Exhibit 10(a)
SECTION 10(A) PROSPECTUS OF
GFY Foods, Inc.
April 21, 2004: This document constitutes part of a prospectus covering
securities of GFY Foods, Inc., a Nevada corporation (the "Company"), that have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"). This document, a Section 10(a) Prospectus, contains and constitutes four
sections. The first section includes "General Plan Information." "Registrant
Information and Employee Plan Annual Information" is the next portion and is
located in this prospectus. The Company's latest Form 10-KSB, for the fiscal
year ended March 31, 2003, which is incorporated herein by this reference, is
the third section with which offerees are being constructively provided.
Finally, offerees who receive Stock Options shall be provided with a Stock
Option Agreement and a Notice of Exercise, which is to be completed and
submitted within the time allowed, with tender of the appropriate consideration
for those who wish to exercise options.
Item 1. General Plan Information
The Company's board of directors (the "Board") has adopted a benefit
plan for its employees and others entitled "Amended and Restated 2004 Benefit
Plan of GFY Foods, Inc." (the "Plan"). Pursuant to the Plan, the Board can
authorize the issuance of stock or options to purchase stock up to an aggregate
of one billion seven hundred fifty million (1,750,000,000) shares of common
stock of the Company, par value $0.001 per share (the "Common Stock"), over a
maximum of a five year period, although the Board may shorten this period.
The Board adopted the Plan on January 14, 2004. The Plan is intended to
aid the Company in maintaining and continuing its development of a quality
management team, in attracting qualified employees, consultants, and advisors
who can contribute to the future success of the Company, and in providing such
individuals with an incentive to use their best efforts to promote the growth
and profitability of the Company.
The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), nor qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Administration of the Plan is the exclusive province of the Board. Board members
are elected at each annual meeting of shareholders. The term each Board member
serves is therefore one year. If an annual meeting is not held the member shall
serve until the next submission of matters to a vote of Company's shareholders.
As ultimate administrators of the Plan, the Board should be contacted
with requests for additional Plan information. Alternatively, the Board may
appoint a committee to administer the plan (hereinafter the Board or its duly
authorized committee shall be referred to as "Plan Administrators"). As no
committee has been authorized by the Board, the current Board member is the Plan
Administrator. This person is Ed Schwalb. The address of the Board is c/o the
Company, 601 Deerfield Parkway, Buffalo Grove, Illinois 60089.
In the event a vacancy in the Board arises, the vote of a majority of
remaining directors may select a successor, or, if the vacancy is not filled by
the remaining Board, the vote of shareholders may also elect a successor to fill
such vacancy. Board members may be removed from office by the vote of
shareholders representing not less than two-thirds (2/3) of the shares entitled
to vote on such removal. Plan Administrators who are not Board members can be
removed or appointed at any time for any reason by the majority vote of Board
members.
The Plan Administrators shall interpret the Plan (which interpretation
is binding on the participants absent demonstrable error), determine which
employees or others shall receive shares or options, decide the number of shares
or options and establish any other terms for the shares or options not already
established in the Company's Plan. Information concerning changes in the Plan
Administrators will be provided in the future either in the Company's proxy
statements, annual or other reports, or in amendments to this document.
Securities to be Offered
Shares and options providing for the issuance or purchase of shares
equaling a maximum of one billion seven hundred fifty million (1,750,000,000)
shares of Common Stock may be granted under the Plan. All options under the Plan
are "non-qualified" stock options. The number of shares of Common Stock issuable
under the Plan is subject to adjustment in the event of changes in the
outstanding shares of Common Stock resulting from stock dividends, stock splits,
or recapitalizations.
Employees Who May Participate in the Plan
The Board shall determine which of the Company's employees are eligible
to receive shares or options under the Plan. The term "Employee" includes any
employee, director, officer, or consultant or advisor of the Company or any of
its subsidiaries, provided that bona fide services shall be rendered by
consultants and advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
Purchase of Securities Pursuant to the Plan and Payment for Securities Offered
The Plan Administrators shall determine which employees shall receive
shares or options. The Plan is not subject to ERISA and the securities are being
issued by the Company and not purchased on the open market or otherwise.
Options granted under the Plan shall be exercisable as determined by
the Plan Administrators. If an option granted under the Plan should expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject to that option will again be available for grant under the Plan.
The exercise price payable to the Company for Option Shares shall be asset forth
from time to time by the Plan Administrator. The exercise of any Option shall be
contingent on receipt by the Company of the exercise price paid in either cash,
certified or personal check payable to the Company.
