-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wec7cVavKYUCH3bKSXs2E5tFDj7/OPboe17kBPFG3qXWPTomSjZmlmYLEiT2GJ/G tAx/SAJ8OwXUc+7ak1d4WQ== 0001013762-04-000518.txt : 20040507 0001013762-04-000518.hdr.sgml : 20040507 20040507134539 ACCESSION NUMBER: 0001013762-04-000518 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20040507 EFFECTIVENESS DATE: 20040507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEVSYSTEMS INTERNATIONAL INC CENTRAL INDEX KEY: 0001020477 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 841352529 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-115272 FILM NUMBER: 04788215 BUSINESS ADDRESS: STREET 1: 501 BRICKELL KEY DRIVE STREET 2: SUITE 407 CITY: MIAMI STATE: FL ZIP: 33151 BUSINESS PHONE: 786-425-2201 MAIL ADDRESS: STREET 1: 501 BRICKELL KEY DRIVE STREET 2: SUITE 407 CITY: MIAMI STATE: FL ZIP: 33151 FORMER COMPANY: FORMER CONFORMED NAME: AQUA CLARA BOTTLING & DISTRIBUTION INC DATE OF NAME CHANGE: 19971219 S-8 1 may62004s8.txt As filed with the Securities and Exchange Commission on May 7, 2004 Reg. No. 333-_________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___________________________________ BevSystems International, Inc. (Exact name of registrant as specified in its charter) Florida 84-1352529 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 334 South Hyde Park Avenue, Suite 111 Tampa, Florida 33606 (Address of principal executive offices) (Zip Code) ________________________________________________ 2004 INCENTIVE STOCK PLAN (Full title of plan) ________________________________ Rand Gray, CEO 334 South Hyde Park Avenue, Suite 111 Tampa, Florida 33606 (Name and address of agent for service) (727) 375-0290 (Telephone number, including area code, of agent for service) Copies to: Richard A. Friedman, Esq. Stephen M. Fleming, Esq. Sichenzia Ross Friedman Ference LLP 1065 Avenue of the Americas, 21st Floor New York, New York 10018 212-930-9700
CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------- Proposed maximum Proposed maximum Title of securities Amount to be offering price Aggregate offering Amount of to be registered Registered per share* Price Registration fee - ----------------------- --------------------- -------------------- --------------------- -------------------- Common Stock 35,000,000 $0.03 $1,050,000 $133.04 ($.0007 par value) - ----------------------- --------------------- -------------------- --------------------- --------------------
* Estimated solely for the purpose of determining the amount of registration fee and pursuant to Rules 457(c) and 457 (h) of the General Rules and Regulations under the Securities Act of 1993, based upon the average of the high and low selling prices per share of Common Stock of BevSystems International, Inc. on May 3, 2004. Prospectus Bevsystems International, INC. 35,000,000 SHARES OF COMMON STOCK issuable pursuant to the 2004 STOCK INCENTIVE PLAN This prospectus relates to the sale of up to 35,000,000 shares of common stock of Bevsystems International, Inc. offered by certain holders of our shares of common stock to be issued in connection with our 2004 Stock Incentive Plan. The shares may be offered by the selling stockholders from time to time in regular brokerage transactions, in transactions directly with market makers or in certain privately negotiated transactions. For additional information on the methods of sale, you should refer to the section entitled "Plan of Distribution." We will not receive any of the proceeds from the sale of the shares by the selling stockholders. Each of the selling stockholders may be deemed to be an "underwriter," as such term is defined in the Securities Act of 1933. Our common stock trades on the pink sheets under the symbol "BEVI." On April 30, 2004, the closing sale price of the common stock was $.03 per share. The securities offered hereby are speculative and involve a high degree of risk and substantial dilution. Only investors who can bear the risk of loss of their entire investment should invest. See "Risk Factors" beginning on page 5. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is May 6, 2004. 2 TABLE OF CONTENTS Page Prospectus Summary 4 Risk Factors 5 Selling Stockholders 10 Plan of Distribution 12 Interests of Named Experts and Counsel 13 Incorporation of Certain Documents by Reference 13 Disclosure of Commission Position on Indemnification For Securities Act Liabilities 13 Available Information
3 Prospectus Summary General Overview Summary We are a provider of oxygenated water. We bottle our product through co-packing agreements and distribute our product primarily through an international distribution network. On July 12, 2001, we acquired the assets of the beverage division of Life International, a provider of oxygenated water. The assets included oxygenation equipment, bottles, proprietary seals, marketing materials, office equipment, trademarks, patent rights and other intangible assets. On February 25, 2002, we consummated a merger with Aqua Clara Bottling and Distribution, Inc. and its subsidiary. On March 31, 2004, an Involuntary Petition under Chapter 7 of the U.S. Bankruptcy Code was filed against Bevsystems International, Inc. in the United States Bankruptcy Court for the Middle District of Florida (Case No. 04-6K-6248-KRM). The Company has filed a motion to convert the involuntary Chapter 7 liquidation case filed against it to a reorganization proceeding under Chapter 11 of the U.S. Bankruptcy Code. In addition, on April 8, 2004, we entered into an agreement whereby we acquired Sun Rayz Water, Inc. ("Sun Rayz Water") Sun Rayz Water holds a sub-license to use the "FLA-USA" label on water products. Prior to the Company's acquisition of Sun Rayz Water, Sun Rayz Water was a wholly-owned subsidiary of Sun Rayz Beverages, inc. ("SRB"), which is a wholly-owned subsidiary of Sun Rayz Products, Inc. ("Sun Rayz Products"). Mr. Segal and Mr. Goeree, two of our executive officers and/or directors, are officers, directors and shareholders of Sun Rayz Products. Sun Rayz Water's sole asset is a Marketing, Distribution and Copacking Sub-Licensing Agreement entered with SRB (the "Sub-License") in March 2004. The Sub-License provides Sun Rayz Water with the non-exclusive, worldwide right to use the "FLA-USA" label in connection with the marketing, sale and distribution of bottled water products on a retail and wholesale basis. In anticipation of entering into the Share Exchange Agreement and as consideration for the entering into the Sub-License, Sun Rayz Water agreed to pay to SRB (i) 35,000,000 shares of common stock of the Company (ii) 50% of any fees generated as a result of Sun Rayz Water's licensing of the label and any fees incurred by SRB from the original licensor of the FLA-USA label.The FLA-USA label is a proprietary trademark owned by the Florida Tourism Industry Marketing Corporation, doing business as Visit Florida. Visit Florida entered into a License Agreement with Florida Media, Inc. ("Florida Media"), whereby Florida Media received an exclusive license to the FLA-USA label on various products. In November of 2003, SRB entered into a license agreement with Florida Media for the exclusive use of the FLA-USA label on retail beverage products. In consideration for entering into such license, SRB is required to pay a license fee of $1,800,000 to Florida Media (the "Florida Media Fee") during the first four years of the license and all royalty fees owed to Visit Florida (the "Visit Florida Fee") (the Florida Media Fee and the Visit Florida Fee are collectively known as the "Fee"). 65% of the Fee is to be paid in cash and 35% is to be paid in common stock. The cash portion of the Fee does not have to be paid until the fourth year of the license. However, in the event that SRB earns in excess of $3,000,000 in net profit, then the cash portion of the Fee must be paid. Further, if SRB raises a certain level of funding or generates sufficient income from direct sales, then SRB is required to make a minimum monthly payment of $25,000 in connection with the Fees. Our principal offices are located at 334 South Hyde Park Avenue, Suite 111, Tampa, Florida 33606, and our telephone number is (727) 375-0290. We are formed under the laws of the state of Florida. The Offering
Shares of common stock outstanding prior to this offering..............................232,910,980 Shares offered in this prospectus.......................................................35,000,000 Total shares outstanding after this offering...........................................267,910,980 Use of proceeds................. We will not receive any proceeds from the sale of the shares of common stock offered in this prospectus.
