (iii) if the Optionee's Service with the Company, its Parent, or
its Subsidiaries terminates for Cause, all outstanding Options granted to such
Optionee shall expire as of the commencement of business on the date of such
termination. The Administrator may, in its sole discretion, waive the
accelerated expiration provided for in (i) or (ii). Outstanding Options that are
not exercisable at the time of termination of employment for any reason shall
expire at the close of business on the date of such termination.
6.7 Leaves of Absence. For purposes of Section 6.6 above, to the extent
required by applicable law, Service shall be deemed to continue while the
Optionee is on a bona fide leave of absence. To the extent applicable law does
not require such a leave to be deemed to continue while the Optionee is on a
bona fide leave of absence, such leave shall be deemed to continue if, and only
if, expressly provided in writing by the Administrator or a duly authorized
officer of the Company, Parent, or Subsidiary for whom Optionee provides his or
her services.
6.8 Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Administrator may modify, extend or assume
outstanding Options (whether granted by the Company or another issuer) or may
accept the cancellation of outstanding Options (whether granted by the Company
or another issuer) in return for the grant of new Options for the same or a
different number of shares and at the same or a different Exercise Price.
Without limiting the foregoing, the Administrator may amend a previously granted
Option to fully accelerate the exercise schedule of such Option and provide that
upon the exercise of such Option, the Optionee shall receive shares of
Restricted Stock that are subject to repurchase by the Company at the Exercise
Price paid for the Option in accordance with Section 8.8.1 with such Company's
right to repurchase at such price lapsing at the same rate as the exercise
provisions set forth in Optionee's Stock Option Agreement. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, impair the Optionee's rights or increase the Optionee's obligations
under such Option. However, a termination of the Option in which the Optionee
receives a cash payment equal to the difference between the Fair Market Value
and the Exercise Price for all shares subject to exercise under any outstanding
Option shall not be deemed to impair any rights of the Optionee or increase the
Optionee's obligations under such Option.
SECTION 7: TERMS AND CONDITIONS OF AWARDS OR SALES
7.1 Stock Purchase Agreement. Each award or sale of shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Purchaser and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Board deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
-7-
7.2 Duration of Offers. Unless otherwise provided in the Stock Purchase
Agreement, any right to acquire shares under the Plan (other than an Option)
shall automatically expire if not exercised by the Purchaser within 15 days
after the grant of such right was communicated to the Purchaser by the Company.
7.3 Purchase Price.
7.3.1 In General. Each Stock Purchase Agreement shall state
the price at which the Stock subject to such Stock Purchase Agreement
may be purchased (the "Purchase Price"), which, with respect to Stock
Purchase Rights, shall be determined in the sole discretion of the
Administrator.
7.3.2 Payment of Purchase Price. The Purchase Price shall be
payable in a form described in Section 8.
7.4 Withholding Taxes. As a condition to the purchase of shares, the
Purchaser shall make such arrangements as the Board may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such purchase.
SECTION 8: PAYMENT; RESTRICTIONS
8.1 General Rule. The entire Purchase Price or Exercise Price of shares
issued under the Plan shall be payable in full by, as applicable, cash or
certified check for an amount equal to the aggregate Purchase Price or Exercise
Price for the number of shares being purchased, or in the discretion of the
Administrator, upon such terms as the Administrator shall approve, (i) in the
case of an Option and provided the Company's stock is publicly traded, by a copy
of instructions to a broker directing such broker to sell the Stock for which
such Option is exercised, and to remit to the Company the aggregate Exercise
Price of such Options (a "cashless exercise"), (ii) in the case of an Option or
a sale of Stock, by paying all or a portion of the Exercise Price or Purchase
Price for the number of shares being purchased by tendering Stock owned by the
Optionee, duly endorsed for transfer to the Company, with a Fair Market Value on
the date of delivery equal to the aggregate Purchase Price of the Stock with
respect to which such Option or portion thereof is thereby exercised or Stock
acquired (a "stock-for-stock exercise") or (iii) by a stock-for-stock exercise
by means of attestation whereby the Optionee identifies for delivery specific
shares of Stock already owned by Optionee and receives a number of shares of
Stock equal to the difference between the Option shares thereby exercised and
the identified attestation shares of Stock (an "attestation exercise").
8.2 Withholding Payment. The Purchase Price or Exercise Price shall
include payment of the amount of all federal, state, local or other income,
excise or employment taxes subject to withholding (if any) by the Company or any
parent or subsidiary corporation as a result of the exercise of a Stock Option.
The Optionee may pay all or a portion of the tax withholding by cash or check
payable to the Company, or, at the discretion of the Administrator, upon such
terms as the Administrator shall approve, by (i) cashless exercise or
attestation exercise; (ii) stock-for-stock exercise; (iii) in the case of an
Option, by paying all or a portion of the tax withholding for the number of
shares being purchased by withholding shares from any transfer or payment to the
Optionee ("Stock withholding"); or (iv) a combination of one or more of the
foregoing payment methods. Any shares issued pursuant to the exercise of an
Option and transferred by the Optionee to the Company for the purpose of
-8-
satisfying any withholding obligation shall not again be available for purposes
of the Plan. The Fair Market Value of the number of shares subject to Stock
withholding shall not exceed an amount equal to the applicable minimum required
tax withholding rates.
8.3 Services Rendered. At the discretion of the Administrator, shares
may be awarded under the Plan in consideration of services rendered to the
Company, a Parent or a Subsidiary prior to the award.
8.4 Promissory Note. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, in the discretion of the Administrator,
upon such terms as the Administrator shall approve, all or a portion of the
Exercise Price or Purchase Price (as the case may be) of shares issued under the
Plan may be paid with a full-recourse promissory note. However, in the event
there is a stated par value of the shares and applicable law requires, the par
value of the shares, if newly issued, shall be paid in cash or cash equivalents.
The shares shall be pledged as security for payment of the principal amount of
the promissory note and interest thereon, and held in the possession of the
Company until said amounts are repaid in full. The interest rate payable under
the terms of the promissory note shall not be less than the minimum rate (if
any) required to avoid the imputation of additional interest under the Code.
Subject to the foregoing, the Administrator (at its sole discretion) shall
specify the term, interest rate, amortization requirements (if any) and other
provisions of such note. Unless the Administrator determines otherwise, shares
of Stock having a Fair Market Value at least equal to the principal amount of
the loan shall be pledged by the holder to the Company as security for payment
of the unpaid balance of the loan and such pledge shall be evidenced by a pledge
agreement, the terms of which shall be determined by the Administrator, in its
discretion; provided, however, that each loan shall comply with all applicable
laws, regulations and rules of the Board of Governors of the Federal Reserve
System and any other governmental agency having jurisdiction.
8.5 Exercise/Pledge. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so allows and if Stock is publicly traded, in the
discretion of the Administrator, upon such terms as the Administrator shall
approve, payment may be made all or in part by the delivery (on a form
prescribed by the Administrator) of an irrevocable direction to pledge shares to
a securities broker or lender approved by the Company, as security for a loan,
and to deliver all or part of the loan proceeds to the Company in payment of all
or part of the Exercise Price and any withholding taxes.
8.6 Written Notice. The purchaser shall deliver a written notice to the
Administrator requesting that the Company direct the transfer agent to issue to
the purchaser (or to his designee) a certificate for the number of shares of
Common Stock being exercised or purchased or, in the case of a cashless exercise
or share withholding exercise, for any shares that were not sold in the cashless
exercise or withheld.
8.7 First Refusal Right. Each Stock Option Agreement and Stock Purchase
Agreement may provide that the Company shall have the right of first refusal
(the "First Refusal Right"), exercisable in connection with any proposed sale,
hypothecation or other disposition of the Stock purchased by the Optionee or
Offeree pursuant to a Stock Option Agreement or Stock Purchase Agreement; and in
the event the holder of such Stock desires to accept a bona fide third-party
offer for any or all of such Stock, the Stock shall first be offered to the
Company upon the same terms and conditions as are set forth in the bona fide
offer.
8.8 Repurchase Rights. Following a termination of the Participant's
Service, the Company may repurchase the Participant's Rights as provided in this
Section 8.8 (the "Repurchase Right").
-9-
8.8.1 Repurchase Price. Following a termination of the
Participant's Service the Repurchase Right shall be exercisable at a
price equal to (i) the Fair Market Value of vested Stock or, in the
case of exercisable options, the Fair Market Value of the Stock
underlying such unexercised options less the Exercise Price, or (ii)
the Purchase Price or Exercise Price, as the case may be, of unvested
Stock; provided, however, the right to repurchase unvested stock as
described in Section 8.8.1(ii) shall lapse at a rate of at least 33.33%
per year over three years from the date the Right is granted.
8.8.2 Exercise of Repurchase Right. A Repurchase Right may be
exercised only within 90 days after the termination of the
Participant's Service (or in the case of Stock issued upon exercise of
an Option or after the date of termination or the purchase of Stock
under a Stock Purchase Agreement after the date of termination, within
90 days after the date of the exercise or Stock purchase, whichever is
applicable) for cash or for cancellation of indebtedness incurred in
purchasing the shares.
8.9 Termination of Repurchase and First Refusal Rights. Each Stock
Option Agreement and Stock Purchase Agreement shall provide that the Repurchase
Rights and First Refusal Rights shall have no effect with respect to, or shall
lapse and cease to have effect when the issuer's securities become publicly
traded or a determination is made by counsel for the Company that such
Repurchase Rights and First Refusal Rights are not permitted under applicable
federal or state securities laws.
8.10 No Transferability. Except as provided herein, a Participant may
not assign, sell or transfer Rights, in whole or in part, other than by
testament or by operation of the laws of descent and distribution.
8.10.1 Permitted Transfer of Non-Qualified Option. The
Administrator, in its sole discretion may permit the transfer of a
Non-Qualified Option (but not an ISO or Stock Purchase Right) as
follows: (i) by gift to a member of the Participant's immediate family,
or (ii) by transfer by instrument to a trust providing that the Option
is to be passed to beneficiaries upon death of the Settlor (either or
both (i) or (ii) referred to as a "Permitted Transferee"). For purposes
of this Section 8.10.1, "immediate family" shall mean the Optionee's
spouse (including a former spouse subject to terms of a domestic
relations order); child, stepchild, grandchild, child-in-law; parent,
stepparent, grandparent, parent-in-law; sibling and sibling-in-law, and
shall include adoptive relationships.
8.10.2 Conditions of Permitted Transfer. A transfer permitted
under this Section 8.10 hereof may be made only upon written notice to
and approval thereof by Administrator. A Permitted Transferee may not
further assign, sell or transfer the transferred Option, in whole or in
part, other than by testament or by operation of the laws of descent
and distribution. A Permitted Transferee shall agree in writing to be
bound by the provisions of this Plan, which a copy of said agreement
shall be provided to the Administrator for approval prior to the
transfer.
SECTION 9: ADJUSTMENTS; MARKET STAND-OFF
9.1 Effect of Certain Changes.
9.1.1 Stock Dividends, Splits, Etc. If there is any change in
the number of outstanding shares of Stock by reason of a stock split,
reverse stock split, stock dividend, recapitalization, combination or
reclassification, then (i) the number of shares of Stock available for
Rights, (ii) the number of shares of Stock covered by outstanding
-10-
Rights, and (iii) the Exercise Price or Purchase Price of any Stock
Option or Purchase Right, in effect prior to such change, shall be
proportionately adjusted by the Administrator to reflect any increase
or decrease in the number of issued shares of Stock; provided, however,
that any fractional shares resulting from the adjustment shall be
eliminated.