The shares of Common Stock subject to the Plan and the exercise price
of outstanding options are subject to proportionate adjustment in the event of a
stock dividend on the Common Stock or a change in the number of issued and
outstanding shares of Common Stock as a result of a stock split, consolidation,
or other recapitalization. Options and all other interests under the plan shall
be non- transferable, except by means of a will or the laws of descent and
distribution.
Amendments and Termination
The Plan may be abandoned or terminated at any time by the Plan
Administrators except with respect to any Options then outstanding under the
Plan. The Plan shall otherwise terminate on the earlier of the date that is five
years from the date first appearing in the Plan or the date on which an option
for the one billion seven hundred fifty millionth share is either granted under
the Plan or on which the one billion seven hundred fifty millionth share is
de-registered on a post-effective amendment on Form S-8 filed with the
Securities and Exchange Commission (the "SEC"). No options may be granted under
the terms of the Plan after it has been terminated. The Board may alter or amend
the Plan only once during any six month period, except as to comply with changes
to the Code. No termination, suspension, alteration or amendment may adversely
affect the rights of a holder of a previously issued option without the consent
of that holder.
Resale of Common Stock
Shares of Common Stock issued or purchased on exercise of options
granted under the Plan will have been initially registered pursuant to a Form
S-8 Registration Statement filed by the Company. Subsequent resales of shares
obtained pursuant to the Plan may be eligible for immediate resale depending on
whether an exemption from registration is available or whether the shares are in
fact registered. The Company makes no statement as to subsequent sale-ability of
specific shares obtained pursuant to the Plan and urges any persons seeking to
sell shares so obtained to seek counsel from independent attorneys.
As may be applicable for subsequent resale of shares obtained from the
Plan, the Board believes that the Company has filed all reports and other
material required to be filed during the preceding twelve months under the
Securities Exchange Act of 1934 as of April 21, 2004.
Tax Effects of Plan Participation & Non-statutory Options
The following discussion of the federal income tax consequences of
participation in the Plan is only a summary, does not purport to be complete,
and does not cover, among other things, state and local tax consequences.
Additionally, differences in participants' financial situations may cause
federal, state, and local tax consequences of participation in the Plan to vary.
Therefore, each participant in the Plan is urged to consult his or her own
accountant, legal or other advisor regarding the tax consequences of
participation in the Plan. This discussion is based on the provisions of the
Code as presently in effect.
Under the current provisions of the Code, if shares of Common Stock are
issued to the original holder of a non-qualified option granted and exercised
under the Plan (assuming there is not an active trading market for options of
the Company), (i) the option holder ("Holder") will not recognize income at the
time of the grant of the option; (ii) on exercise of the option the Holder will
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares of Common Stock acquired at the time of exercise over the
exercise price; (iii) upon the sale of the shares of Common Stock the Holder
will recognize a short term or long term capital gain, or loss, as may be, in an
amount equal to the difference between the amount he or she receives from the
sale of those shares and the Holder's tax basis in the shares (as described
below); and (iv) the Company will be entitled to expense as compensation the
amount of ordinary income that the holder recognized, as set forth in Clause
(ii) above.
If the Holder pays the exercise price entirely in cash, the tax basis
of the shares of Common Stock will be equal to the amount of the exercise price
paid plus the ordinary income recognized by the Holder from exercising the
options. This basis should equal the fair market value of the shares of Common
Stock acquired on the date of exercise. The holding period will begin on the day
after the tax basis of the shares is determined.
The ordinary income received by the Holder on exercise of the option is
considered to be compensation from the Company. As with other forms of
compensation, withholding tax and other trust fund payments will be due with
respect to the exercise of the options. The Company will initially pay the
Optionee's liability and will be reimbursed by Optionee no later than six months
after such liability arises.
Item 2. Registrant Information and Employee Plan Annual Information
The Company will provide to any Employee upon request a copy, without
charge, of the Company's periodic reports filed with the SEC, including its
latest annual report on Form 10-KSB and its quarterly reports on Form 10-QSB.
The Company will also provide any Employee upon written or oral request a copy,
without charge, of the documents incorporated by reference in Item 3 of Part II
of the Form S-8 registration statement. These documents are also incorporated by
reference into the Section 10(a) prospectus, of which this document is a part.
Requests for such information should be directed to the Company to the attention
of Ed Schwalb. The address of the Board is c/o the Company, 601 Deerfield
Parkway, Buffalo Grove, Illinois 60089.
/s/ Ed Schwalb President, CEO and Director
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Ed Schwalb, dated April 21, 2004.