4 Risk Factors Risks relating to our company The outcome of our bankruptcy case may have a negative impact on our results of operations and we may cease operations On March 31, 2004, an Involuntary Petition under Chapter 7 of the U.S. Bankruptcy Code was filed against Bevsystems International, Inc. in the United States Bankruptcy Court for the Middle District of Florida (Case No. 04-6K-6248-KRM). The pace and outcome of our bankruptcy case will be affected by: o whether the Bankruptcy Court allows us to covert the proceeding to a Chapter 11 proceedings and allows us to enter a plan of reorganization; o whether regulatory and governmental approvals required to implement a confirmed plan are obtained and the timing of such approvals; o whether there are any delays in implementation of a plan due to litigation related to regulatory, governmental, or Bankruptcy Court orders; and o future equity or debt market conditions, future interest rates, future credit ratings, and other factors that may affect the ability to implement either plan or affect the amount and value of the securities proposed to be issued under either plan. In the event that the case proceeds under Chapter 7 of the U.S. Bankruptcy Code, we may be forced to curtail or cease our operations, which will have a material adverse effect of on the trading and value of our securities. Through our acquisition of Sun Rayz Water we have acquired a license to use the "FLA-USA" label and the termination of such license may impact our results of operations. A portion of our business depends upon a sub-license that has originated with Visit Florida. The Sub-License that we have acquired through our acquisition of Sun has is subject to many risks and uncertainties including many condition which may be out of our control. If SRB, Florida Media or Visit Florida elect to terminate their license with each applicable party for any reason, including failure to pay the required royalties, our results of operations may be severally impacted and we may be forced to cease operations. We may not be able to raise capital as needed to maintain our operations. We will need to raise additional funds to promote our brand and support all of our strategies for growth. Additional financing may not be available on favorable terms, if at all. We may also require additional capital to acquire or invest in complementary businesses or products or obtain the right to use complementary technologies. If we cannot raise needed funds on acceptable terms, we may not be able to develop or enhance our brands or our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could seriously harm our business, financial condition and results of operations. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. If we lose key personnel, we may not be able to successfully operate our business. Our future success depends, in large part, on our ability to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel in the future or delays in hiring required personnel, particularly sales, marketing and financial personnel, may seriously harm our business, financial condition and results of operations. We will need to expand our sales operations and marketing operations in order to increase market awareness of our products, generate increased revenue and support the existing and future distributors. New sales personnel and marketing personnel will require training and take time to achieve full productivity. Competition for such personnel is intense. We cannot be certain that we will successfully attract and retain additional qualified personnel. 5 Our markets are highly competitive, and we cannot assure we will be able to compete effectively. We compete in a new, rapidly evolving and highly competitive and fragmented market. We expect competition to intensify in the future. We cannot assure you that we will be able to compete effectively. We believe that the main competitive factors in the bottled water market are brand recognition, product quality, product placement and availability and cost. We compete in the oxygenated bottled water market with Talking Rain (Airwater), O to Go and a variety of start- ups, and in general with other bottled waters and sports drinks. Many of our large competitors have strong relationships with mass merchandisers and entrenched shelf space commitments. They may be able to leverage their existing relationships to carry alternative oxygenated water offerings. We also expect that other companies may enter our market with better products, greater financial resources or greater brand recognition. We expect our competitors to continue to improve the dissolved oxygen content and shelf life of their current products and introduce new products. To be competitive, we must continue to invest significant resources in research and development, advertising and marketing. We cannot be sure that we will have sufficient resources to make these investments or that we will be able to make the technological advances necessary to be competitive. Increased competition is likely to result in price reductions, reduced gross margin and loss of market share. Our failure to compete successfully against current or future competitors could seriously harm our business, financial condition and results of operations. The oxygenated water category may not achieve widespread acceptance, which could cause our business to fail. The oxygenated water category is relatively new. Less than 1% of all bottled water sold worldwide has enriched oxygen content. Our ability to increase revenue in the future depends on consumers becoming aware of and selecting oxygenated bottled water instead of mineral waters and sports drinks. In order to achieve acceptance, we will have to convince consumers to prefer oxygen-enriched water. If these efforts fail or if oxygen enriched water does not achieve commercial acceptance, our business, financial condition and results of operations could be seriously harmed. As competition increases, our inability to introduce enhanced bottling equipment and packaging could prevent us from competing effectively with others. We expect that the oxygenated water market will be characterized by rapid technological change. We also expect that increased competition in the oxygenated water category will require us to rapidly evolve and adapt our products to remain competitive. The successful operation of our business depends on our ability to develop new bottling technology and packaging enhancements that respond to evolving industry standards on a timely and cost-effective basis. We cannot be certain that we will successfully develop these technologies or capabilities. Our failure to produce technologically competitive products in a cost-effective manner and on a timely basis will seriously harm our business, financial condition and results of operations. Our reliance on co-packers may adversely affect our revenues and margins. Our business sells bottled water that is produced by co-packers. While this arrangement will permit us to avoid significant capital expenditures to establish bottling plants of our own, it will expose us to various risks. Our current arrangements do not provide for any capacity reservations or committed delivery times from these co- packers. Since the volumes of Life International's orders have been low to date, Life International has not been adversely affected by the lack of dedicated capacity. If demand for our products increases, we will need committed capacities and pricing. In order to secure committed capacity, we will be required to enter into "take-or-pay" arrangements that commit us to fixed purchase commitments whether or not warranted by our sales. If any of our co-packers were to terminate or fail to renew our arrangements, or should they have difficulties in timely producing oxygenated water for us, our ability to fulfill our commitments to distributors would be adversely affected until we were able to make alternative arrangements, and our business reputation would be adversely affected if any of the co-packers were to produce inferior quality products. To the extent that the co- packers increase their prices, we would in most cases not be able to pass along the increase and our revenues, gross profit and operating income would be adversely affected. In addition, in order to reduce logistics costs, we must establish numerous co-packing relationships with strategically located co-packers. We will need to achieve very large volumes in order to support a geographically diverse co-packer network. Accordingly, our logistics costs are likely to be very high for the foreseeable future. We depend on entrepreneurial, local distributors to generate most of our revenue and our operating results may be harmed if these companies are not commercially viable. 6 We expect to generate most of our revenue from small, private distributors. Failure to generate revenue from these distributors would have a negative impact on our business. Many of these distributors are still building their infrastructures and introducing their products. We cannot guarantee that any of these companies will achieve commercial viability. Given that these distributors may be small or start-up operations with uncertain financial resources, we cannot be sure that these distributors will be able to properly market and sell the products in their territories, produce oxygenated water that meets applicable quality standards, or pay their obligations to us. Life International recently terminated a distributor that had been delinquent for over one year in the payment of a minimum royalty for the use of the Life O2 technology. The failure of our distributors to achieve commercial viability or to pay their obligations to us would, in turn, seriously harm our business, financial condition and results of operations. A loss of one or more of our key distributors could cause a significant decrease in our sales. We expect to derive a majority of our revenue from a small number of distributors. While many of the agreements with distributors provide minimum annual payments, failure to make such payments in most cases would result in a reevaluation of the relationship rather than the collection of the amount. Accordingly, we cannot be certain that present or future distributors will not terminate their purchasing arrangements with us or significantly reduce or delay their orders. A substantial number of the distributors of Life International have been recently established and we will need to provide substantial assistance in order for them to succeed. Many of the distributors of Life International have not yet reached volumes that are adequate to achieve commercial success. The continued inability of distributors to increase volumes could cause the distributors to discontinue their efforts to bottle and sell our products. Any termination, reduction or delay in orders could seriously harm our business, financial condition and results of operations. We may not be able to expand our distribution channels, which would harm our ability to generate revenue. We believe that our future success is dependent upon our ability to establish and maintain successful relationships with a variety of international distributors. To date, we have entered into agreements with distributors covering only a portion of the territory that we plan to cover, and most of the relationships developed to date are new. The distributor typically may terminate these distribution agreements without cause upon short notice. We cannot be certain that we will be able to reach agreement with additional distributors on a timely basis or at all, or that these distributors will devote adequate resources to marketing, selling and supporting our products. We must successfully manage our distributor relationships. Our inability to generate revenue from distributors may harm our business, financial condition and results of operations. Revenues from distributors based outside the United States have historically accounted for most of the revenue of the business, which exposes us to risks inherent in international operations. Our international operations will be subject to a variety of risks associated with conducting business internationally, any of which could seriously harm our business, financial condition and results of operations. These risks include: o greater difficulty in collecting accounts receivable; o satisfying import or export licensing and product certification requirements; o tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers imposed by foreign countries; o potential adverse tax consequences, including restrictions on repatriation of earnings; o