9.1.2 Liquidation, Dissolution, Merger or Consolidation. In
the event of a dissolution or liquidation of the Company, or any
corporate separation or division, including, but not limited to, a
split-up, a split-off or a spin-off, or a sale of substantially all of
the assets of the Company; a merger or consolidation in which the
Company is not the Surviving Entity; or a reverse merger in which the
Company is the Surviving Entity, but the shares of Company stock
outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash
or otherwise, then, the Company, to the extent permitted by applicable
law, but otherwise in its sole discretion may provide for: (i) the
continuation of outstanding Rights by the Company (if the Company is
the Surviving Entity); (ii) the assumption of the Plan and such
outstanding Rights by the Surviving Entity or its parent; (iii) the
substitution by the Surviving Entity or its parent of Rights with
substantially the same terms for such outstanding Rights; or (iv) the
cancellation of such outstanding Rights without payment of any
consideration, provided that if such Rights would be canceled in
accordance with the foregoing, the Participant shall have the right,
exercisable during the later of the ten-day period ending on the fifth
day prior to such merger or consolidation or ten days after the
Administrator provides the Rights holder a notice of cancellation, to
exercise such Rights in whole or in part without regard to any
installment exercise provisions in the Rights agreement.
9.1.3 Par Value Changes. In the event of a change in the Stock
of the Company as presently constituted which is limited to a change of
all of its authorized shares with par value, into the same number of
shares without par value, or a change in the par value, the shares
resulting from any such change shall be "Stock" within the meaning of
the Plan.
9.2 Decision of Administrator Final. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive; provided, however, that each ISO granted pursuant
to the Plan shall not be adjusted in a manner that causes such Stock Option to
fail to continue to qualify as an ISO without the prior consent of the Optionee
thereof.
9.3 No Other Rights. Except as hereinbefore expressly provided in this
Section 9, no Participant shall have any rights by reason of any subdivision or
consolidation of shares of Company stock or the payment of any dividend or any
other increase or decrease in the number of shares of Company stock of any class
or by reason of any of the events described in Section 9.1, above, or any other
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class; and, except as provided in this Section 9,
none of the foregoing events shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Stock subject to
Rights. The grant of a Right pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or part of its
business or assets.
-11-
9.4 Market Stand-Off. Each Stock Option Agreement and Stock Purchase
Agreement shall provide that, in connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Participant shall agree not
to sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the repurchase of, or otherwise dispose or transfer for value or otherwise agree
to engage in any of the foregoing transactions with respect to any Stock without
the prior written consent of the Company or its underwriters, for such period of
time from and after the effective date of such registration statement as may be
requested by the Company or such underwriters (the "Market Stand-Off").
SECTION 10: AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the Plan at any time and for
any reason. At the time of such amendment, the Board shall determine, upon
advice from counsel, whether such amendment will be contingent on stockholder
approval.
SECTION 11: GENERAL PROVISIONS
11.1 General Restrictions.
11.1.1 No View to Distribute. The Administrator may require
each person acquiring shares of Stock pursuant to the Plan to represent
to and agree with the Company in writing that such person is acquiring
the shares without a view towards distribution thereof. The
certificates for such shares may include any legend that the
Administrator deems appropriate to reflect any restrictions on
transfer.
11.1.2 Legends. All certificates for shares of Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Administrator may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed and
any applicable federal or state securities laws, and the Administrator
may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
11.1.3 No Rights as Stockholder. Except as specifically
provided in this Plan, a Participant or a transferee of a Right shall
have no rights as a stockholder with respect to any shares covered by
the Rights until the date of the issuance of a Stock certificate to him
or her for such shares, and no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property) or distributions of other rights for which the record date is
prior to the date such Stock certificate is issued, except as provided
in Section 9.1, hereof.
11.2 Other Compensation Arrangements. Nothing contained in this Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
11.3 Disqualifying Dispositions. Any Participant who shall make a
"disposition" (as defined in Section 424 of the Code) of all or any portion of
an ISO within two years from the date of grant of such ISO or within one year
after the issuance of the shares of Stock acquired upon exercise of such ISO
-12-
shall be required to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such shares of
Stock.
11.4 Regulatory Matters. Each Stock Option Agreement and Stock Purchase
Agreement shall provide that no shares shall be purchased or sold thereunder
unless and until (i) any then applicable requirements of state or federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel and (ii) if required to do so by the Company, the
Optionee or Offeree shall have executed and delivered to the Company a letter of
investment intent in such form and containing such provisions as the Board or
Committee may require.
11.5 Recapitalizations. Each Stock Option Agreement and Stock Purchase
Agreement shall contain provisions required to reflect the provisions of Section
9.
11.6 Delivery. Upon exercise of a Right granted under this Plan, the
Company shall issue Stock or pay any amounts due within a reasonable period of
time thereafter. Subject to any statutory obligations the Company may otherwise
have, for purposes of this Plan, thirty days shall be considered a reasonable
period of time.
11.7 Other Provisions. The Stock Option Agreements and Stock Purchase
Agreements authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation, restrictions upon
the exercise of the Rights, as the Administrator may deem advisable.
SECTION 12: INFORMATION TO PARTICIPANTS
To the extent necessary to comply with Texas law, the Company each year
shall furnish to Participants its balance sheet and income statement unless such
Participants are limited to key Employees whose duties with the Company assure
them access to equivalent information.
SECTION 13: STOCKHOLDERS AGREEMENT
As a condition to the transfer of Stock pursuant to a Right granted
under this Plan, the Administrator, in its sole and absolute discretion, may
require the Participant to execute and become a party to any agreement by and
among the Company and any of its stockholders which exists on or after the Date
of Grant (the "Stockholders Agreement"). If the Participant becomes a party to a
Stockholders Agreement, in addition to the terms of this Plan and the Stock
Option Agreement or Stock Purchase Agreement (whichever is applicable) pursuant
to which the Stock is transferred, the terms and conditions of the Stockholders
Agreement shall govern Participant's rights in and to the Stock; and if there is
any conflict between the provisions of the Stockholders Agreement and this Plan
or any conflict between the provisions of the Stockholders Agreement and the
Stock Option Agreement or Stock Purchase Agreement (whichever is applicable)
pursuant to which the Stock is transferred, the provisions of the Stockholders
Agreement shall be controlling. Notwithstanding anything to the contrary in this
Section 13, if the Stockholders Agreement contains any provisions which would
violate the Texas Corporations Code if applied to the Participant, the terms of
this Plan and the Stock Option Agreement or Stock Purchase Agreement (whichever
is applicable) pursuant to which the Stock is transferred shall govern the
Participant's rights with respect to such provisions.
-13-
SECTION 14: EFFECTIVE DATE OF PLAN
The effective date of this Plan is ____________, 2010. The adoption of
the Plan is subject to approval by the Company's stockholders, which approval
must be obtained within 12 months from the date the Plan is adopted by the
Board. In the event that the stockholders fail to approve the Plan within 12
months after its adoption by the Board, any grants of Options or sales or awards
of shares that have already occurred shall be rescinded, and no additional
grants, sales or awards shall be made thereafter under the Plan.
SECTION 15: TERM OF PLAN
The Plan shall terminate automatically on ______________, 2020, but no
later than the tenth (10th) anniversary of the effective date. No Right shall be
granted pursuant to the Plan after such date, but Rights theretofore granted may
extend beyond that date. The Plan may be terminated on any earlier date pursuant
to Section 10 hereof.
SECTION 16: EXECUTION
To record the adoption of the Plan by the Board, the Company has caused
its authorized officer to execute the same as of __________________________,
2010.
INTREORG SYSTEMS, INC.
By: ______________________________________
Russell K. Boyd, Chief Executive Officer,
President, Chief Financial Officer and Director
-14-
STOCK OPTION AGREEMENT
2010 INTREORG SYSTEMS, INC. STOCK OPTION AND INCENTIVE AWARD PLAN
Notice Of Stock Option Grant
You have been granted the following option to purchase Common Stock of INTREORG
SYSTEMS, INC. (the "Company"):
Name of Optionee:
Total Number of Shares Granted:
Type of Option:
Exercise Price Per Share:
Date of Grant:
Vesting Commencement Date:
Vesting Schedule:
Expiration Date:
By your signature and the signature of the Company's authorized representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 2010 INTREORG SYSTEMS, INC. STOCK OPTION AND
AWARD INCENTIVE PLAN and the STOCK OPTION AGREEMENT, both of which are attached
hereto and are incorporated herein by reference. Optionee hereby represents that
both the option and any shares acquired upon exercise of the option have been or
will be acquired for investment for his own account and not with a view to or
for sale in connection with any distribution or resale of the security.
Optionee: INTREORG SYSTEMS, INC.
By: By:
- ------------------------------- ----------------------------------------
Name: Russell K. Boyd,
Chief Executive Officer, President
Chief Financial Officer and Director
-15-
ANNEX I
THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD INCENTIVE PLAN:
STOCK OPTION AGREEMENT
SECTION 1: GRANT OF OPTION
1.1 Option. On the terms and conditions set forth in the notice of
stock option grant to which this agreement (the "Agreement") is attached (the
"Notice of Stock Option Grant") and this agreement, the Company grants to the
individual named in the Notice of Stock Option Grant (the "Optionee") the option
to purchase at the exercise price specified in the Notice of Stock Option Grant
(the "Exercise Price") the number of Shares set forth in the Notice of Stock
Option Grant. This option is intended to be either an ISO or a Non-Qualified
Stock Option, as provided in the Notice of Stock Option Grant.
1.2 Stock Plan and Defined Terms. This option is granted pursuant to
and subject to the terms of the 2010 INTREORG SYSTEMS, INC. STOCK OPTION AND
AWARD INCENTIVE PLAN, as in effect on the date specified in the Notice of Stock
Option Grant (which date shall be the later of (i) the date on which the Board
resolved to grant this option, or (ii) the first day of the Optionee's Service)
and as amended from time to time (the "Plan"), a copy of which is attached
hereto and which the Optionee acknowledges having received. Capitalized terms
not otherwise defined in this Agreement have the definitions ascribed to them in
the Plan.
SECTION 2: RIGHT TO EXERCISE
2.1 Exercisability. Subject to Sections 2.2 and 2.3 below and the other
conditions set forth in this Agreement, all or part of this option may be
exercised prior to its expiration at the time or times set forth in the Notice
of Stock Option Grant. Shares purchased by exercising this option may be subject
to the Right of Repurchase under Section 7. In addition, all of the remaining
unexercised options shall become vested and fully exercisable if (i) a Change in
Control occurs before the Optionee's Service terminates, and (ii) the option is
not assumed or an equivalent option is not substituted by the successor entity
that employs the Optionee immediately after the Change in Control or by its
parent or subsidiary.
2.2 Limitation. If this option is designated as an ISO in the Notice of
Stock Option Grant, then to the extent (and only to the extent) the Optionee's
right to exercise this option causes this option (in whole or in part) to not be
treated as an ISO by reason of the $100,000 annual limitation under Section
422(d) of the Code, such options shall be treated as Non-Qualified Stock
Options, but shall be exercisable by their terms. The determination of options
to be treated as Non-Qualified Stock Options shall be made by taking options
-1-
into account in the order in which they are granted. If the terms of this option
cause the $100,000 annual limitation under Section 422(d) of the Code to be
exceeded, a pro rata portion of each exercise shall be treated as the exercise
of a Non-Qualified Stock Option.
2.3 Stockholder Approval. Any other provision of this Agreement
notwithstanding, no portion of this option shall be exercisable at any time
prior to the approval of the Plan by the Company's stockholders.
SECTION 3: NO TRANSFER OR ASSIGNMENT OF OPTION
Except as provided herein, an Optionee may not assign, sell or transfer
the option, in whole or in part, other than by testament or by operation of the
laws of descent and distribution. The Administrator, in its sole discretion may
permit the transfer of a Non-Qualified Option (but not an ISO) as follows: (i)
by gift to a member of the Participant's immediate family, or (ii) by transfer
by instrument to a trust providing that the Option is to be passed to
beneficiaries upon death of the Settlor (either or both (i) or (ii) referred to
as a "Permitted Transferee"). For purposes of this Section 3, "immediate family"
shall mean the Optionee's spouse (including a former spouse subject to terms of
a domestic relations order); child, stepchild, grandchild, child-in-law; parent,
stepparent, grandparent, parent-in-law; sibling and sibling-in-law, and shall
include adoptive relationships. A transfer permitted under this Section 3 hereof
may be made only upon written notice to and approval thereof by Administrator. A
Permitted Transferee may not further assign, sell or transfer the transferred
option, in whole or in part, other than by testament or by operation of the laws
of descent and distribution. A Permitted Transferee shall agree in writing to be
bound by the provisions of this Plan, which agreement shall be submitted to and
approved by the Administrator before the transfer.
SECTION 4: EXERCISE PROCEDURES
4.1 Notice of Exercise. The Optionee or the Optionee's representative
may exercise this option by delivering a written notice in the form of Exhibit A
attached hereto ("Notice of Exercise") to the Company in the manner specified
pursuant to Section 14.4 hereof. Such Notice of Exercise shall specify the
election to exercise this option, the number of Shares for which it is being
exercised and the form of payment, which must comply with Section 5. The Notice
of Exercise shall be signed by the person who is entitled to exercise this
option. In the event that this option is to be exercised by the Optionee's
representative, the notice shall be accompanied by proof (satisfactory to the
Company) of the representative's right to exercise this option.
4.2 Issuance of Shares. After receiving a proper Notice of Exercise,
the Company shall cause to be issued a certificate or certificates for the
Shares as to which this option has been exercised, registered in the name of the
person exercising this option (or in the names of such person and his or her
spouse as community property or as joint tenants with right of survivorship).
The Company shall cause such certificate or certificates to be deposited in
escrow or delivered to or upon the order of the person exercising this option.
4.3 Withholding Taxes. In the event that the Company determines that it
is required to withhold any tax as a result of the exercise of this option, the
Optionee, as a condition to the exercise of this option, shall make arrangements
satisfactory to the Company to enable it to satisfy all withholding
requirements. The Optionee shall also make arrangements satisfactory to the
Company to enable it to satisfy any withholding requirements that may arise in
connection with the vesting or disposition of Shares purchased by exercising
this option, and shall provide to the Company his/her/its social security number
or employment identification number.
-2-
SECTION 5: PAYMENT FOR STOCK
5.1 General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in full by cash or cashier's check for an amount equal to
the aggregate Exercise Price for the number of shares being purchased.
Alternatively, in the sole discretion of the Plan Administrator and upon such
terms as the Plan Administrator shall approve, the Exercise Price may be paid
by:
5.1.1 Cashless Exercise. Provided the Company's Common Stock
is publicly traded, a copy of instructions to a broker directing such
broker to sell the Shares for which this option is exercised, and to
remit to the Company the aggregate Exercise Price of such option
("Cashless Exercise");
5.1.2 Stock-For-Stock Exercise. Paying all or a portion of the
Exercise Price for the number of Shares being purchased by tendering
Shares owned by the Optionee, duly endorsed for transfer to the
Company, with a Fair Market Value on the date of delivery equal to the
Exercise Price multiplied by the number of Shares with respect to which
this option is being exercised (the "Purchase Price") or the aggregate
Purchase Price of the shares with respect to which this option or
portion hereof is exercised ("Stock-for-Stock Exercise"); or
5.1.3 Attestation Exercise. By a stock for stock exercise by
means of attestation whereby the Optionee identifies for delivery
specific Shares already owned by Optionee and receives a number of
Shares equal to the difference between the Option Shares thereby
exercised and the identified attestation Shares ("Attestation
Exercise").
5.2 Withholding Payment. The Exercise Price shall include payment of
the amount of all federal, state, local or other income, excise or employment
taxes subject to withholding (if any) by the Company or any parent or subsidiary
corporation as a result of the exercise of a Stock Option. The Optionee may pay
all or a portion of the tax withholding by cash or check payable to the Company,
or, at the discretion of the Administrator, upon such terms as the Administrator
shall approve, by (i) Cashless Exercise or Attestation Exercise; (ii)
Stock-for-Stock Exercise; (iii) in the case of an Option, by paying all or a
portion of the tax withholding for the number of shares being purchased by
withholding shares from any transfer or payment to the Optionee ("Stock
withholding"); or (iv) a combination of one or more of the foregoing payment
methods. Any shares issued pursuant to the exercise of an Option and transferred
by the Optionee to the Company for the purpose of satisfying any withholding
obligation shall not again be available for purposes of the Plan. The fair
market value of the number of shares subject to Stock withholding shall not
exceed an amount equal to the applicable minimum required tax withholding rates.
5.3 Promissory Note. The Plan Administrator, in its sole discretion,
upon such terms as the Plan Administrator shall approve, may permit all or a
portion of the Exercise Price of Shares issued under the Plan to be paid with a
full-recourse promissory note. However, in the event there is a stated par value
of the shares and applicable law requires, the par value of the shares, if newly
issued, shall be paid in cash or cash equivalents. The Shares shall be pledged
as security for payment of the principal amount of the promissory note and
interest thereon, and shall be held in the possession of the Company until the
promissory note is repaid in full. Subject to the foregoing, the Plan
Administrator (at its sole discretion) shall specify the term, interest rate,
amortization requirements (if any) and other provisions of such note.
-3-
5.4 Exercise/Pledge. In the discretion of the Plan Administrator, upon
such terms as the Plan Administrator shall approve, payment may be made all or
in part by the delivery (on a form prescribed by the Plan Administrator) of an
irrevocable direction to pledge Shares to a securities broker or lender approved
by the Company, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the Exercise Price and any
withholding taxes.
SECTION 6: TERM AND EXPIRATION
6.1 Basic Term. This option shall expire and shall not be exercisable
after the expiration of the earliest of (i) the Expiration Date specified in the
Notice of Stock Option Grant, (ii) three months after the date the Optionee's
Service with the Company and its Subsidiaries terminates if such termination is
for any reason other than death, Disability or Cause, (iii) one year after the
date the Optionee's Service with the Company and its Subsidiaries terminates if
such termination is a result of death or Disability, and (iv) if the Optionee's
Service with the Company and its Subsidiaries terminates for Cause, all
outstanding Options granted to such Optionee shall expire as of the commencement
of business on the date of such termination. Outstanding Options that are not
exercisable at the time of termination of employment for any reason shall expire
at the close of business on the date of such termination. The Plan Administrator
shall have the sole discretion to determine when this option is to expire. For
any purpose under this Agreement, Service shall be deemed to continue while the
Optionee is on a bona fide leave of absence, if such leave to the extent
required by applicable law. To the extent applicable law does not require such a
leave to be deemed to continue while the Optionee is on a bona fide leave of
absence, such leave shall be deemed to continue if, and only if, expressly
provided in writing by the Administrator or a duly authorized officer of the
Company, Parent or Subsidiary for whom Optionee provides his or her services.
6.2 Exercise After Death. All or part of this option may be exercised
at any time before its expiration under Section 6.1 above by the executors or
administrators of the Optionee's estate or by any person who has acquired this
option directly from the Optionee by beneficiary designation, bequest or
inheritance, but only to the extent that this option had become exercisable
before the Optionee's death. When the Optionee dies, this option shall expire
immediately with respect to the number of Shares for which this option is not
yet exercisable and with respect to any Share that is subject to the Right of
Repurchase (as such term is defined in below) (the "Restricted Stock").
6.3 Notice Concerning ISO Treatment. If this option is designated as an
ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax
treatment as an ISO to the extent it is exercised (i) more than three months
after the date the Optionee ceases to be an Employee for any reason other than
death or permanent and total disability (as defined in Section 22(e)(3) of the
Code), (ii) more than 12 months after the date the Optionee ceases to be an
Employee by reason of such permanent and total disability, or (iii) after the
Optionee has been on a leave of absence for more than 90 days, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
-4-
SECTION 7: RIGHT OF REPURCHASE
7.1 Option Repurchase Right. Following a termination of the Optionee's
Service, the Company shall have the option to repurchase the Optionee's vested
and exercisable options at a price equal to the Fair Market Value of the Stock
underlying such options, less the Exercise Price (the "Option Repurchase
Right").
7.2 Stock Repurchase Right. Unless they have become vested in
accordance with the Notice of Stock Option Grant and Section 7.4 below, the
stock acquired under this Agreement initially shall be Restricted Stock and
shall be subject to a right (but not an obligation) of repurchase by the
Company, which shall be exercisable at a price equal to the Exercise Price paid
for the Restricted Stock (the "Stock Repurchase Right"). Vested stock acquired
under this Agreement shall be subject to a right (but not an obligation) of
repurchase by the Company, which shall be exercisable at a price equal to the
Fair Market Value of the vested Stock.
7.3 Condition Precedent to Exercise. The Option Repurchase Right and
Stock Repurchase Rights (collectively, the "Right of Repurchase") shall be
exercisable over Restricted Stock only during the 90-day period next following
the later of:
7.3.1 The date when the Optionee's Service terminates for any
reason, with or without Cause, including (without limitation) death or
disability; or
7.3.2 The date when this option was exercised by the Optionee,
the executors or administrators of the Optionee's estate, or any person
who has acquired this option directly from the Optionee by bequest,
inheritance or beneficiary designation.
7.4 Lapse of Right of Repurchase. The Right of Repurchase shall lapse
with respect to the Shares subject to this option in accordance with the vesting
schedule set forth in the Notice of Stock Option Grant. In addition, the Right
of Repurchase shall lapse and all of the remaining Restricted Stock shall become
vested if (i) a Change in Control occurs before the Optionee's Service
terminates, and (ii) the Right of Repurchase is not assigned to the entity that
employs the Optionee immediately after the Change in Control or to its parent or
subsidiary. The Right of Repurchase shall lapse with respect to (i) Shares that
are registered under a then currently effective registration statement under
applicable federal securities laws and the issuer is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act or becomes an investment
company registered or required to be registered under the Investment Company Act
of 1940, or (ii) Shares for which a determination is made by counsel for the
Company that such Exercise Price restrictions are not required in the
circumstances under applicable federal or state securities laws.
7.5 Exercise of Right of Repurchase. The Company shall exercise the
Right of Repurchase by written notice delivered to the Optionee prior to the
expiration of the 90-day period specified in Section 7.3 above. The notice shall
set forth the date on which the repurchase is to be effected, which must occur
within 31 days of the notice. The certificate(s) representing the Restricted
Stock to be repurchased shall, prior to the close of business on the date
specified for the repurchase, be delivered to the Company properly endorsed for
transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Optionee the Purchase Price determined according to
this Section 7. Payment shall be made in cash or cash equivalents or by
canceling indebtedness to the Company incurred by the Optionee in the purchase
of the Restricted Stock. The Right of Repurchase shall terminate with respect to
any Restricted Stock for which it has not been timely exercised pursuant to this
Section 7.5.
-5-
7.6 Rights of Repurchase Adjustments. If there is any change in the
number of outstanding shares of Stock by reason of a stock split, reverse stock
split, stock dividend, an extraordinary dividend payable in a form other than
stock, recapitalization, combination or reclassification, or a similar
transaction affecting the Company's outstanding securities without receipt of
consideration, then (i) any new, substituted or additional securities or other
property (including money paid other than as an ordinary cash dividend)
distributed with respect to any Restricted Stock (or into which such Restricted
Stock thereby become convertible) shall immediately be subject to the Right of
Repurchase; and (ii) appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Stock and to the price per share to be paid upon the exercise of the
Right of Repurchase; provided, however, that the aggregate Purchase Price
payable for the Restricted Stock shall remain the same.
7.7 Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Stock to be repurchased in
accordance with this Section 7, then after such time the person from whom such
Restricted Stock is to be repurchased shall no longer have any rights as a
holder of such Restricted Stock (other than the right to receive payment of such
consideration in accordance with this Agreement). Such Restricted Stock shall be
deemed to have been repurchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefore have been delivered as
required by this Agreement.
7.8 Escrow. Upon issuance, the certificates for Restricted Stock shall
be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Section 7.6 above shall immediately be delivered to
the Company to be held in escrow, but only to the extent the Shares are at the
time Restricted Stock. All regular cash dividends on Restricted Stock (or other
securities at the time held in escrow) shall be paid directly to the Optionee
and shall not be held in escrow. Restricted Stock, together with any other
assets or securities held in escrow hereunder, shall be (i) surrendered to the
Company for repurchase and cancellation upon the Company's exercise of its Right
of Repurchase or Right of First Refusal or (ii) released to the Optionee upon
the Optionee's request to the extent the Shares are no longer Restricted Stock
(but not more frequently than once every six months). In any event, all Shares
which have vested (and any other vested assets and securities attributable
thereto) shall be released within 60 days after the earlier of (i) the
Optionee's cessation of Service or (ii) the lapse of the Right of First Refusal.