fluctuations in currency exchange rates; o seasonal reductions in business activity in some parts of the world; o unexpected changes in regulatory requirements; 7 o burdens of complying with a wide variety of foreign laws, particularly with respect to intellectual property and license requirements; o difficulties and costs of staffing and managing foreign operations; o political instability; o the impact of economic recessions outside of the United States; and o limited ability to enforce agreements, intellectual property and other rights in some foreign countries. Defects in our products may seriously harm our credibility and harm our business. While we have established quality standards, our distributors may not comply with these standards and may ship bottled water products that have lower oxygen content or shorter shelf life than as advertised. These problems would seriously harm our credibility, market acceptance of our products and the value of our brand. We believe that there are inherent limitations in the shelf life of oxygen-enriched water packaged in PET bottles. While we are investigating alternative packaging systems, we cannot assure you that we will be able to discover a commercially viable solution. The failure to utilize packaging that provides a consumer with high oxygen content following extended periods of shipping, handling and stocking of our products may result in consumer dissatisfaction with our products and harm our brand. We also believe that additional education and monitoring of our distributors and co-packers will be required to assure compliance with our quality standards. We will need to hire and train regional field managers to improve the performance of the distributors. The occurrence of some of these types of problems may seriously harm our business, financial condition and results of operations. Government regulation could restrict our business or increase our cost of doing business. The bottled water industry is highly regulated in the United States by the Food and Drug Administration, state agencies and self-regulatory organizations, such as the International Bottled Water Association. There are equivalent governmental and self-regulatory agencies in other countries. These agencies impose strict production, quality, labeling and packaging requirements on producers of bottled water. New and more stringent government regulations may be adopted in the future that may adversely impact on our business. We may be liable for product liability damages. Our distributors and we will be selling ingested consumer products into the stream of commerce. We may, therefore, be subject to claims by consumers if the bottled water that our appointed bottlers or we or distributors sell injures them. Life International in the past has maintained product liability insurance in amounts it deemed sufficient and we plan to obtain product liability insurance. We cannot assure you that we will obtain and maintain adequate or affordable product liability insurance. If we incur uninsured product liability claims our business, financial condition and results of operations could be materially and adversely affected. We are currently a party to several lawsuits and if significant judgments are entered against us we may forced to cease operations as a result of these actions. We are currently defending several lawsuits that have been filed against our company. In connection with these lawsuits, significant judgments may be entered against us and we may forced to cease operations as a result of these actions. The following is a list of our current material legal proceedings: o Thorp & Company v. BEVsystems Int'l, Inc., et al., Case No. 02-27983-CA-13. This action was filed in the Eleventh Judicial Circuit for Miami-Dade County on November 8, 2002. The Plaintiff is asserting a claim to recover $35,000 of accounts payable. The Plaintiff in this case has filed a motion for default judgment. o Freeman Decorating Co. v. BEVsystems Int'l, Inc., et al., Case No. 02-22432-CA (09). This action was filed in the Seventh Judicial Circuit for Dade County on September 10, 2002. The Plaintiff in the action seeks payment for advertising services rendered. A default judgment for approximately $18,995 has been entered against our company. We have served a temporary standstill on collection activities. 8 o Young & Rubicam, L.P. v. BEVsystems Int'l, Inc., et al., Case No. 02-31444-CA-08. This action was filed in the Eleventh Judicial District for Miami-Dade County. The Plaintiff in the action seeks to recover approximately $57,410 for non-payment of office rent. We have received the complaint and the answer is due. o Brickell Bay Capital Fund, LLC v. BEVsystems Int'l, Inc., et al., Case No. 03-4936-CI-015. This action was filed in the Sixth Judicial Circuit for Pinellas County, Florida on June 26, 2003. The suit is a foreclosure action against us by a secured mortgage holder for non-payment. The Plaintiff seeks to recover possession of the collateral, consisting of real property and machinery. The principal amount of the note is approximately $300,000. In addition to this amount, back interest, attorneys' fees and costs are being sought in the amount of approximately $50,000. The complaint in this action has been received by us and our answer has been filed and we are awaiting discovery. o Burkhardt, et al. v. BEVsystems Int'l, Inc., et al., Case No. 03-13379-CA-08. This action was filed in the Eleventh Judicial Circuit for Miami-Dade County, Florida on June 6, 2003. The Plaintiff served a 13-count complaint which includes claims of breach of contract, ejectment and foreclosure of a security agreement. Further, the Plaintiff is claiming that he is entitled to receive shares of Preferred Stock, which are convertible into 15% of the issued and outstanding shares of our company. The Plaintiff has not specified an amount of damages. The satisfaction of the conditions upon which we agreed to issue such shares and the consideration for the issuance of such shares are in dispute. Accordingly, we believe the individual is no longer entitled to receive such shares. We filed a motion to transfer venue and the motion is pending. Our company and counsel handling the action believe that we will prevail in the defense of these transactions due to the Plaintiff's failure to satisfy our consideration obligations. Although we believe that such action is without merit, and we will vigorously defending such action, there can be no assurance that such action will not be successful. o Bell Industries, Inc. v. BEVsystems Int'l, Inc., et al., Case No. 03-362-CC-26 (04). This action was filed in the Sixth Judicial Circuit for Pinellas County, Florida on January 16, 2003. The Plaintiff commenced the action to recover approximately $17,683 for advertising services rendered. The Plaintiff obtained a default judgment on April 9, 2003. We have served a temporary standstill on collection activities. o GBS v. BEVsystems Int'l, Inc., Case No. 02-5341-A-21. This action was filed in Pinellas County, Florida. The Plaintiff seeks recovery of approximately $28,084 allegedly owed to it for accounts payable by the Company. The extent of potential liability on the claim is being determined by way of discovery and due diligence. o Plunkett v. BEVsystems Int'l, Inc, et al. This action was filed in the Sixth Judicial Circuit for Pinellas County on February 11, 2003. Former employees of our company filed the action to recover severance pay as a result of their termination and/or for salary accruals. The Plaintiffs in this case obtained a judgment in the amount of approximately $438,620, have attached our bottling equipment in Clearwater, Florida and are forcing a sheriff's auction to dispose of the equipment. The proceeds will go to the Lien Holder, Brickell Bay Fund. We have filed an appeal with the courts to hear the matter and still expects to prevail. o The real estate in Clearwater, Florida is in foreclosure with the first and second mortgage holder, Yale Mortgage and Brickell Bay Fund. Mortgages amount to approximately $720,000. o Rand L. Gray vs. Aqua Clara, et al CASE NO: 0-2122-CI-021: A Pinellas County action seeking monies for back wages and breach of employment agreement by a former director of Aqua Clara Bottling and Distribution, Inc. who is now serving as a director and officer of our company. The initial claim included a mortgage foreclosure action, which was paid under protest to clear title. A judgment has been entered against us in the amount of $734,000. We are currently negotiating a settlement with Mr. Gray in connection with the payment of this judgment. If any of plaintiffs listed in the above actions, or any other plaintiffs in any other action in which we are a defendant, are successful are revenues will be negatively impacted and may be forced to cease operations. Holders of our stock may be subject to foreign personal holding company, passive foreign investment company, controlled foreign corporation and personal holding company rules. 9 To the extent that we earn a majority of our income from the payment of royalties, together with other "passive" income (for United States federal income tax purposes), we may be treated as a foreign personal holding company or a passive foreign investment company. In that event, holders of our common stock that are United States persons would be required to pay tax on their pro rata share of our relevant non-United States subsidiary's undistributed foreign personal holding company income. If we were a passive foreign investment company, then any holder of our common stock that is a United States person could be liable to pay tax at the then prevailing rates on ordinary income plus an interest charge upon some distributions by our company or when that shareholder sold our common stock at a gain. Furthermore, additional tax considerations would apply if our company or any of our affiliates were a controlled foreign corporation or a personal holding company. Risks Related To Our Stock We have anti-takeover provisions, which could inhibit potential investors or delay or prevent a change of control that may favor you. Some of the provisions of our certificate of incorporation, our bylaws and Florida law could, together or separately, discourage potential acquisition proposals or delay or prevent a change in control. In particular, our board of directors is authorized to issue up to 5,000,000 shares of preferred stock (less any outstanding shares of preferred stock) with rights and privileges that might be senior to our common stock, without the consent of the holders of the common stock. Our auditors included an explanatory paragraph in their report stating that there is substantial doubt about our ability to continue as a going concern, and if we cannot operate as a going concern, our stock price will decline and you may lose your entire investment. Our auditors included an explanatory paragraph in their report on our financial statements for the year ended March 29, 2003 which states that, due to recurring losses from operations since our inception, there is substantial doubt about our ability to continue as a going concern. We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various financial institutions where possible. Our continued net operating losses increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful. Our common stock is subject to the "Penny Stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: o that a broker or dealer approve a person's account for transactions in penny stocks; and o the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the Penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: o obtain financial information and investment experience objectives of the person; and o make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: o sets forth the basis on which the broker or dealer made the suitability determination; and 10 o that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Selling Stockholders 11 The table below sets forth information concerning the resale of the shares of common stock by the selling stockholders upon exercise of the warrants, if any. We will not receive any proceeds from the resale of the common stock by the selling stockholders. The following table also sets forth the name of each person who is offering the resale of shares of common stock by this prospectus, the number of shares of common stock beneficially owned by each person, the number of shares of common stock that may be sold in this offering and the number of shares of common stock each person will own after the offering, assuming they sell all of the shares offered.