SECTION 8: RIGHT OF FIRST REFUSAL
8.1 Right of First Refusal. In the event that the Company's stock is
not readily tradable on an established securities market and the Optionee
proposes to sell, pledge or otherwise transfer to a third party any Shares
acquired under this Agreement, or any interest in such Shares, to any person,
entity or organization (the "Transferee") the Company shall have the Right of
First Refusal with respect to all (and not less than all) of such Shares (the
"Right of First Refusal"). If the Optionee desires to transfer Shares acquired
under this Agreement, the Optionee shall give a written transfer notice
("Transfer Notice") to the Company describing fully the proposed transfer,
including the number of Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to
the Company that the proposed sale or transfer will not violate any applicable
federal or state securities laws. The Transfer Notice shall be signed both by
the Optionee and by the proposed Transferee and must constitute a binding
commitment of both parties to the transfer of the Shares. The Company shall have
the right to purchase all, and not less than all, of the Shares on the terms of
-6-
the proposal described in the Transfer Notice by delivery of a notice of
exercise of the Right of First Refusal within 30 days after the date when the
Transfer Notice was received by the Company. The Company's rights under this
Section 8.1 shall be freely assignable, in whole or in part.
8.2 Additional Shares or Substituted Securities. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Shares subject to this Section 8 or into which
such Shares thereby become convertible shall immediately be subject to this
Section 8. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Shares
subject to this Section 8.
8.3 Termination of Right of First Refusal. Any other provision of this
Section 8 notwithstanding, in the event that the Stock is readily tradable on an
established securities market when the Optionee desires to transfer Shares, the
Company shall have no Right of First Refusal, and the Optionee shall have no
obligation to comply with the procedures prescribed by this Section 8.
8.4 Permitted Transfers. This Section 8 shall not apply to a transfer
(i) by gift to a member of the Participant's immediate family or (ii) by
transfer by instrument to a trust providing that the Option is to be passed to
beneficiaries upon death of the Settlor. For purposes of this Section 8.4,
"immediate family" shall mean the Optionee's spouse (including a former spouse
subject to terms of a domestic relations order); child, stepchild, grandchild,
child-in-law; parent, stepparent, grandparent, parent-in-law; sibling and
sibling-in-law, and shall include adoptive relationships.
8.5 Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Shares to be purchased in accordance with
this Section 8, then after such time the person from whom such Shares are to be
purchased shall no longer have any rights as a holder of such Shares (other than
the right to receive payment of such consideration in accordance with this
Agreement). Such Shares shall be deemed to have been purchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefore have been delivered as required by this Agreement.
SECTION 9: OBLIGATION TO SELL.
Notwithstanding anything herein to the contrary, if at any time
following Optionee's acquisition of Shares hereunder, stockholders of the
Company owning 51% or more of the shares of the Company (on a fully diluted
basis) (the "Control Sellers") enter into an agreement (including any agreement
in principal) to transfer all of their shares to any person or group of persons
who are not affiliated with the Control Sellers, such Control Sellers may
require each stockholder who is not a Control Seller (a "Non-Control Seller") to
sell all of their shares to such person or group of persons at a price and on
terms and conditions the same as those on which such Control Sellers have agreed
to sell their shares, other than terms and conditions relating to the
performance or non-performance of services. For the purposes of the preceding
sentence, an affiliate of a Control Seller is a person who controls, which is
controlled by, or which is under common control with, the Control Seller.
-7-
SECTION 10: STOCKHOLDERS AGREEMENT
As a condition to the transfer of Stock pursuant to this Stock Option
Agreement, the Administrator, in its sole and absolute discretion, may require
the Participant to execute and become a party to any agreement by and among the
Company and any of its stockholders which exists on or after the Date of Grant
(the "Stockholders Agreement"). If the Participant becomes a party to a
Stockholders Agreement, in addition to the terms of the Plan and this Stock
Option Agreement, the terms and conditions of Stockholders Agreement shall
govern Participant's rights in and to the Stock; and if there is any conflict
between the provisions of the Stockholders Agreement and the Plan or any
conflict between the provisions of the Stockholders Agreement and this Stock
Option Agreement, the provisions of the Stockholders Agreement shall be
controlling. Notwithstanding anything to the contrary in this Section 10, if the
Stockholders Agreement contains any provisions which would violate Texas
corporate law if applied to the Participant, the terms of the Plan and this
Stock Option Agreement shall govern the Participant's rights with respect to
such provisions.
SECTION 11: LEGALITY OF INITIAL ISSUANCE
No Shares shall be issued upon the exercise of this option unless and
until the Company has determined that:
11.1 It and the Optionee have taken any actions required to register
the Shares, provided the Stock is publicly traded, under the Securities Act of
1933, as amended (the "Securities Act"), or to perfect an exemption from the
registration requirements thereof;
11.2 Any applicable listing requirement of any stock exchange on which
Stock is listed has been satisfied; and
11.3 Any other applicable provision of state or federal law has been
satisfied.
SECTION 12: NO REGISTRATION RIGHTS
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The Company
shall not be obligated to take any affirmative action in order to cause the sale
of Shares under this Agreement to comply with any law.
SECTION 13: RESTRICTIONS ON TRANSFER
13.1 Securities Law Restrictions. Regardless of whether the offering
and sale of Shares under the Plan have been registered under the Securities Act
or have been registered or qualified under the securities laws of any state, the
Company, at its discretion, may impose restrictions upon the sale, pledge or
other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the
judgment of the Company, such restrictions are necessary or desirable in order
to achieve compliance with the Securities Act, the securities laws of any state
or any other law.
13.2 Market Stand-Off. In the event of an underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Act, including the Company's initial public offering
(a "Public Offering"), the Optionee shall not transfer for value any shares of
Stock without the prior written consent of the Company or its underwriters, for
such period of time from and after the effective date of such registration
statement as may be requested by the Company or such underwriters (the "Market
-8-
Stand-Off"). The Market Stand-off shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or such underwriters. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any Shares subject to the Market Stand-Off, or into which such Shares thereby
become convertible, shall immediately be subject to the Market Stand-Off. In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to the Shares acquired under this Agreement until the
end of the applicable stand-off period.
13.3 Investment Intent at Grant. The Optionee represents and agrees
that the Shares to be acquired upon exercising this option will be acquired for
investment, and not with a view to the sale or distribution thereof.
13.4 Investment Intent at Exercise. In the event that the sale of
Shares under the Plan is not registered under the Securities Act but an
exemption is available which requires an investment representation or other
representation, the Optionee shall represent and agree at the time of exercise
that the Shares being acquired upon exercising this option are being acquired
for investment, and not with a view to the sale or distribution thereof, and
shall make such other representations as are deemed necessary or appropriate by
the Company and its counsel.
13.5 Legends. All certificates evidencing Shares purchased under this
Agreement in an unregistered transaction shall bear the following legend (and
such other restrictive legends as are required or deemed advisable under the
provisions of any applicable law):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED."
13.6 Removal of Legends. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement no longer is required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but without such legend.
13.7 Administration. Any determination by the Company and its counsel
in connection with any of the matters set forth in this Section 13 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 14: MISCELLANEOUS PROVISIONS
14.1 Rights as a Stockholder. Neither the Optionee nor the Optionee's
representative shall have any rights as a stockholder with respect to any Shares
subject to this option until the Optionee or the Optionee's representative
becomes entitled to receive such Shares by filing a notice of exercise and
paying the Exercise Price pursuant to Section 4 and Section 5 hereof.
-9-
14.2 Adjustments. If there is any change in the number of outstanding
shares of Stock by reason of a stock split, reverse stock split, stock dividend,
recapitalization, combination or reclassification, then (i) the number of shares
subject to this option and (ii) the Exercise Price of this option, in effect
prior to such change, shall be proportionately adjusted to reflect any increase
or decrease in the number of issued shares of Stock; provided, however, that any
fractional shares resulting from the adjustment shall be eliminated.
14.3 No Retention Rights. Nothing in this option or in the Plan shall
confer upon the Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the Optionee)
or of the Optionee, which rights are hereby expressly reserved by each, to
terminate his or her Service at any time and for any reason, with or without
Cause.
14.4 Notice. Any notice required by the terms of this Agreement shall
be given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail,
with postage and fees prepaid. Notice shall be addressed the Optionee at the
address set forth in the records of the Company. Notice shall be addressed to
the Company at:
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE
SUITE 314, PMB 106
TROPHY CLUB, TEXAS 76262
14.5 Entire Agreement. The Notice of Stock Option Grant, this Agreement
and the Plan constitute the entire contract between the parties hereto with
regard to the subject matter hereof. They supersede any other agreements,
representations or understandings (whether oral or written and whether express
or implied) that relate to the subject matter hereof.
14.6 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CHOICE
OF LAWS PROVISIONS, AS TEXAS LAWS ARE APPLIED TO CONTRACTS ENTERED INTO AND
PERFORMED IN SUCH STATE.
14.7 Attorneys' Fees. In the event that any action, suit or proceeding
is instituted upon any breach of this Agreement, the prevailing party shall be
paid by the other party thereto an amount equal to all of the prevailing party's
costs and expenses, including attorneys' fees incurred in each and every such
action, suit or proceeding (including any and all appeals or petitions
therefrom). As used in this Agreement, "attorneys' fees" shall mean the full and
actual cost of any legal services actually performed in connection with the
matter involved calculated on the basis of the usual fee charged by the attorney
performing such services and shall not be limited to "reasonable attorneys'
fees" as defined in any statute or rule of court.
-10-
EXHIBIT A
TO
2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD INCENTIVE PLAN:
STOCK OPTION AGREEMENT
ANNEX I
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE
SUITE 314, PMB 106
TROPHY CLUB, TEXAS 76262
The undersigned, the holder of the enclosed Stock Option Agreement, hereby
irrevocably elects to exercise the purchase rights represented by the Option and
to purchase thereunder __________* shares of Common Stock of INTREORG SYSTEMS,
INC. (the "Company"), and herewith encloses payment of $_______ and/or _________
shares of the Company's common stock in full payment of the purchase price of
such shares being purchased.
Dated:
- ------------------------------
NOTICE: YOUR STOCK MAY BE SUBJECT TO RESTRICTIONS AND FORFEITABLE UNDER THE
NOTICE OF STOCK OPTION GRANT AND STOCK OPTION AGREEMENT
(Signature must conform in all respects to name of holder as specified on the
face of the Option)
- --------------------------------------------------------------
- --------------------------------------------------------------
(Please Print Name)
- --------------------------------------------------------------
- --------------------------------------------------------------
(Address)
* Insert here the number of shares called for on the face of the Option, or, in
the case of a partial exercise, the number of shares being exercised, in either
case without making any adjustment for additional Common Stock of the Company,
other securities or property that, pursuant to the adjustment provisions of the
Option, may be deliverable upon exercise.
FORM OF RESOLUTIONS FOR OPTION GRANTS
RESOLUTIONS ADOPTED BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
INTREORG SYSTEMS, INC.
As of ______________, 2010
The undersigned directors, constituting the entire board of directors (the
"Board") of INTREORG SYSTEMS, INC., a Texas corporation (the "Company"), hereby
take the following actions, adopt the following resolutions, and transact the
following business, by written consent without a meeting, as of the date above
written, pursuant to the applicable corporate laws of the State of Texas and the
Company's Bylaws.
WHEREAS, the Company previously adopted the 2010 INTREORG SYSTEMS, INC. STOCK
OPTION AND AWARD INCENTIVE PLAN (the "Plan"), and has delegated the
responsibility to administer the Plan to the Board;
WHEREAS, Two Million (2,000,000) shares of Common Stock of the Company were
originally reserved for issuance under the Plan;
WHEREAS, as of the date hereof, ___ Million (__,000,000) shares remain available
for issuance under the Plan; and
WHEREAS, the Board has determined that it is in the best interests of this
Company and its stockholders to provide, under the Plan, equity incentives to
those employees, directors and/or consultants of the Company identified below.