Shares Beneficially Owned Shares Beneficially Owned ----------------------------------- ------------------------------------------- Prior to the Offering After the Offering Total ---------------- Name Number Percent Shares Offered Number Percent Joel Stohlman(1)(2) 6,768,602 2.91% 3,000,000 3,768,602 1.41% Rand L. Gray(1)(3) 10,000,000 4.29% 10,000,000 0 * Michael J. Goeree(1)(4) 61,200,000 26.28% 4,000,000 57,200,000 21.35% Lior Segal(1)(5) 10,500,000 4.51% 5,000,000 5,500,000 2.05% Darren Cioffi(1)(6) 6,000,000 2.58% 4,000,000 2,000,000 * All Officers and Directors as a group ------------------ 40.56% 26,000,000 68,468,602 25.56% 94,468,602 * Less than one percent.
The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholder has sole or shared voting power or investment power and also any shares which the selling stockholder has the right to acquire within 60 days. Shares owned prior to the offering include the shares issuable upon exercise of the options set forth in the "Total Shares Offered" column. The above percentages are based on 22,380,740 shares of common stock outstanding prior to the offering and 23,390,740 shares of common stock outstanding after the offering. Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to the shares shown. Except where indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of voting securities shown as beneficially owned by them. Percentages are based upon the assumption that each shareholder has exercised all of the currently exercisable options he or she owns which are currently exercisable or exercisable within 60 days and that no other shareholder has exercised any options he or she owns. The address of each of the above selling shareholders is c/o Bevsystems International, Inc., 334 South Hyde Park Avenue, Suite 111 ,Tampa, Florida 33606. (1) Officer and/or director. (2) Includes 3,768,602 shares of common stock and 3,000,000 shares of common stock to be issued under the 2004 Stock Inventive Plan. (3) Includes 10,000,000 shares of common stock to be issued under the 2004 Stock Incentive Plan. (4) Includes 57,200,000 shares that are indirectly beneficially owned through ownership of the common stock of Sun Rayz Products, Inc., the sole shareholder of Sun Rayz Beverages, Inc., which is a shareholder of our company, and 4,000,000 shares of common stock to be issued under the 2004 Stock Incentive Plan. 12 (5) Includes 5,500,000 shares that are indirectly beneficially owned through ownership of the common stock of Sun Rayz Products, Inc., the sole shareholder of Sun Rayz Beverages, Inc., which is a shareholder of our company, and 5,000,000 shares of common stock to be issued under the 2004 Stock Incentive Plan. (6) Includes 2,000,000 shares of common stock and 4,000,000 shares of common stock to be issued under the 2004 Stock Inventive Plan. 13 Plan of Distribution Sales of the shares may be effected by or for the account of the selling stockholders from time to time in transactions (which may include block transactions) on the Pink Sheets, in negotiated transactions, through a combination of such methods of sale, or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale or at negotiated prices. The selling stockholders may effect such transactions by selling the shares directly to purchasers, through broker-dealers acting as agents of the selling stockholders, or to broker-dealers acting as agents for the selling stockholders, or to broker-dealers who may purchase shares as principals and thereafter sell the shares from time to time in transactions (which may include block transactions) on the Pink Sheets, in negotiated transactions, through a combination of such methods of sale, or otherwise. In effecting sales, broker-dealers engaged by a selling stockholder may arrange for other broker-dealers to participate. Such broker-dealers, if any, may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of the shares for whom such broker-dealers may act as agents or to whom they may sell as principals, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). The selling stockholders and any broker-dealers or agents that participate with the selling stockholders in the distribution of the shares may be deemed to be "underwriters" within the meaning of the Securities Act of 1933. Any commissions paid or any discounts or concessions allowed to any such persons, and any profits received on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. We have agreed to bear all expenses of registration of the shares other than legal fees and expenses, if any, of counsel or other advisors of the selling stockholders. The selling stockholders will bear any commissions, discounts, concessions or other fees, if any, payable to broker-dealers in connection with any sale of their shares. We have agreed to indemnify the selling stockholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act of 1933 or to contribute to payments the selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect thereof. 14 Information Incorporated by Reference The Securities and Exchange Commission allows us to incorporate by reference certain of our publicly-filed documents into this prospectus, which means that such information is considered part of this prospectus. Information that we file with the SEC subsequent to the date of this prospectus will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under all documents subsequently filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the selling stockholders have sold all of the shares offered hereby or such shares have been deregistered. The following documents filed with the SEC are incorporated herein by reference: o Reference is made to the Registrant's annual report on Form 10-KSB/A, as filed with the SEC on September 16, 2003, which is hereby incorporated by reference. o Reference is made to the Registrant's quarterly report on Form 10-QSB, as filed with the SEC on February 10, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on February 5, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on April 27, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on April 30, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on May_4, 2004, which is hereby incorporated by reference. We will provide without charge to each person to whom a copy of this prospectus has been delivered, on written or oral request a copy of any or all of the documents incorporated by reference in this prospectus, other than exhibits to such documents. Written or oral requests for such copies should be directed to Rand Gray, CEO, Bevsystems International, Inc., 334 South Hyde Park Avenue, Suite 111, Tampa, Florida 33606. Disclosure Of Commission Position On Indemnification For Securities Act Liabilities Our Certificate of Incorporation, as amended, provide to the fullest extent permitted by Washington law, a director or officer of our company shall not be personally liable to us or our shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our Certificate of Incorporation, as amended, is to eliminate the right of our company and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Certificate of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to its directors, officers and controlling persons pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. 15 Additional Information Available to You This prospectus is part of a Registration Statement on Form S-8 that we filed with the SEC. Certain information in the Registration Statement has been omitted from this prospectus in accordance with the rules of the SEC. We file annual, quarterly and special reports, proxy statements and other information with the SEC. You can inspect and copy the Registration Statement as well as reports, proxy statements and other information we have filed with the SEC at the public reference room maintained by the SEC at 450 Fifth Street, NW, Washington, D.C. 20549, and at the following Regional Offices of the SEC: Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. You can obtain copies from the public reference room of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549, upon payment of certain fees. You can call the SEC at 1-800-732-0330 for further information about the public reference room. We are also required to file electronic versions of these documents with the SEC, which may be accessed through the SEC's World Wide Web site at http://www.sec.gov. Our common stock is quoted on Pink Sheets. 16 No dealer, salesperson or other person is authorized to give any information or to make any representations other than those contained in this prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to buy any security other than the securities offered by this prospectus, or an offer to sell or a solicitation of an offer to buy any securities by any person in any jurisdiction where such offer or solicitation is not authorized or is unlawful. Neither delivery of this prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of our company since the date hereof. ------------------------ 35,000,000 SHARES OF COMMON STOCK ------------------------ PROSPECTUS _______________ May 6, 2004 17 PART I Item 1. Plan Information. The documents containing the information specified in Item 1 will be sent or given to participants in the Registrant's 2004 Incentive Stock Plan as specified by Rule 428(b)(1) of the Securities Act of 1933, as amended (the "Securities Act"). Such documents are not required to be and are not filed with the Securities and Exchange Commission (the "SEC") either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424. These documents and the documents incorporated by reference in this Registration Statement pursuant to Item 3 of Part II of this Form S-8, taken together, constitute a prospectus that meets the requirements of Section 10(a) of the Securities Act. Item 2. Registrant Information, the 2004 Incentive Stock Plan. Upon written or oral request, any of the documents incorporated by reference in Item 3 of Part II of this Registration Statement (which documents are incorporated by reference in this Section 10(a) Prospectus), other documents required to be delivered to eligible employees, non-employee directors and consultants, pursuant to Rule 428(b) or additional information about the 2004 Incentive Stock Plan are available without charge by contacting: Rand Gray, CEO 334 South Hyde Park Avenue, Suite 111 Tampa, Florida 33606 (727) 375-0290 PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference. The Registrant hereby incorporates by reference into this Registration Statement the documents listed below. In addition, all documents subsequently filed pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents: o Reference is made to the Registrant's annual report on Form 10-KSB/A, as filed with the SEC on September 16, 2003, which is hereby incorporated by reference. o Reference is made to the Registrant's quarterly report on Form 10-QSB, as filed with the SEC on February 10, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on February 5, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on April 27, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on April 30, 2004, which is hereby incorporated by reference. o Reference is made to the Registrant's current report on Form 8-K, as filed with the SEC on May_5, 2004, which is hereby incorporated by reference. Item 4. Description of Securities. Not Applicable. Item 5. Interests of Named Experts and Counsel. None. 18 Item 6. Indemnification of Directors and Officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. The Company's Certificate of Incorporation provides that no director of the Company shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director except as limited by Florida law. The Company's Bylaws provide that the Company shall indemnify to the full extent authorized by law each of its directors and officers against expenses incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the corporation. Insofar as indemnification for liabilities may be invoked to disclaim liability for damages arising under the Securities Act of 1933, as amended, or the Securities Act of 1934, (collectively, the "Acts") as amended, it is the position of the Securities and Exchange Commission that such indemnification is against public policy as expressed in the Acts and are therefore, unenforceable. Item 7. Exemption from Registration Claimed. None. Item 8. Exhibits. EXHIBIT NUMBER EXHIBIT 4.1 2004 Incentive Stock Plan 5.1 Opinion of Sichenzia Ross Friedman Ference LLP 23.1 Consent of Massella & Associates, CPA, PLLC 23.2 Consent of Gerson, Preston, Robinson & Company, P.A. 23.3 Consent of Sichenzia Ross Friedman Ference LLP is contained in Exhibit 5.1. Item 9. Undertakings. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 19 (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 20 Signatures In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of an amendment to a filing on Form S-8 and authorized this amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tampa, Florida on May 3, 2004 BEVSYSTEMS INTERNATIONAL, INC.. /s/ Rand L. Gray ------------------- Rand L. Gray Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Michael Goeree Chairman of the Board May 3, 2004 Michael Goeree /s/ Rand L. Gray President, CEO and Director May 3, 2004 Rand L. Gray /s/Lior Segal Secretary and Director May 3, 2004 Lior Segal /s/Darren Cioffi Chief Financial Officer May 3, 2004 Darren Cioffi 21 EX-23 2 may62004s8ex231.txt Exhibit 23.1 [Letterhead of Massella & Associates, CPA, PLLC] May 5, 2004 U.S. Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Bevsystems International, Inc. - Form S-8 Dear Sir/Madam: As independent certified public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated September 8, 2003 in the Company's Form 10-KSB/A for the year ended March 29, 2003, and to all references to our firm included in this Registration Statement. Sincerely, /s/ Massella & Associates, CPA, PLLC Massella & Associates, CPA, PLLC EX-23 3 may62004s8ex232.txt Exhibit 23.2 [Letterhead of Gerson, Preston, Robinson & Company, P.A.] May 3, 2004 U.S. Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Bevsystems International, Inc. - Form S-8 Dear Sir/Madam: As independent certified public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated July 8, 2002 in the Company's Form 10-KSB for the year ended March 30, 2002, and to all references to our firm included in this Registration Statement. Sincerely, /s/ Gerson, Preston, Robinson & Company, P.A. Gerson, Preston, Robinson & Company, P.A. EX-5 4 may62004s8ex51.txt EXHIBIT 5.1 SICHENZIA ROSS FRIEDMAN FERENCE LLP 1065 AVENUE OF THE AMERICAS NEW YORK NY 10018 TEL 212 930 9700 FAX 212 930 9725 WEB WWW. SRFFLLP.COM May 6, 2004 VIA ELECTRONIC TRANSMISSION Securities and Exchange Commission 450 Fifth Street, N.W. Washington, CC 20549 Re: Bevsystems International, Inc. Ladies and Gentlemen: We refer to the registration statement on Form S-8 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), filed by Bevsystems International, Inc., a Florida corporation (the "Company"), with the Securities and Exchange Commission. We have examined the originals, photocopies, certified copies or other evidence of such records of the Company, certificates of officers of the Company and public officials, and other documents as we have deemed relevant and necessary as a basis for the opinion hereinafter expressed. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as certified copies or photocopies and the authenticity of the originals of such latter documents. Based on our examination mentioned above, we are of the opinion that the securities being registered to be sold pursuant to the Registration Statement are duly authorized and will be, when sold in the manner described in the Registration Statement, legally and validly issued, and fully paid and nonassessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under Legal Matters in the related Prospectus. In giving the foregoing consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations of the Securities and Exchange Commission. Very truly yours, /s/ Sichenzia Ross Friedman Ference LLP Sichenzia Ross Friedman Ference LLP EX-4 5 may62004s8ex41.txt Exhibit 4.1 BEVSYSTEMS INTERNATIONAL, INC. 2004 INCENTIVE STOCK PLAN ================================================================================ THIS BEVSYSTEMS INTERNATIONAL, INC. 2004 INCENTIVE STOCK PLAN (the "Plan") is designed to retain directors, executives and selected employees and consultants and reward them for making major contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company. 1. Definitions. (a) "Board" - The Board of Directors of the Company. (b) "Code" - The Internal Revenue Code of 1986, as amended from time to time. (c) "Committee" - The Compensation Committee of the Company's Board, or such other committee of the Board that is designated by the Board to administer the Plan, composed of not less than two members of the Board all of whom are disinterested persons, as contemplated by Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (d) "Company" - BEVSYSTEMS INTERNATIONAL, INC. and its subsidiaries including subsidiaries of subsidiaries. (e) "Exchange Act" - The Securities Exchange Act of 1934, as amended from time to time. (f) "Fair Market Value" - The fair market value of the Company's issued and outstanding Stock as determined in good faith by the Board or Committee. (g) "Florida Securities Rules" - Chapter 517.061 (15) of Title XXXIII of the Florida Statues. (h) "Grant" - The grant of any form of stock option, stock award, or stock purchase offer, whether granted singly, in combination or in tandem, to a Participant pursuant to such terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan. (i) "Grant Agreement" - An agreement between the Company and a Participant that sets forth the terms, conditions and limitations applicable to a Grant. (j) "Option" - Either an Incentive Stock Option, in accordance with Section 422 of Code, or a Nonstatutory Option, to purchase the Company's Stock that may be awarded to a Participant under the Plan. A Participant who receives an award of an Option shall be referred to as an "Optionee." (k) "Participant" - A director, officer, employee or consultant of the Company to whom an Award has been made under the Plan. (l) "Restricted Stock Purchase Offer" - A Grant of the right to purchase a specified number of shares of Stock pursuant to a written agreement issued under the Plan. (m) "Securities Act" - The Securities Act of 1933, as amended from time to time. (n) "Stock" - Authorized and issued or unissued shares of common stock of the Company. (o) "Stock Award" - A Grant made under the Plan in stock or denominated in units of stock for which the Participant is not obligated to pay additional consideration. 2. Administration. The Plan shall be administered by the Board, provided however, that the Board may delegate such administration to the Committee. Subject to the provisions of the Plan, the Board and/or the Committee shall have authority to (a) grant, in its discretion, Incentive Stock Options in accordance with Section 422 of the Code, or Nonstatutory Options, Stock Awards or Restricted Stock Purchase Offers; (b) determine in good faith the fair market value of the Stock covered by any Grant; (c) determine which eligible persons shall receive Grants and the number of shares, restrictions, terms and conditions to be included in such Grants; (d) construe and interpret the Plan; (e) promulgate, amend and rescind rules and regulations relating to its administration, and correct defects, omissions and inconsistencies in the Plan or any Grant; (f) consistent with the Plan and with the consent of the Participant, as appropriate, amend any outstanding Grant or amend the exercise date or dates thereof; (g) determine the duration and purpose of leaves of absence which may be granted to Participants without constituting termination of their employment for the purpose of the Plan or any Grant; and (h) make all other determinations necessary or advisable for the Plan's administration. The interpretation and construction by the Board of any provisions of the Plan or selection of Participants shall be conclusive and final. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Grant made thereunder. 3. Eligibility. (a) General: The persons who shall be eligible to receive Grants shall be directors, officers, employees or consultants to the Company. The term consultant shall mean any person, other than an employee, who is engaged by the Company to render services and is compensated for such services. An Optionee may hold more than one Option. Any issuance of a Grant to an officer or director of the Company subsequent to the first registration of any of the securities of the Company under the Exchange Act shall comply with the requirements of Rule 16b-3. (b) Incentive Stock Options: Incentive Stock Options may only be issued to employees of the Company. Incentive Stock Options may be granted to officers or directors, provided they are also employees of the Company. Payment of a director's fee shall not be sufficient to constitute employment by the Company. The Company shall not grant an Incentive Stock Option under the Plan 2 to any employee if such Grant would result in such employee holding the right to exercise for the first time in any one calendar year, under all Incentive Stock Options granted under the Plan or any other plan maintained by the Company, with respect to shares of Stock having an aggregate fair market value, determined as of the date of the Option is granted, in excess of $100,000. Should it be determined that an Incentive Stock Option granted under the Plan exceeds such maximum for any reason other than a failure in good faith to value the Stock subject to such option, the excess portion of such option shall be considered a Nonstatutory Option. To the extent the employee holds two (2) or more such Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such Option as Incentive Stock Options under the Federal tax laws shall be applied on the basis of the order in which such Options are granted. If, for any reason, an entire Option does not qualify as an Incentive Stock Option by reason of exceeding such maximum, such Option shall be considered a Nonstatutory Option. (c) Nonstatutory Option: The provisions of the foregoing Section 3(b) shall not apply to any Option designated as a "Nonstatutory Option" or which sets forth the intention of the parties that the Option be a Nonstatutory Option. (d) Stock Awards and Restricted Stock Purchase Offers: The provisions ------------------------------------------------------ of this Section 3 shall not apply to any Stock Award orRestricted Stock Purchase Offer under the Plan. 4. Stock. (a) Authorized Stock: Stock subject to Grants may be either unissued or reacquired Stock. (b) Number of Shares: Subject to adjustment as provided in Section 5(i) of the Plan, the total number of shares of Stock which may be purchased or granted directly by Options, Stock Awards or Restricted Stock Purchase Offers, or purchased indirectly through exercise of Options granted under the Plan shall not exceed Thirty Five Million (35,000,000). If any Grant shall for any reason terminate or expire, any shares allocated thereto but remaining unpurchased upon such expiration or termination shall again be available for Grants with respect thereto under the Plan as though no Grant had previously occurred with respect to such shares. Any shares of Stock issued pursuant to a Grant and repurchased pursuant to the terms thereof shall be available for future Grants as though not previously covered by a Grant. (c) Reservation of Shares: The Company shall reserve and keep available at all times during the term of the Plan such number of shares as shall be sufficient to satisfy the requirements of the Plan. If, after reasonable efforts, which efforts shall not include the registration of the Plan or Grants under the Securities Act, the Company is unable to obtain authority from any applicable regulatory body, which authorization is deemed necessary by legal counsel for the Company for the lawful issuance of shares hereunder, the Company shall be relieved of any liability with respect to its failure to issue and sell the shares for which such requisite authority was so deemed necessary unless and until such authority is obtained. 3 (d) Application of Funds: The proceeds received by the Company from the sale of Stock pursuant to the exercise of Options or rights under Stock Purchase Agreements will be used for general corporate purposes. (e) No Obligation to Exercise: The issuance of a Grant shall impose no obligation upon the Participant to exercise any rights under such Grant. 5. Terms and Conditions of Options. Options granted hereunder shall be evidenced by agreements between the Company and the respective Optionees, in such form and substance as the Board or Committee shall from time to time approve. The form of Incentive Stock Option Agreement attached hereto as Exhibit A and the three forms of a Nonstatutory Stock Option Agreement for employees, for directors and for consultants, attached hereto as Exhibit B-1, Exhibit B-2 and Exhibit B-3, respectively, shall be deemed to be approved by the Board. Option agreements need not be identical, and in each case may include such provisions as the Board or Committee may determine, but all such agreements shall be subject to and limited by the following terms and conditions: (a) Number of Shares: Each Option shall state the number of shares to which it pertains. (b) Exercise Price: Each Option shall state the exercise price, which shall be determined as follows: (i) Any Incentive Stock Option granted to a person who at the time the Option is granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power or value of all classes of stock of the Company ("Ten Percent Holder") shall have an exercise price of no less than 110% of the Fair Market Value of the Stock as of the date of grant; and (ii) Incentive Stock Options granted to a person who at the time the Option is granted is not a Ten Percent Holder shall have an exercise price of no less than 100% of the Fair Market Value of the Stock as of the date of grant. For the purposes of this Section 5(b), the Fair Market Value shall be as determined by the Board in good faith, which determination shall be conclusive and binding; provided however, that if there is a public market for such Stock, the Fair Market Value per share shall be the average of the bid and asked prices (or the closing price if such stock is listed on the NASDAQ National Market System or Small Cap Issue Market) on the date of grant of the Option, or if listed on a stock exchange, the closing price on such exchange on such date of grant. (c) Medium and Time of Payment: The exercise price shall become immediately due upon exercise of the Option and shall be paid in cash or check made payable to the Company. Should the Company's outstanding Stock be registered under Section 12(g) of the Exchange Act at the time the Option is exercised, then the exercise price may also be paid as follows: (i) in shares of Stock held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the exercise date, or 4 (ii) through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions (a) to a Company designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Company by reason of such purchase and (b) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. At the discretion of the Board, exercisable either at the time of Option grant or of Option exercise, the exercise price may also be paid (i) by Optionee's delivery of a promissory note in form and substance satisfactory to the Company and permissible under the Securities Rules of the State of Florida and bearing interest at a rate determined by the Board in its sole discretion, but in no event less than the minimum rate of interest required to avoid the imputation of compensation income to the Optionee under the Federal tax laws, or (ii) in such other form of consideration permitted by the Florida corporations law as may be acceptable to the Board. (d) Term and Exercise of Options: Any Option granted to an employee of the ----------------------------- Company shall become exercisable over a period of no longer than five (5) years, and no less than twenty percent (20%) of the shares covered thereby shall become exercisable annually. No Option shall be exercisable, in whole or in part, prior to one (1) year from the date it is granted unless the Board shall specifically determine otherwise, as provided herein. In no event shall any Option be exercisable after the expiration of ten (10) years from the date it is granted, and no Incentive Stock Option granted to a Ten Percent Holder shall, by its terms, be exercisable after the expiration of five (5) years from the date of the Option. Unless otherwise specified by the Board or the Committee in the resolution authorizing such Option, the date of grant of an Option shall be deemed to be the date upon which the Board or the Committee authorizes the granting of such Option. Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements may provide. During the lifetime of an Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee, and no other person shall acquire any rights therein. To the extent not exercised, installments (if more than one) shall accumulate, but shall be exercisable, in whole or in part, only during the period for exercise as stated in the Option agreement, whether or not other installments are then exercisable. (e) Termination of Status as Employee, Consultant or Director: If ------------------------------------------------------------- Optionee's status as an employee shall terminate for any reason other than Optionee's disability or death, then Optionee (or if the Optionee shall die after such termination, but prior to exercise, Optionee's personal representative or the person entitled to succeed to the Option) shall have the right to exercise the portions of any of Optionee's Incentive Stock Options which were exercisable as of the date of such termination, in whole or in part, not less than 30 days 5 nor more than three (3) months after such termination (or, in the event of "termination for good cause" as that term is defined in Florida case law related thereto, or by the terms of the Plan or the Option Agreement or an employment agreement, the Option shall automatically terminate as of the termination of employment as to all shares covered by the Option). With respect to Nonstatutory Options granted to employees, directors or consultants, the Board may specify such period for exercise, not less than 30 days (except that in the case of "termination for cause" or removal of a director, the Option shall automatically terminate as of the termination of employment or services as to shares covered by the Option, following termination of employment or services as the Board deems reasonable and appropriate. The Option may be exercised only with respect to installments that the Optionee could have exercised at the date of termination of employment or services. Nothing contained herein or in any Option granted pursuant hereto shall be construed to affect or restrict in any way the right of the Company to terminate the employment or services of an Optionee with or without cause. (f) Disability of Optionee: If an Optionee is disabled (within the meaning of Section 22(e)(3) of the Code) at the time of termination, the three (3) month period set forth in Section 5(e) shall be a period, as determined by the Board and set forth in the Option, of not less than six months nor more than one year after such termination. (g) Death of Optionee: If an Optionee dies while employed by, ------------------- engaged as a consultant to, or serving as a Director of the Company, the portion of such Optionee's Option which was exercisable at the date of death may be exercised, in whole or in part, by the estate of the decedent or by a person succeeding to the right to exercise such Option at any time within (i) a period, as determined by the Board and set forth in the Option, of not less than six (6) months nor more than one (1) year after Optionee's death, which period shall not be more, in the case of a Nonstatutory Option, than the period for exercise following termination of employment or services, or (ii) during the remaining term of the Option, whichever is the lesser. The Option may be so exercised only with respect to installments exercisable at the time of Optionee's death and not previously exercised by the Optionee. (h) Nontransferability of Option: No Option shall be transferable by the Optionee, except by will or by the laws of descent and distribution. (i) Recapitalization: Subject to any required action of shareholders, the number of shares of Stock covered by each outstanding Option, and the exercise price per share thereof set forth in each such Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock of the Company resulting from a stock split, stock dividend, combination, subdivision or reclassification of shares, or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company; provided, however, the conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration" by the Company. In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the 6 surviving entity, or a sale of all or substantially all of the assets or capital stock of the Company (collectively, a "Reorganization"), unless otherwise provided by the Board, this Option shall terminate immediately prior to such date as is determined by the Board, which date shall be no later than the consummation of such Reorganization. In such event, if the entity which shall be the surviving entity does not tender to Optionee an offer, for which it has no obligation to do so, to substitute for any unexercised Option a stock option or capital stock of such surviving of such surviving entity, as applicable, which on an equitable basis shall provide the Optionee with substantially the same economic benefit as such unexercised Option, then the Board may grant to such Optionee, in its sole and absolute discretion and without obligation, the right for a period commencing thirty (30) days prior to and ending immediately prior to the date determined by the Board pursuant hereto for termination of the Option or during the remaining term of the Option, whichever is the lesser, to exercise any unexpired Option or Options without regard to the installment provisions of Paragraph 6(d) of the Plan; provided, that any such right granted shall be granted to all Optionees not receiving an offer to receive substitute options on a consistent basis, and provided further, that any such exercise shall be subject to the consummation of such Reorganization. Subject to any required action of shareholders, if the Company shall be the surviving entity in any merger or consolidation, each outstanding Option thereafter shall pertain to and apply to the securities to which a holder of shares of Stock equal to the shares subject to the Option would have been entitled by reason of such merger or consolidation. 