NOW, THEREFORE, BE IT RESOLVED, that the persons listed on the Exhibit A, which
is attached hereto and incorporated herein by reference, which exhibit was
reviewed by the Board and shall be included with this Consent, are hereby
granted, as of the date hereof, an option (the "Option") to purchase the number
of shares with the vesting schedule and exercise price as set forth in Exhibit
A;
RESOLVED FURTHER, that each of the Options shall be either a Non-Qualified Stock
Option or an ISO (as such terms are defined in the Plan) as specified in Exhibit
A;
RESOLVED FURTHER, that the Options shall be evidenced by stock option agreements
and be subject to the restrictions (including transfer and/or repurchase
rights), if any, set forth in such stock option agreements;
RESOLVED FURTHER, that the Options shall be granted pursuant to the exemptions
provided under Section 701 of the Securities Act Rules and Texas Securities
Laws;
RESOLVED FURTHER, that there is hereby reserved and set aside under the Plan the
number of shares adequate to cover the shares underlying the Options granted
herein; and
RESOLVED FURTHER, that the officers of this Company, and each of them, be, and
they hereby are, authorized, directed and empowered for and on behalf of the
Company to do or cause to be done all such acts and things and to sign, deliver
and/or file all such documents and notices as any of such officers may deem
necessary or advisable in order to carry out and perform the foregoing
resolutions and the intention thereof.
The Secretary of the Corporation is directed to file the original executed copy
of this Consent with the minutes of proceedings of the Board.
IN WITNESS WHEREOF, each of the undersigned has executed this consent as of the
date first written above.
DIRECTORS:
- -------------------------------------- ---------------------------------------
Russell K. Boyd Malcolm C. Davenport, V
- --------------------------------------
Redgie T. Green
EXHIBIT A
TO
FORM OF RESOLUTIONS FOR OPTION GRANTS
Stock Option Grant Information
- -------------- --------------- ------------ ----------------- -----------------
Name No. Shares ISO or NQSO Exercise Price* Vesting Schedule
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
- -------------- --------------- ------------ ----------------- -----------------
* In the case of an ISO, the per share exercise price must be at least 100% of
the Fair Market Value (as such term is defined in the Plan) of the underlying
share as of the date of grant. In the case of a NQSO, the per share exercise
price must be at least 85% of the Fair Market Value of the underlying share as
of the date of grant.
STOCK PURCHASE AGREEMENT
STOCK PURCHASE CERTIFICATE
THIS IS TO CERTIFY that INTREORG SYSTEMS, INC., a Texas corporation (the
"Company"), has offered you (the "Purchaser") the right to purchase Common Stock
(the "Stock" or "Shares") of the Company under its 2010 INTREORG SYSTEMS, INC.
STOCK OPTION AND AWARD INCENTIVE PLAN (the "Plan"), as follows:
- --------------------------------------------- ----------------------------------
Name of Purchaser:
- --------------------------------------------- ----------------------------------
Address of Purchaser:
- --------------------------------------------- ----------------------------------
- --------------------------------------------- ----------------------------------
- --------------------------------------------- ----------------------------------
Number of Shares:
- --------------------------------------------- ----------------------------------
Purchase Price: $
- --------------------------------------------- ----------------------------------
Offer Grant Date:
- --------------------------------------------- ----------------------------------
Offer Expiration Date: 15 days after the Offer Grant Date
- --------------------------------------------- ----------------------------------
Vesting Commencement Date:
- --------------------------------------------- ----------------------------------
Vesting Schedule:
- --------------------------------------------- ----------------------------------
- --------------------------------------------- ----------------------------------
By your signature and the signature of the Company's representative below, you
and the Company agree to be bound by all of the terms and conditions of the
Stock Purchase Agreement, which is attached hereto as Annex I and the Plan (both
incorporated herein by this reference as if set forth in full in this document).
By executing this Agreement, Purchaser hereby irrevocably elects to exercise the
purchase rights granted pursuant to the Stock Purchase Agreement and to purchase
________ shares of Stock of INTREORG SYSTEMS, INC., and herewith encloses
payment of $ ____________ in payment of the purchase price of the shares being
purchased.
PURCHASER: INTREORG SYSTEMS, INC.
By:_________________________________ By:______________________
Russell K. Boyd
Print Name:_________________________ Its: Chief Executive Officer
President and Chief Financial Officer
-1-
ANNEX I
to
STOCK PURCHASE AGREEMENT
THE STOCK GRANTED PURSUANT TO THIS AGREEMENT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION UNDER SUCH ACT OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.
2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD INCENTIVE PLAN:
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into on the
execution date of the Stock Purchase Certificate to which it is attached (the
"Certificate"), by and between INTREORG SYSTEMS, INC., a Texas corporation (the
"Company"), and the Director, Employee or Consultant ("Purchaser") named in the
Certificate.
Pursuant to the 2010 INTREORG SYSTEMS, INC. STOCK OPTION AND AWARD INCENTIVE
PLAN (the "Plan"), the Administrator of the Plan has authorized the grant to
Purchaser of the right to purchase shares of the Company's Common Stock, upon
the terms and subject to the conditions set forth in this Agreement and in the
Plan. Capitalized terms not otherwise defied herein shall have the meanings
ascribed to them in the Plan.
SECTION 1: THE OFFER.
1.1 Offer of the Stock. The Company hereby offers to sell to purchaser
the number of shares of stock set forth in the certificate at the price and
subject to the restrictions set forth in this Agreement (the shares of stock
which you purchase under this agreement are referred to as the "Stock" or
"Shares").
1.2 Purchase Price. The Purchase Price for the Stock is set forth in
the Certificate.
1.3 Payment For The Stock. Purchaser may pay for the stock by
delivering to the company the purchase price in the form of either (i) cash or
cashier's check or (ii) your promissory note, in the form of the Promissory Note
attached to this agreement as Exhibit A. If Purchaser pays for the stock by
delivery of the Promissory Note, Purchaser must also deliver to the company at
the same time one executed copy of both the Security Agreement attached as
Exhibit B and the Stock Assignment attached as Exhibit C.
1.4 Expiration of Offer. This offer expires at 5:00 o'clock p.m. on the
date set forth in the certificate.
-2-
SECTION 2: ACCEPTANCE OF THE OFFER.
There is no obligation to exercise the rights granted to you under this
Agreement, in whole or in part. Purchaser may purchase fewer shares than the
number offered to Purchaser in this Agreement. If Purchaser decides to accept
the offer and purchase any shares offered, Purchaser must do the following:
2.1 Complete Documents. Complete, sign and date one copy of the
Certificate, and, if Purchaser is paying by delivery of a promissory note, one
copy each of the attached Promissory Note, Security Agreement and Stock
Assignment;
2.2 Spousal Consent. If Purchaser is married, Purchaser must have his
or her spouse sign and date one copy of the attached Spousal Consent; and
2.3 Deliver to Company. Deliver to the Company on or before the time
the offer expires, the signed copy of this Agreement, the Spousal Consent, and
payment for the Stock, in cash, by cashier's check or by the Promissory Note. If
Purchaser is paying for the stock by the Promissory Note, Purchaser must also
deliver to the Company the executed original Promissory Note, Security Agreement
and Stock Assignment.
Purchaser should retain a copy of all of the signed documents for his or her
files, and if Purchaser does so, Purchaser should mark the retained copy of the
Promissory Note "COPY." THE SIGNED PROMISSORY NOTE IS A NEGOTIABLE INSTRUMENT
AND IS ENFORCEABLE AGAINST PURCHASER BY ANY HOLDER OF THE PROMISSORY NOTE, AND
ANY ADDITIONAL SIGNED COPIES WHICH ARE NOT MARKED "COPY" MAY ALSO BE NEGOTIABLE
INSTRUMENTS WHICH ARE ENFORCEABLE AGAINST PURCHASER BY THEIR HOLDER.
SECTION 3: RESTRICTIONS ON THE STOCK.
3.1 Restrictions on Transfer of Shares. Purchaser shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option for the
repurchase of, or otherwise dispose or transfer for value (each a "Transfer") or
otherwise agree to engage in any of the foregoing transactions with respect to
any shares of Stock. The Company shall not be required to register any such
Transfer and the Company may instruct its transfer agent not to register any
such Transfer, unless and until all of the following events shall have occurred:
3.1.1 The Company has declined to exercise the right of first
refusal provided for in Section 5 hereof;
3.1.2 The Shares are Transferred pursuant to and in conformity
with: (i) (x) an effective registration statement filed with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Act") or (y) an exemption from
registration under the Act; and (ii) the securities laws of any state
of the United States; and
3.1.3 Purchaser has, prior to the Transfer of such Shares, and
if requested by the Company, provided all relevant information to the
Company's counsel so that upon the Company's request, the Company's
counsel is able to deliver, and actually prepares and delivers to the
Company a written opinion that the proposed Transfer is: (i) (x)
pursuant to a registration statement which has been filed with the
Commission and is then effective or (y) exempt from registration under
-3-
the Act as then in effect, and the Rules and Regulations of the
Commission thereunder; and (ii) is either qualified or registered under
any applicable state securities laws, or exempt from such qualification
or registration. The Company shall bear all reasonable costs of
preparing such opinion.
3.2 Additional Restrictions on Transfer of Non-Vested Shares. Purchaser
agrees, for himself or herself and for his or her heirs, successors and assigns,
that Purchaser shall have no right or power under any circumstance to Transfer
any interest in shares of the Stock which are "Non-Vested Shares," as determined
by the schedule set forth in the Certificate, except to the Company. As used in
this Agreement, "Vested Shares" means all shares of the Stock which Purchaser
has the right to Transfer at a specified point in time and "Non-Vested Shares"
means all shares of the Stock which Purchaser does not have the right to
Transfer at a specified point in time. The Certificate sets forth the vesting
schedule.
3.3 Company's Repurchase Right.
3.3.1 Scope of Repurchase Right. Unless they have become
vested, the Shares acquired under this Agreement initially shall be
"Restricted Stock" and shall be subject to a right (but not an
obligation) of repurchase by the Company (the "Repurchase Right"). The
Purchaser shall not transfer, assign, encumber or otherwise dispose of
any Restricted Stock, except as provided in the following sentence. The
Purchaser may transfer Restricted Stock:
3.3.1.1 By testament or intestate succession or by
transfer by instrument to a trust providing that the
Restricted Stock is to be passed to one or more beneficiaries
upon death of the Settlor; or
3.3.1.2 To the Purchaser's "immediate family," as
that term is defined in the Plan (together, "Transferee").
Provided, however, in either case the Transferee must
agree in writing on a form prescribed by the Company to be
bound by all provisions of this Agreement. If the Purchaser
transfers any Restricted Stock, then this Section 3 will apply
to the Transferee to the same extent as to the Purchaser.
3.3.2 Exercise Period. The Repurchase Right shall be
exercisable only during the 90-day period following the later of the
date when the Purchaser's service as an Employee, outside Director or
Consultant ("Service") terminates for any reason, with or without
cause, including (without limitation) death or disability.
3.3.3 Non Applicability and Lapse of Repurchase Right. The
Repurchase Right shall lapse with respect to the Shares in accordance
with the vesting schedule set forth in the Certificate. In addition,
the Repurchase Right shall lapse and all of such Stock shall become
vested if (i) a Change in Control occurs before the Purchaser's Service
terminates and (ii) the options are not assumed by, or Repurchase Right
is not assigned to, the entity that employs the Participant immediately
after the Change in Control or to its parent or subsidiary.
The Repurchase Right shall not exist with respect to shares of
Stock that have been registered under a then currently effective
registration statement under applicable federal securities laws and the
issuer is subject to the reporting requirements of Section 13 or 15(d)
-4-
of the Exchange Act or becomes an investment company registered or
required to be registered under the Investment Company Act of 1940, or
(ii) a determination is made by counsel for the Company that such
Exercise Price restrictions are not required in the circumstances under
applicable federal or state securities laws.