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 without par value into the same number of shares with a par value, the shares resulting from any such change shall be deemed to be the Stock within the meaning of the Plan. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided in this Section 5(i), the Optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, and the number or price of shares of Stock subject to any Option shall not be affected by, and no adjustment shall be made by reason of, any dissolution, liquidation, merger, consolidation or sale of assets or capital stock, or any issue by the Company of shares of stock of any class or securities convertible into shares of stock of any class. The Grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make any adjustments, reclassifications, reorganizations or changes in its capital or business structure or to merge, consolidate, dissolve, or liquidate or to sell or transfer all or any part of its business or assets. (j) Rights as a Shareholder: An Optionee shall have no rights as a shareholder with respect to any shares covered by an Option until the effective date of the issuance of the shares following exercise of such Option by Optionee. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other 7 property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as expressly provided in Section 5(i) hereof. (k) Modification, Acceleration, Extension, and Renewal of Options: Subject to the terms and conditions and within the limitations of the Plan, the Board may modify an Option, or, once an Option is exercisable, accelerate the rate at which it may be exercised, and may extend or renew outstanding Options granted under the Plan or accept the surrender of outstanding Options (to the extent not theretofore exercised) and authorize the granting of new Options in substitution for such Options, provided such action is permissible under Section 422 of the Code and the Florida Securities Rules. Notwithstanding the provisions of this Section 5(k), however, no modification of an Option shall, without the consent of the Optionee, alter to the Optionee's detriment or impair any rights or obligations under any Option theretofore granted under the Plan. (l) Exercise Before Exercise Date: At the discretion of the Board, the Option may, but need not, include a provision whereby the Optionee may elect to exercise all or any portion of the Option prior to the stated exercise date of the Option or any installment thereof. Any shares so purchased prior to the stated exercise date shall be subject to repurchase by the Company upon termination of Optionee's employment as contemplated by Section 5(n) hereof prior to the exercise date stated in the Option and such other restrictions and conditions as the Board or Committee may deem advisable. (m) Other Provisions: The Option agreements authorized under the Plan ----------------- shall contain such other provisions, including, without limitation, restrictions upon the exercise of the Options, as the Board or the Committee shall deem advisable. Shares shall not be issued pursuant to the exercise of an Option, if the exercise of such Option or the issuance of shares thereunder would violate, in the opinion of legal counsel for the Company, the provisions of any applicable law or the rules or regulations of any applicable governmental or administrative agency or body, such as the Code, the Securities Act, the Exchange Act, the Florida Securities Rules, Florida corporation law, and the rules promulgated under the foregoing or the rules and regulations of any exchange upon which the shares of the Company are listed. Without limiting the generality of the foregoing, the exercise of each Option shall be subject to the condition that if at any time the Company shall determine that (i) the satisfaction of withholding tax or other similar liabilities, or (ii) the listing, registration or qualification of any shares covered by such exercise upon any securities exchange or under any state or federal law, or (iii) the consent or approval of any regulatory body, or (iv) the perfection of any exemption from any such withholding, listing, registration, qualification, consent or approval is necessary or desirable in connection with such exercise or the issuance of shares thereunder, then in any such event, such exercise shall not be effective unless such withholding, listing registration, qualification, consent, approval or exemption shall have been effected, obtained or perfected free of any conditions not acceptable to the Company. (n) Repurchase Agreement: The Board may, in its discretion, require as a --------------------- condition to the Grant of an Option hereunder, that an Optionee execute an agreement with the Company, in form and substance satisfactory to the Board in its discretion ("Repurchase Agreement"), (i) restricting the Optionee's right to transfer shares purchased under such Option without first offering such shares to the Company or another shareholder of the Company upon the same terms and conditions as provided therein; and (ii) providing that upon 8 termination of Optionee's employment with the Company, for any reason, the Company (or another shareholder of the Company, as provided in the Repurchase Agreement) shall have the right at its discretion (or the discretion of such other shareholders) to purchase and/or redeem all such shares owned by the Optionee on the date of termination of his or her employment at a price equal to: (A) the fair value of such shares as of such date of termination; or (B) if such repurchase right lapses at 20% of the number of shares per year, the original purchase price of such shares, and upon terms of payment permissible under the Florida securities rules; provided that in the case of Options or Stock Awards granted to officers, directors, consultants or affiliates of the Company, such repurchase provisions may be subject to additional or greater restrictions as determined by the Board or Committee. 6. Stock Awards and Restricted Stock Purchase Offers. (a) Types of Grants. (i) Stock Award. All or part of any Stock Award under the Plan may be subject to conditions established by the Board or the Committee, and set forth in the Stock Award Agreement, which may include, but are not limited to, continuous service with the Company, achievement of specific business objectives, increases in specified indices, attaining growth rates and other comparable measurements of Company performance. Such Awards may be based on Fair Market Value or other specified valuation. All Stock Awards will be made pursuant to the execution of a Stock Award Agreement substantially in the form attached hereto as Exhibit C. (ii) Restricted Stock Purchase Offer. A Grant of a Restricted Stock Purchase Offer under the Plan shall be subject to such (i) vesting contingencies related to the Participant's continued association with the Company for a specified time and (ii) other specified conditions as the Board or Committee shall determine, in their sole discretion, consistent with the provisions of the Plan. All Restricted Stock Purchase Offers shall be made pursuant to a Restricted Stock Purchase Offer substantially in the form attached hereto as Exhibit D. (b) Conditions and Restrictions. Shares of Stock which Participants may ----------------------------- receive as a Stock Award under a Stock Award Agreement or Restricted Stock Purchase Offer under a Restricted Stock Purchase Offer may include such restrictions as the Board or Committee, as applicable, shall determine, including restrictions on transfer, repurchase rights, right of first refusal, and forfeiture provisions. When transfer of Stock is so restricted or subject to forfeiture provisions it is referred to as "Restricted Stock". Further, with Board or Committee approval, Stock Awards or Restricted Stock Purchase Offers may be deferred, either in the form of installments or a future lump sum distribution. The Board or Committee may permit selected Participants to elect to defer distributions of Stock Awards or Restricted Stock Purchase Offers in accordance with procedures established by the Board or Committee to assure that such deferrals comply with applicable requirements of the Code including, at the choice of Participants, the capability to make further deferrals for distribution after retirement. Any deferred distribution, whether elected by the Participant or specified by the Stock Award Agreement, Restricted Stock Purchase Offers or by the 9 Board or Committee, may require the payment be forfeited in accordance with the provisions of Section 6(c). Dividends or dividend equivalent rights may be extended to and made part of any Stock Award or Restricted Stock Purchase Offers denominated in Stock or units of Stock, subject to such terms, conditions and restrictions as the Board or Committee may establish. (c) Cancellation and Rescission of Grants. Unless the Stock Award Agreement or Restricted Stock Purchase Offer specifies otherwise, the Board or Committee, as applicable, may cancel any unexpired, unpaid, or deferred Grants at any time if the Participant is not in compliance with all other applicable provisions of the Stock Award Agreement or Restricted Stock Purchase Offer, the Plan and with the following conditions: (i) A Participant shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the chief executive officer of the Company or other senior officer designated by the Board or Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company. For Participants whose employment has terminated, the judgment of the chief executive officer shall be based on the Participant's position and responsibilities while employed by the Company, the Participant's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's customers, suppliers and competitors and such other considerations as are deemed relevant given the applicable facts and circumstances. A Participant who has retired shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to the Participant or a greater than ten percent (10%) equity interest in the organization or business. (ii) A Participant shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any confidential information or material, as defined in the Company's Proprietary Information and Invention Agreement or similar agreement regarding confidential information and intellectual property, relating to the business of the Company, acquired by the Participant either during or after employment with the Company. (iii)A Participant, pursuant to the Company's Proprietary Information and Invention Agreement, shall disclose promptly and assign to the Company all right, title and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment by the Company, relating in any manner to the actual or anticipated business, research or development work of the Company and shall do anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in foreign countries. 