3.3.4 Repurchase Price. Following a termination of the
Participant's Service, which does not result from the Company's
termination of Service for Cause, the Repurchase Right shall be
exercisable at a price equal to (i) the Fair Market Value of vested
Stock and (ii) the Purchase Price of unvested Stock. Following the
termination of the Participant's Service for Cause, the Repurchase
Right shall be exercisable as to both vested and unvested Shares at a
price equal to the Purchase Price as set forth in the Certificate.
3.3.5 Rights of Repurchase Adjustments. If there is any change
in the number of outstanding shares of Stock by reason of a stock
split, reverse stock split, stock dividend, an extraordinary dividend
payable in a form other than stock, recapitalization, combination or
reclassification, or a similar transaction affecting the Company's
outstanding securities without receipt of consideration, then (i) any
new, substituted or additional securities or other property (including
money paid other than as an ordinary cash dividend) distributed with
respect to any Restricted Stock (or into which such Restricted Stock
thereby become convertible) shall immediately be subject to the Right
of Repurchase; and (ii) appropriate adjustments to reflect the
distribution of such securities or property shall be made to the number
and/or class of the Restricted Stock and to the price per share to be
paid upon the exercise of the Right of Repurchase; provided, however,
that the aggregate Purchase Price payable for the Restricted Stock
shall remain the same.
3.3.6 Escrow. Upon issuance, the certificates for Restricted
Stock shall be deposited in escrow with the Company to be held in
accordance with the provisions of this Agreement. Any new, substituted
or additional securities or other property described in Section 3.3.5
above shall immediately be delivered to the Company to be held in
escrow, but only to the extent the Shares are at the time Restricted
Stock. All regular cash dividends on Restricted Stock (or other
securities at the time held in escrow) shall be paid directly to the
Purchaser and shall not be held in escrow. Restricted Stock, together
with any other assets or securities held in escrow hereunder, shall be
(i) surrendered to the Company for repurchase and cancellation upon the
Company's exercise of its Right of Repurchase or Right of First Refusal
or (ii) released to the Purchaser upon the Purchaser's request to the
extent the Shares are no longer Restricted Stock (but not more
frequently than once every six months). In any event, all Shares which
have vested (and any other vested assets and securities attributable
thereto) shall be released within 60 days after the earlier of (i) the
Purchaser's cessation of Service or (ii) the lapse of the Right of
First Refusal.
3.4 Retention of Non-Vested Shares. Purchaser shall immediately deliver
to the Company each certificate representing Non-Vested Shares issued to
Purchaser hereunder, or deemed to be issued to Purchaser hereunder, together
with the collateral instruments of transfer executed in blank, to be held by the
Company until such time as all shares represented by that certificate are Vested
Shares and any indebtedness with respect to those shares has been paid in full;
provided, however, that if the Company holds a certificate representing Vested
-5-
Shares and Non-Vested Shares, and any indebtedness with respect to the Vested
Shares has been paid in full, upon Purchaser's request the Company will cause a
certificate representing the Vested Shares to be delivered to Purchaser, but the
Company will retain any certificate representing the Non-Vested Shares.
3.5 Non-Complying Transfers. Every attempted Transfer of any shares of
the Stock in violation of this Section 3 shall be null and void ab initio, and
of no force or effect.
SECTION 4: LEGENDS ON STOCK CERTIFICATES.
Purchaser agrees that the Company may place on each certificate representing
Shares the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT BETWEEN THE ISSUER AND THE REGISTERED HOLDER OF
THIS CERTIFICATE, WHICH AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT THE ISSUER
HAS A RIGHT TO REPURCHASE THE SECURITIES EVIDENCED BY THIS CERTIFICATE. A COPY
OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER."
SECTION 5: RIGHT OF FIRST REFUSAL.
5.1 Right of First Refusal. In the event that the Stock is not readily
tradable on an established securities market and the Purchaser proposes to sell,
pledge or otherwise transfer to a third party any Shares acquired under this
Agreement, or any interest in such Shares, to any person, entity or organization
(the "Transferee") the Company shall have the Right of First Refusal with
respect to all (and not less than all) of such Shares (the "Right of First
Refusal"). If the Purchaser desires to transfer Shares acquired under this
Agreement, the Purchaser shall give a written transfer notice ("Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Shares proposed to be transferred, the proposed transfer price, the
name and address of the proposed Transferee and proof satisfactory to the
Company that the proposed sale or transfer will not violate any applicable
federal or state securities laws. The Transfer Notice shall be signed both by
the Purchaser and by the proposed Transferee and must constitute a binding
commitment of both parties to the transfer of the Shares. The Company shall have
the right to purchase all, and not less than all, of the Shares on the terms of
the proposal described in the Transfer Notice by delivery of a notice of
exercise of the Right of First Refusal within 30 days after the date when the
Transfer Notice was received by the Company. The Company's rights under this
Section 5 shall be freely assignable, in whole or in part.
5.2 Additional Shares or Substituted Securities. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Shares subject to this Section 5 or into which
such Shares thereby become convertible shall immediately be subject to this
Section 5. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Shares
subject to this Section 5.
5.3 Termination of Right of First Refusal. Any other provision of this
Section 5 notwithstanding, in the event that the Stock is readily tradable on an
established securities market when the Purchaser desires to transfer Shares, the
-6-
Company shall have no Right of First Refusal, and the Purchaser shall have no
obligation to comply with the procedures prescribed by this Section 5.
5.4 Permitted Transfers. This Section 5 shall not apply to a transfer
(i) by gift to a member of the Participant's immediate family or (ii) by
transfer by instrument to a trust providing that the Shares is to be passed to
beneficiaries upon death of the Settlor. For purposes of this Section 5.4,
"immediate family" shall mean the Purchaser's spouse (including a former spouse
subject to terms of a domestic relations order); child, stepchild, grandchild,
child-in-law; parent, stepparent, grandparent, parent-in-law; sibling and
sibling-in-law, and shall include adoptive relationships.
5.5 Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Shares to be purchased in accordance with
this Section 5, then after such time the person from whom such Shares are to be
purchased shall no longer have any rights as a holder of such Shares (other than
the right to receive payment of such consideration in accordance with this
Agreement). Such Shares shall be deemed to have been purchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefor have been delivered as required by this Agreement.
SECTION 6: OBLIGATION TO SELL.
Notwithstanding anything herein to the contrary, if at any time following
Purchaser's acquisition of Shares hereunder, stockholders of the Company owning
51% or more of the shares of the Company (on a fully diluted basis) (the
"Control Sellers") enter into an agreement (including any agreement in
principal) to transfer all of their shares to any person or group of persons who
are not affiliated with the Control Sellers, such Control Sellers may require
each stockholder who is not a Control Seller (a "Non-Control Seller") to sell
all of their shares to such person or group of persons at a price and on terms
and conditions the same as those on which such Control Sellers have agreed to
sell their shares, other than terms and conditions relating to the performance
or non-performance of services. For the purposes of the preceding sentence, an
affiliate of a Control Seller is a person who controls, which is controlled by,
or which is under common control with, the Control Seller.
SECTION 7: STOCKHOLDERS AGREEMENT.
As a condition to the transfer of Stock pursuant to this Stock Purchase
Agreement, the Administrator, in its sole and absolute discretion, may require
the Participant to execute and become a party to any agreement by and among the
Company and any of its stockholders which exists on or after the Date of Grant
(the "Stockholders Agreement"). If the Participant becomes a party to a
Stockholders Agreement, in addition to the terms of the Plan and this Stock
Purchase Agreement, the terms and conditions of Stockholders Agreement shall
govern Participant's rights in and to the Stock; and if there is any conflict
between the provisions of the Stockholders Agreement and the Plan or any
conflict between the provisions of the Stockholders Agreement and this Stock
Purchase Agreement, the provisions of the Stockholders Agreement shall be
controlling. Notwithstanding anything to the contrary in this Section 7, if the
Stockholders Agreement contains any provisions which would violate Texas law if
applied to the Participant, the terms of the Plan and this Stock Purchase
Agreement shall govern the Participant's rights with respect to such provisions.
-7-
SECTION 8: WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Agreement, Purchaser acknowledges and agrees that neither the
Company nor any other person or entity is under any obligation to sell or
transfer to Purchaser any option or equity security of the Company, other than
the shares of Stock subject to this Agreement and any other right or option to
purchase Stock which was previously granted in writing to Purchaser by the Board
(or a committee thereof). By signing this Agreement, except as provided in the
immediately preceding sentence, Purchaser specifically waives all rights he or
she may have had prior to the date of this Agreement to receive any option or
equity security of the Company.
SECTION 9: INVESTMENT INTENT.
Purchaser represents and agrees that if he or she purchases the Stock in whole
or in part and if at the time of such purchase the Stock has not been registered
under the Act, that he or she will acquire the Stock upon such purchase for the
purpose of investment and not with a view to the distribution of such Stock and
upon each purchase, he or she will furnish to the Company a written statement to
such effect.
SECTION 10: GENERAL PROVISIONS.
10.1 Further Assurances. Purchaser shall promptly take all actions and
execute all documents requested by the Company which the Company deems to be
reasonably necessary to effectuate the terms and intent of this Agreement. Any
sale or transfer of the Stock to Purchaser by the Company shall be made free of
any and all claims, encumbrances, liens and restrictions of every kind, other
than those imposed by this Agreement.
10.2 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be given to the parties
hereto as follows:
10.2.1 If to the Company, to:
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE
SUITE 314, PMB 106
TROPHY CLUB, TEXAS 76262
10.2.2 If to Purchaser, to the address set forth in the
records of the Company.
10.2.3 Any such notice request, demand or other communication
shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail,
return receipt requested, postage pre-paid, addressed as aforesaid, or
(ii) if given by any other means, when delivered at the address
specified in this Section 10.2.
10.3 Transfer of Rights under this Agreement. The Company may at any
time transfer and assign its rights and delegate its obligations under this
Agreement to any other person, Company, firm or entity, including its officers,
Directors and stockholders, with or without consideration.
10.4 Purchase Rights Non Transferable. Purchaser may not sell,
transfer, assign or otherwise dispose of any rights hereunder except by
testament or the laws of descent and distribution and the rights hereunder may
-8-
be exercised during the lifetime of Purchaser only by the Purchaser or by his or
her guardian or legal representative.
10.5 Market Stand-Off. In the event of an underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Act, including the Company's initial public offering
(a "Public Offering"), Purchaser shall not transfer for value any shares of
Stock without the prior written consent of the Company or its underwriters, for
such period of time from and after the effective date of such registration
statement as may be requested by the Company or such underwriters (the "Market
Stand-Off"). The Market Stand-Off shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or such underwriters. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any Shares subject to the Market Stand-Off, or into which such Shares thereby
become convertible, shall immediately be subject to the Market Stand-Off. In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to the Shares acquired under this Agreement until the
end of the applicable stand-off period.
10.6 Adjustment. If there is any change in the number of outstanding
shares of Stock by reason of a stock split, reverse stock split, stock dividend,
an extraordinary dividend payable in a form other than stock, recapitalization,
combination or reclassification, or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, then (i) any
new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) distributed with respect to any
Restricted Stock (or into which such Restricted Stock thereby become
convertible) shall immediately be subject to the Repurchase Right; and (ii)
appropriate adjustments to reflect the distribution of such securities or
property shall be made to the number and/or class of the Restricted Stock and to
the price per share to be paid upon the exercise of the Repurchase Right;
provided, however, that the aggregate purchase price payable for the Restricted
Stock shall remain the same.
10.7 Successors and Assigns. Except to the extent this Agreement is
specifically limited by the terms and provisions of this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successor, assigns, heirs and personal representatives.
10.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CHOICE
OF LAW PROVISIONS, AS TEXAS LAWS ARE APPLIED TO CONTRACTS ENTERED INTO AND
PERFORMED IN SUCH STATE.
10.9 Severability. Should any paragraph or any part of a paragraph
within this Stock Purchase Agreement be rendered void, invalid or unenforceable
by any court of law for any reason, such invalidity or unenforceability shall
not void or render invalid or unenforceable any other paragraph or part of a
paragraph in this Stock Purchase Agreement.
10.10 Attorneys' Fees. In the event that any action, suit or proceeding
is instituted upon any breach of this Agreement, the prevailing party shall be
paid by the other party thereto an amount equal to all of the prevailing party's
costs and expenses, including attorneys' fees incurred in each and every such
action, suit or proceeding (including any and all appeals or petitions
therefrom). As used in this Agreement, "attorneys' fees" shall mean the full and
-9-
actual cost of any legal services actually performed in connection with the
matter involved calculated on the basis of the usual fee charged by the attorney
performing such services and shall not be limited to "reasonable attorneys'
fees" as defined in any statute or rule of court.
10.11 The Plan. This Agreement is made pursuant to the Plan, and it is
intended, and shall be interpreted in a manner, to comply herewith. Any
provision of this Agreement inconsistent with the Plan shall be superseded and
governed by the Plan.
10.12 Miscellaneous. Title and captions contained in this Agreement are
inserted for convenience and reference only and do not constitute a part of this
Agreement for any purpose.
-10-
SPOUSAL CONSENT
The undersigned spouse of __________________________ does hereby consent to the
execution of the foregoing Agreement by _____________________, and the
performance by him (or her) of his (or her) obligations thereunder.
Dated:_______________
--------------------------------------------
Signature
-11-
EXHIBIT A
to
ANNEX I
of
STOCK PURCHASE AGREEMENT
PROMISSORY NOTE
$ Date:
- ------------------------------------ ----------------------------------------
FOR VALUE RECEIVED, the undersigned promises to pay to INTREORG SYSTEMS, INC., a
Texas corporation, 501 TROPHY LAKE DRIVE, SUITE 314, PMB 106, TROPHY CLUB, TEXAS
76262 (the "Company"), the principal sum of $_______________ with interest from
the date hereof on the unpaid principal balance at the rate of _______% per
annum, compounded annually. Accrued but unpaid interest under this Note shall be
due and payable annually on the date immediately preceding the anniversary of
this Note, at the rate of ____% per annum, and the unpaid principal balance and
any remaining accrued but unpaid interest shall be due and payable on
_______________, _____.
All sums paid hereunder shall be paid in lawful money of the United States of
America at the principal executive offices of the Company or at such other place
as the holder of this Note shall have designated to the undersigned in writing.
The principal amount of this Note may be paid in whole or in part (in either
case with any interest accrued through the date of payment) at any time or from
time to time, prior to maturity, without penalty or charge for prepayment. All
sums paid hereunder shall be applied first to any unpaid interest and then to
the principal amount then outstanding.
If service of the undersigned with the Company is terminated for any reason,
with or without cause, the holder of this Note shall be entitled at its option
to demand payment of the full principal amount of this Note then unpaid,
together with all interest accrued thereon to the date of payment, by delivery
to the undersigned of written demand. Not later than 30 days after delivery of
such demand the undersigned shall pay the principal amount together with all
accrued interest.
The undersigned shall pay to the holder of this Note reasonable attorneys' fees
and all costs and other expenses (including, without limitation, fees, costs and
expenses of litigation) incurred by the holder in enforcing this Note. This Note
is secured by a Security Agreement of even date herewith between the Company and
the undersigned. The holder of this Note is entitled to the benefits of the
Security Agreement and may enforce the agreements of the undersigned contained
therein and exercise the remedies provided for thereby or otherwise available
with respect to this Note.
Borrower:
Print name and Address:
EXHIBIT B
to
ANNEX I
of
STOCK PURCHASE AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is made and entered into as
of the ___ day of ______________, ____, between INTREORG SYSTEMS, INC., a Texas
corporation ("Lender") and ___________________ ("Debtor").
WHEREAS, Debtor has concurrently herewith purchased from Lender _____ shares of
Lender's Stock (the "Stock") pursuant to that certain Stock Purchase Agreement,
dated ________________, ____, between Lender and Debtor (the "Purchase
Agreement") and has made payment therefor by delivery of Debtor's promissory
note of even date herewith (the "Note"); and
WHEREAS, Debtor and Lender desire to have Debtor grant to Lender a security
interest in the collateral described below as security for Debtor's performance
of the terms and conditions of the Purchase Agreement, the Note and this
Security Agreement.
NOW, THEREFORE, on the basis of the above facts and in consideration of the
mutual covenants and agreements set forth below, Lender and Debtor agree as
follows:
SECTION 1: GRANT OF SECURITY INTEREST.
As security for Debtor's full and faithful performance of each and all of its
obligations and liabilities under the Note, and any and all modifications,
extensions or renewals thereof, the Purchase Agreement and this Security
Agreement, Debtor hereby grants and assigns to Lender a continuing security
interest in and to the Stock, and all stock dividends, cash dividends,
liquidating dividends, new securities and all other property, moneys and rights
to which Debtor may become entitled on account thereof (the "Collateral").
SECTION 2: PERFECTION OF SECURITY INTEREST.
To perfect Lender's security interest in and lien on the Collateral, Debtor
shall, upon the execution of this Agreement, immediately deliver to Lender,
together with collateral instruments of transfer executed in blank, all
certificates representing the Stock to be held by Lender until released pursuant
to Section 6 hereof.
SECTION 3: DEFAULT.
At the sole and exclusive option of Lender, upon an Event of Default (as defined
in Section 3.2 below) Lender may exercise any or all of the rights and remedies
of a secured party under the Texas Uniform Commercial Code, as amended from time
to time. All rights and remedies of Lender shall be cumulative and may be
exercised successively or concurrently and without impairment of Lender's
interest in the Collateral.
-1-
As used herein, an Event of Default ("Event of Default") shall mean any of the
following:
The failure of Debtor to perform any of its obligations under the Purchase
Agreement, the Note or this Security Agreement; or
The occurrence of one or more of the following: (i) Debtor becoming the subject
of any case or action or order for relief under the Bankruptcy Reform Act of
1978; (ii) the filing by Debtor of a petition or answer to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debts, dissolution or
liquidation law or statute, or the filing of any answer admitting the material
allegations of a petition filed against Debtor in any proceeding under any such
law or the taking of any action by Debtor for the purpose of effecting the
foregoing; the appointment of a trustee, receiver or custodian of Debtor or any
of Debtor's material assets or properties; (iii) Debtor making an assignment for
the benefit of creditors; or (iv) the occurrence of any other act by Debtor or
Debtor's creditors which Lender reasonably determines may jeopardize Debtor's
ability to pay the Note or perform Debtor's obligations under the Purchase
Agreement or this Security Agreement.
SECTION 4: WARRANTIES AND REPRESENTATIONS OF DEBTOR.
Debtor hereby represents and warrants that the Collateral is free and clear of
any security interest, lien, restriction or encumbrance and that he has the full
right and power to transfer the Collateral to Lender free and clear thereof and
to enter into and carry out the Purchase Agreement, the Note and this Security
Agreement.
SECTION 5: POWER OF ATTORNEY.
Debtor hereby appoints Lender's Secretary as his true and lawful
attorney-in-fact to transfer the Collateral or cause it to be transferred on
Lender's books whenever Lender determines in its sole and absolute discretion
that such transfer is necessary or advisable to protect its rights or interests
under this Security Agreement.
SECTION 6: RELEASE OF THE COLLATERAL.
Within five days following receipt by Lender of the unpaid principal amount of
the Note from Debtor, Lender shall release from its security interest hereunder
and deliver or cause to be delivered to Debtor the Stock.
SECTION 7: WAIVERS.
No waiver by Lender of any breach or default by Debtor under the Purchase
Agreement, the Note or this Security Agreement shall be deemed a waiver of any
breach or default thereafter occurring, and the taking of any action by Lender
shall not be deemed an election of that action in exclusion of any other action.
The rights, privileges, remedies and options granted to Lender under this
Security Agreement or under any applicable law shall be deemed cumulative and
may be exercised successively or concurrently.
-2-
SECTION 8: GENERAL PROVISIONS.
8.1 Notices. All notices, requests, demands or other communications
under this Security Agreement shall be in writing and shall be given to parties
hereto as follows: If to the Company, to:
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE
SUITE 314, PMB 106
TROPHY CLUB, TEXAS 76262
If to Debtor, to the address set forth in the records of the Company, or such
other address as may be furnished by either such party in writing to the other
party hereto.
Any such notice, request, demand or other communication shall be effective (i)
if given by mail, 72 hours after such communication is deposited in the mail by
first-class certified mail, return receipt requested, postage prepaid, addressed
as aforesaid, or (ii) if given by any other means, when delivered at the address
specified in this Paragraph 8.
8.2 Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives.
8.3 Severability. Should any paragraph or any part of a paragraph
within this Security Agreement be rendered void, invalid or unenforceable by any
court of law for any reason, such invalidity or unenforceability shall not void
or render invalid or unenforceable any other paragraph or part of a paragraph in
this Security Agreement.
8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CHOICE
OF LAW PROVISIONS, AS TEXAS LAWS ARE APPLIED TO CONTRACTS ENTERED INTO AND
PERFORMED IN SUCH STATE.
8.5 Attorneys' Fees. In the event that any action, suit or proceeding
is instituted upon any breach of this Security Agreement, the prevailing party
shall be paid by the other party thereto an amount equal to all of the
prevailing party's costs and expenses, including attorneys' fees incurred in
each and every such action, suit or proceeding (including any and all appeals or
petitions therefrom). As used in this Agreement, "Attorneys' Fees" shall mean
the full and actual cost of any legal services actually performed in connection
with the matter involved calculated on the basis of the usual fee charged by the
attorney performing such services and shall not be limited to "reasonable
attorneys' fees" as defined in any statute or rule of court.
8.6 Entire Agreement. The making, execution and delivery of this
Security Agreement by the parties hereto have been induced by no
representations, statements, warranties or agreements other than those herein
expressed. This Security Agreement, the Purchase Agreement and the Note embody
the entire understanding of the parties and there are no further or other
agreements or understandings, written or oral, in effect between the parties
relating to the subject matter hereof, unless expressly referred to by reference
herein.
8.7 Miscellaneous. Titles and captions contained in this Security
Agreement are inserted for convenience of reference only and do not constitute
part of this Security Agreement for any other purpose.
-3-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Security
Agreement as of the date first above written.
DEBTOR: LENDER: INTREORG SYSTEMS, INC.
By:
- ---------------------------------------- ----------------------------------
(Sign) Russell K. Boyd
Its: Chief Executive Officer
(Please print name and address) President and Chief Financial Officer
- ----------------------------------------
- ----------------------------------------
-4-
EXHIBIT C
to
ANNEX I
of
STOCK PURCHASE AGREEMENT
STOCK ASSIGNMENT
SEPARATE FROM CERTIFICATE
For Value Received, _________________________________ ("Holder") hereby sells,
assigns and transfers unto ____________________________________ (________)
shares (the "Shares") of the Stock of INTREORG SYSTEMS, INC., a Texas
corporation (the "Company"), held of record by Holder and represented by
Certificate No. ______, and hereby irrevocably constitutes and appoints as
Holder's attorney to transfer the Shares on the books of the Company, with full
power of substitution in the premises.
The signature to this assignment must correspond with the name written upon the
face of the Certificate in every particular without any alteration or addition
or any other change.
Dated
- ------------------------------
- -------------------------------------------------------------------------------
(Signature of Holder)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
SIGNATURE GUARANTEED BY:
(Holder's signature must be guaranteed by a bank, a trust company or a brokerage
firm):
- ----------------------------------------------------
- ----------------------------------------------------
LETTER REGARDING
FEDERAL AND _________ TAX CONSEQUENCES
INTREORG SYSTEMS, INC.
501 TROPHY LAKE DRIVE
SUITE 314, PMB 106
TROPHY CLUB, TEXAS 76262
[Purchaser]
Dear :
- ------------------------------
This letter is to notify you of certain federal and ___________ income tax
consequences to you as a result of your purchase of shares (the "Shares") of
Common Stock of INTREORG SYSTEMS, INC. (the "Company") pursuant to the Stock
Purchase Agreement dated __________, 2010 between you and the Company.