10 (iv) Upon exercise, payment or delivery pursuant to a Grant, the Participant shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan. Failure to comply with all of the provisions of this Section 6(c) prior to, or during the six months after, any exercise, payment or delivery pursuant to a Grant shall cause such exercise, payment or delivery to be rescinded. The Company shall notify the Participant in writing of any such rescission within two years after such exercise, payment or delivery. Within ten days after receiving such a notice from the Company, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery pursuant to a Grant. Such payment shall be made either in cash or by returning to the Company the number of shares of Stock that the Participant received in connection with the rescinded exercise, payment or delivery. (d) Nonassignability. (i) Except pursuant to Section 6(e)(iii) and except as set forth in Section 6(d)(ii), no Grant or any other benefit under the Plan shall be assignable or transferable, or payable to or exercisable by, anyone other than the Participant to whom it was granted. (ii) Where a Participant terminates employment and retains a Grant pursuant to Section 6(e)(ii) in order to assume a position with a governmental, charitable or educational institution, the Board or Committee, in its discretion and to the extent permitted by law, may authorize a third party (including but not limited to the trustee of a "blind" trust), acceptable to the applicable governmental or institutional authorities, the Participant and the Board or Committee, to act on behalf of the Participant with regard to such Awards. (e) Termination of Employment. If the employment or service to the Company of a Participant terminates, other than pursuant to any of the following provisions under this Section 6(e), all unexercised, deferred and unpaid Stock Awards or Restricted Stock Purchase Offers shall be cancelled immediately, unless the Stock Award Agreement or Restricted Stock Purchase Offer provides otherwise: (i) Retirement Under a Company Retirement Plan. When a Participant's employment terminates as a result of retirement in accordance with the terms of a Company retirement plan, the Board or Committee may permit Stock Awards or Restricted Stock Purchase Offers to continue in effect beyond the date of retirement in accordance with the applicable Grant Agreement and the exercisability and vesting of any such Grants may be accelerated. (ii) Rights in the Best Interests of the Company. When a Participant resigns from the Company and, in the judgment of the Board or Committee, the acceleration and/or continuation of outstanding Stock Awards or Restricted Stock Purchase Offers would be in the best interests of the Company, the Board or Committee may (i) authorize, where appropriate, the acceleration and/or continuation of all or any part of Grants issued prior to such termination and (ii) permit the exercise, vesting and payment of such Grants for such period as may be set forth in the applicable Grant Agreement, subject to earlier cancellation pursuant to Section 9 or at such time as the Board or Committee shall deem 11 the continuation of all or any part of the Participant's Grants are not in the Company's best interest. (iii) Death or Disability of a Participant. (1) In the event of a Participant's death, the Participant's estate or beneficiaries shall have a period up to the expiration date specified in the Grant Agreement within which to receive or exercise any outstanding Grant held by the Participant under such terms as may be specified in the applicable Grant Agreement. Rights to any such outstanding Grants shall pass by will or the laws of descent and distribution in the following order: (a) to beneficiaries so designated by the Participant; if none, then (b) to a legal representative of the Participant; if none, then (c) to the persons entitled thereto as determined by a court of competent jurisdiction. Grants so passing shall be made at such times and in such manner as if the Participant were living. (2) In the event a Participant is deemed by the Board or Committee to be unable to perform his or her usual duties by reason of mental disorder or medical condition which does not result from facts which would be grounds for termination for cause, Grants and rights to any such Grants may be paid to or exercised by the Participant, if legally competent, or a committee or other legally designated guardian or representative if the Participant is legally incompetent by virtue of such disability. (3) After the death or disability of a Participant, the Board or Committee may in its sole discretion at any time (1) terminate restrictions in Grant Agreements; (2) accelerate any or all installments and rights; and (3) instruct the Company to pay the total of any accelerated payments in a lump sum to the Participant, the Participant's estate, beneficiaries or representative; notwithstanding that, in the absence of such termination of restrictions or acceleration of payments, any or all of the payments due under the Grant might ultimately have become payable to other beneficiaries. (4) In the event of uncertainty as to interpretation of or controversies concerning this Section 6, the determinations of the Board or Committee, as applicable, shall be binding and conclusive. 7. Investment Intent. All Grants under the Plan are intended to be exempt from registration under the Securities Act provided by Rule 701 thereunder. Unless and until the granting of Options or sale and issuance of Stock subject to the Plan are registered under the Securities Act or shall be exempt pursuant to the rules promulgated thereunder, each Grant under the Plan shall provide that the purchases or other acquisitions of Stock thereunder shall be for investment purposes and not with a view to, or for resale in connection with, any distribution thereof. Further, unless the issuance and sale of the Stock have been registered under the Securities Act, each Grant shall provide that no shares shall be purchased upon the exercise of the rights under such Grant unless and until (i) all then applicable requirements of state and federal laws and regulatory agencies shall have been fully complied with to the satisfaction of the Company and its counsel, and (ii) if requested to do so by the Company, the person exercising the rights under the Grant shall (i) give written assurances as to knowledge and experience of such person (or a representative employed by such person) in financial and business matters and the ability of such person (or representative) to evaluate the merits and risks of exercising the Option, and (ii) execute and deliver to the Company a letter of investment intent and/or such other form related to applicable exemptions from registration, all in such form and substance as the Company may 12 require. If shares are issued upon exercise of any rights under a Grant without registration under the Securities Act, subsequent registration of such shares shall relieve the purchaser thereof of any investment restrictions or representations made upon the exercise of such rights. 8. Amendment, Modification, Suspension or Discontinuance of the Plan. The Board may, insofar as permitted by law, from time to time, with respect to any shares at the time not subject to outstanding Grants, suspend or terminate the Plan or revise or amend it in any respect whatsoever, except that without the approval of the shareholders of the Company, no such revision or amendment shall (i) increase the number of shares subject to the Plan, (ii) decrease the price at which Grants may be granted, (iii) materially increase the benefits to Participants, or (iv) change the class of persons eligible to receive Grants under the Plan; provided, however, no such action shall alter or impair the rights and obligations under any Option, or Stock Award, or Restricted Stock Purchase Offer outstanding as of the date thereof without the written consent of the Participant thereunder. No Grant may be issued while the Plan is suspended or after it is terminated, but the rights and obligations under any Grant issued while the Plan is in effect shall not be impaired by suspension or termination of the Plan. In the event of any change in the outstanding Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event, the Board or the Committee may adjust proportionally (a) the number of shares of Stock (i) reserved under the Plan, (ii) available for Incentive Stock Options and Nonstatutory Options and (iii) covered by outstanding Stock Awards or Restricted Stock Purchase Offers; (b) the Stock prices related to outstanding Grants; and (c) the appropriate Fair Market Value and other price determinations for such Grants. In the event of any other change affecting the Stock or any distribution (other than normal cash dividends) to holders of Stock, such adjustments as may be deemed equitable by the Board or the Committee, including adjustments to avoid fractional shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board or the Committee shall be authorized to issue or assume stock options, whether or not in a transaction to which Section 424(a) of the Code applies, and other Grants by means of substitution of new Grant Agreements for previously issued Grants or an assumption of previously issued Grants. 9. Tax Withholding. The Company shall have the right to deduct applicable taxes from any Grant payment and withhold, at the time of delivery or exercise of Options, Stock Awards or Restricted Stock Purchase Offers or vesting of shares under such Grants, an appropriate number of shares for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. If Stock is used to satisfy tax withholding, such stock shall be valued based on the Fair Market Value when the tax withholding is required to be made. 10. Availability of Information. During the term of the Plan and any additional period during which a Grant granted pursuant to the Plan shall be exercisable, the Company shall make available, not later than one hundred and twenty (120) days following the close of each of its fiscal years, such 13 financial and other information regarding the Company as is required by the bylaws of the Company and applicable law to be furnished in an annual report to the shareholders of the Company. 11. Notice. Any written notice to the Company required by any of the provisions of the Plan shall be addressed to the chief personnel officer or to the chief executive officer of the Company, and shall become effective when it is received by the office of the chief personnel officer or the chief executive officer. 12. Indemnification of Board. In addition to such other rights or indemnifications as they may have as directors or otherwise, and to the extent allowed by applicable law, the members of the Board and the Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any claim, action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be a party by reason of any action taken, or failure to act, under or in connection with the Plan or any Grant granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such claim, action, suit or proceeding, except in any case in relation to matters as to which it shall be adjudged in such claim, action, suit or proceeding that such Board or Committee member is liable for negligence or misconduct in the performance of his or her duties; provided that within sixty (60) days after institution of any such action, suit or Board proceeding the member involved shall offer the Company, in writing, the opportunity, at its own expense, to handle and defend the same. 13. Governing Law. The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the Code or the securities laws of the United States, shall be governed by the law of the State of Florida and construed accordingly. 14. Effective and Termination Dates. The Plan shall become effective on the date it is approved by the holders of a majority of the shares of Stock then outstanding. The Plan shall terminate ten years later, subject to earlier termination by the Board pursuant to Section 8. The foregoing 2004 Incentive Stock Plan (consisting of 14 pages, including this page) was duly adopted and approved by the Board of Directors on April 19, 2004. BEVSYSTEMS INTERNATIONAL, INC., a Florida corporation By:__________________________ [ ] Its: Chief Executive Officer 14 -----END PRIVACY-ENHANCED MESSAGE-----