The conclusion of this letter is that, if the purchase price for the Shares
equals their fair market value on the date you sign the Stock Purchase
Agreement, you should send copies of the attached form (the "Section 83 Form")
relating to Section 83 ("Section 83") of the Internal Revenue Code of 1986 (the
"Internal Revenue Code"), to the Internal Revenue Service and the Company, not
later than 30 days after the date of the Stock Purchase Agreement. If the
purchase price for the Shares is less than their fair market value on the date
you sign the Stock Purchase Agreement, you should consider carefully whether or
not you should file the Section 83 Form within 30 days after you sign the Stock
Purchase Agreement.
Federal Income Tax Consequences
Certain federal income tax consequences to you in connection with your purchase
of the Shares are determined in accordance with Section 83.
Section 83(a). Under Section 83(a), a person to whom property is transferred in
connection with the performance of services ("Section 83 property") must
recognize ordinary income in the year the property is transferred in an amount
equal to the fair market value of the Section 83 property at the time it is
transferred less the amount, if any, paid for the Section 83 property, unless
the Section 83 property is not transferable and is subject to a substantial risk
of forfeiture (collectively, a "Restriction on Transfer"). If there is a
Restriction on Transfer, then the person acquiring Section 83 property will not
recognize income until the Restriction on Transfer lapses (unless a Section
83(b) election is made - see below), at which time the person must recognize as
ordinary income the fair market value of the Section 83 property at that time
less the amount, if any, paid for the Section 83 property.
Your purchase of the Shares probably constitutes a transfer of Section 83
property. Further, the Stock Purchase Agreement provides that, if you cease to
be employed by the Company for any reason, the Company must repurchase from you
and you must sell to the Company all Non-Vested Shares (as defined in the Stock
Purchase Agreement) for an amount which may be less than their fair market
value. Under Regulations promulgated under Section 83, these provisions probably
constitute a Restriction on Transfer over your Non-Vested Shares. Thus, under
Section 83(a), you would not be required to recognize any income as a result of
your purchase of the Shares until they vest; when they vest, you would be
required under Section 83(a) to recognize as ordinary income the excess, if any,
of the fair market value of the Shares (as of the day they vest) over the price
you paid for those Shares under the Stock Purchase Agreement. If the price of
the Company's Common Stock is greater when the Shares vest than when you
purchased them, you could have a substantial tax liability in connection with
your purchase of the Shares when they vest.
Section 83(b) Election. Section 83(b) provides an alternative method for taxing
Section 83 property. Under Section 83(b), a person may elect to recognize
ordinary income in the year Section 83 property is transferred to him or her,
rather then waiting until it vests. Thus, if you make a Section 83(b) election,
you will be required to recognize as ordinary income in the year you purchase
the Shares the difference, if any, between the fair market value of the Shares
on the date you sign the Stock Purchase Agreement and the purchase price you pay
for the Shares. For example, if you make the Section 83(b) election and you paid
a purchase price for the Shares equal to their fair market value, you will not
pay any taxes in the year of the purchase in connection with your purchase of
the Shares. On the other hand, if you make the Section 83(b) election and the
purchase price of the Shares is less than their fair market value on the date
you sign the Stock Purchase Agreement, you will be required to pay taxes on the
difference between those amounts in the year of the purchase. In either case,
however, if you make the Section 83(b) election, you will not be required to
recognize any income when the Shares vest.
To make the Section 83(b) election, you must file the Section 83 Form with both
the Company and the Internal Revenue Service office where you file federal
income tax returns. You must file the Section 83(b) Form within 30 days after
you sign the Stock Purchase Agreement. In addition, you must attach a copy of
the Section 83(b) Form to your income tax return that covers the year in which
you filed the Form.
Sale of Section 83 Property. If a person sells Section 83 property after the
Restriction on Transfer lapses (or after making a Section 83(b) election), he or
she will recognize taxable gain or loss equal to the difference between the
amount realized upon the sale of the Section 83 property and the person's
"adjusted basis" for the Section 83 property. The person's adjusted basis for
the Section 83 property will be (i) the amount paid for the Section 83 property
plus (ii) any amount which the person has included in gross income pursuant to
the Section 83(b) election. Thus, upon sale, you will recognize taxable gain or
loss equal to the difference between the sale price of the Shares and your
adjusted basis for the Shares.
In general, the gain or loss you recognize will be capital gain or loss if the
following "Capital Gain Requirements" are met: (i) the Section 83 property is a
capital asset and (ii) the Section 83 property is held for more than 12 months
from either the date the Restrictions on Transfer lapse or, if a Section 83(b)
election is made, the date the Section 83 property is acquired. Thus, as the
Shares are probably a capital asset in your hands, you will recognize capital
gain or loss upon their sale if you hold them for more than 12 months from
either the date they vest or, if you make the Section 83(b) election, from the
date you sign the Stock Purchase Agreement.
Forfeiture of Section 83 Property. If a person's interest in Section 83 property
is forfeited, the person will recognize gain or loss equal to the difference
between the amount realized upon forfeiture and the amount paid for the Section
83 property. In your case, if your employment with the Company is terminated
before all of the Shares have vested, the Company is obligated to repurchase
from you, and you are obligated to sell to the Company, any Non-Vested Shares at
the price you paid for them. As there would be no difference between the amount
realized upon forfeiture and the amount paid for the Shares, you would not be
required to recognize any gain or loss at that time. However, upon forfeiture,
you would not be able to recoup any taxes you pay pursuant to a Section 83(b)
election.
Texas Income Tax Consequences.
The Texas income tax consequences to you in connection with your purchase of the
Shares are identical to the federal income tax consequences. To make the Section
83(b) election in Texas, you must file the Section 83(b) Form with the Internal
Revenue Service, as described above; there are no extra filing requirements for
making the Section 83(b) election in Texas.
If you have any questions concerning the tax consequences described in this
letter, please feel free to call me.
Sincerely,
INTREORG SYSTEMS, INC.
By: __________________________________________________
Russell K. Boyd
Its: Chief Executive Officer
President and Chief Financial Officer
ELECTION TO INCLUDE IN GROSS INCOME IN
YEAR OF TRANSFER PURSUANT TO SECTION 83(b)
OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to the provisions of Section
83(b) of the Internal Revenue Code of 1986, as amended, and the regulations of
the Commissioner of Internal Revenue promulgated thereunder, with respect to the
Section 83 property described below, and supplies the following information in
connection with that election:
The name, address, taxable year and taxpayer identification number of the
undersigned are:
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Taxable Year ________ Taxpayer I.D. No.__________
The description of the Section 83 property with respect to which the undersigned
is making the election is as follows:
_______________ (_____) shares (the "Subject Shares") of the Common Stock of
INTREORG SYSTEMS, INC., a Texas corporation (the "Company").
The date upon which the Subject Shares were transferred to, and acquired by, the
undersigned was ____________, ________.
The Subject Shares are subject to restrictions under a ___________ vesting
period. If the undersigned's employment terminates, the Company is obligated to
purchase and the undersigned is obligated to sell to the Company all Subject
Shares that are not vested for a purchase price, which in certain circumstances
may be less than the fair market value of the Subject Shares.
The fair market value of the Subject Shares at the time of the transfer to, and
acquisition by, the undersigned (determined without regard to any restrictions
other than restrictions which by their terms will never lapse) was $_____ per
share.
The amount paid by the undersigned for the Subject Shares was $____ per share.
The undersigned has furnished a copy of this election to the Company.
[Signature Page Follows]
Dated:
- ---------------------------
- ------------------------------------------------------
(Signature)
Make 4 copies
(1) IRS (to be filed at the IRS where you ordinarily file your returns) within
30 days of the purchase
(1) IRS (to be filed with your income tax return)
(1) INTREORG SYSTEMS, INC.
(1) Copy for purchaser
FORM OF RESOLUTIONS FOR PURCHASE RIGHTS GRANTS
RESOLUTIONS ADOPTED BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
INTREORG SYSTEMS, INC.
As of __________________, 2010
The undersigned directors, constituting the entire board of directors (the
"Board") of INTREORG SYSTEMS, INC., a Texas corporation (the "Company"), hereby
take the following actions, adopt the following resolutions, and transact the
following business, by written consent without a meeting, as of the date above
written, pursuant to the applicable corporate laws of the State of Texas and the
Company's Bylaws.
WHEREAS, The Company Previously Adopted the 2010 INTREORG SYSTEMS, INC. STOCK
OPTION AND AWARD INCENTIVE PLAN (The "Plan"), and has delegated the
responsibility to administer the Plan to the Board;
WHEREAS, Two Million (2,000,000) shares of Common Stock of the Company were
originally reserved for issuance under the Plan;
WHEREAS, as of the date hereof, ___ Million (__,000,000) shares remain available
for issuance under the Plan; and
WHEREAS, the Board has determined that it is in the best interests of this
company and its stockholders to provide, under the plan, equity incentives to
those employees of the company identified below.
NOW, THEREFORE, BE IT RESOLVED, that the persons listed on the Exhibit A, which
exhibit was reviewed by the Board and shall be included with this Consent, are
hereby granted, as of the date hereof, the current right to purchase (the
"Purchase Right") the number of shares at the per share purchase price as set
forth in Exhibit A at any time on or prior to the date which is 15 days from the
date this grant is first communicated to each recipient;
RESOLVED FURTHER, that this Company be, and it hereby is, authorized to accept a
promissory note from each purchaser as consideration for the stock so purchased,
in such form (including security for the obligation thereunder) heretofore
approved by the Board;
RESOLVED FURTHER, that the officers of this Company, and each of them, be, and
they hereby are, authorized, directed and empowered for and on behalf of this
Company to prepare or cause to be prepared a stock purchase agreement,
promissory note and/or security agreement (the "Purchase Agreements") to
represent the rights granted at this meeting substantially in the form, and
containing the terms and provisions, heretofore approved by the Board, and
containing such other terms and provisions as such officers shall, upon advice
of counsel, determine to be necessary or appropriate, their execution of such
Purchase Agreements to conclusively evidence such determination;
RESOLVED FURTHER, that the Purchase Rights shall be evidenced by stock purchase
agreements and be subject to the restrictions (including transfer and/or
repurchase rights), if any, set forth in such stock purchase agreements;
RESOLVED FURTHER, that the Purchase Rights shall be granted pursuant to the
exemptions provided under Section 701 of the Securities Act Rules and Texas
Corporate Securities Laws;
RESOLVED FURTHER, that there is hereby reserved and set aside under the Plan the
number of shares adequate to cover the shares underlying the Purchase Rights
granted herein;
RESOLVED FURTHER, that upon receipt of executed Purchase Agreements from the
person or persons granted rights hereunder, the officers of this Company, and
each of them, be, and they hereby are, authorized, directed and empowered for
and on behalf of this Company to issue the stock so purchased, and to do or
cause to be done all such further acts and things and to sign, deliver and/or
file all such documents and notices as any of such officers may deem necessary
or advisable in order to carry out and perform the foregoing resolutions and the
intention thereof; and
RESOLVED FURTHER, that the officers of this Company, and each of them, be, and
they hereby are, authorized, directed and empowered for and on behalf of the
Company to do or cause to be done all such acts and things and to sign, deliver
and/or file all such documents and notices as any of such officers may deem
necessary or advisable in order to carry out and perform the foregoing
resolutions and the intention thereof.
The Secretary of the Corporation is directed to file the original executed copy
of this Consent with the minutes of proceedings of the Board.
IN WITNESS WHEREOF, each of the undersigned has executed this consent as of the
date first written above.
DIRECTORS:
- ------------------------------------------ -------------------------------------
Russell K. Boyd Malcolm C. Davenport, V
- ------------------------------------------
Redgie T. Green
EXHIBIT A
Purchase Rights Grant Information
- ------------------------ ------------------------ -------------------------
Name No. Shares Purchase Price*
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
* The per share purchase price must be at least 85% of the Fair Market Value (as
such term is defined in the Plan) of the underlying share as of the date of
grant.