-----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, L4nhm7ZLkKdE6vmxibwABM9cIg4A8/mwR6BKdH32wkiG4JkmPfa3kB8rwr0rkiLs i1WuyXRgql/9TnM6rq2xng== 0000050471-98-000002.txt : 19981218 0000050471-98-000002.hdr.sgml : 19981218 ACCESSION NUMBER: 0000050471-98-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITY GROWTH SYSTEMS INC /DE/ CENTRAL INDEX KEY: 0000050471 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 112050317 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-03718 FILM NUMBER: 98771140 BUSINESS ADDRESS: STREET 1: 320 ISLAND WAY STREET 2: STE 210 CITY: CLEARWATER STATE: FL ZIP: 33767 BUSINESS PHONE: 9412559582 MAIL ADDRESS: STREET 1: 320 ISLAND WAY STREET 2: STE 210 CITY: CLEARWATER STATE: FL ZIP: 33767 FORMER COMPANY: FORMER CONFORMED NAME: INFOTEC INC DATE OF NAME CHANGE: 19930506 10QSB 1 FORM 10QSB QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 205490. FORM 10-QSB (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from_________ to_____________ Commission file number 0-3718 Equity Growth Systems, inc. -------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2050317 -------- ---------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 1941 Southeast 51st Terrace, Suite 800; Ocala, Florida 34471 ---------------------------------------- (Address of principal executive offices) (352)694-6714 ------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As at September 30, 1998, the registrant had outstanding 4,116,148 shares of Common Stock, par value $0.01. Transitional Small Business Disclosure Format: Yes No X --- --- EQUITY GROWTH SYSTEMS, inc. Index Page ---- Part I - Financial Information Item 1. Financial Statements Accountant's Compilation Report ............................. 2 Balance Sheets .............................................. 3 Statements Income and Accumulated Deficit.................... 4 Statements of Shareholders' Equity............. 5 Statements of Cash Flows..................................... 6 Notes to Financial Statements................................ 7 - 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 15 Part II -- Other Information Item I. Legal Proceedings ............................................. 16 Item 3. Defaults Upon Senior Securities ................................ 19 Item 5. Other Information 1.Change in Control of Registrant A. Director and CEO Incapacity ................................. 19 B. Biographies of New Directors and Officers ................. 20 2.Acquisition or Disposition of Assets A. Reorganization as Holding Company ........................... 23 B. New Strategic Plan ......................................... 23 5. Other Events .................................................... 23 Item 6. Index of Exhibits............................................. 24 Signatures................................................... 25 1 To the Shareholders Equity Growth Systems, inc., Boca Raton, Florida 33987 I have compiled the accompanying balance sheet of Equity Growth Systems, inc. as of September 30, 1988 and 1997 and the related statements of income and retained earnings and cash flows for the six months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. I have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Leo J. Paul November 11, 1998 2 EQUITY GROWTH SYSTEMS, inc. BALANCE SHEET September 30, 1998 AND 1997 1998 1997 A S S E T S CURRENT ASSETS Cash and cash equivalents $ 6 $ 2,597 Mortgage receivable, current portion (Note 6 & 7) 154,151 147,945 Promissory notes, current portion (Note 8) 5,480 5,480 ---------- ---------- TOTAL CURRENT ASSETS 159,637 156,022 OTHER ASSETS Mortgages receivable (Note 6 & 7) 1,004,706 1,158,857 Promissory notes (Note 8) 265,249 239,132 Interest receivable 50,242 47,820 Escrow receivable 98,000 98,000 ---------- ---------- TOTAL OTHER ASSETS 1,418,197 1,543,809 ---------- ---------- TOTAL ASSETS $1,577,834 $1,699,831 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities (Note 3) $ 35,409 $ 24,058 Mortgage payable, current portion (Note 7) 181,636 160,773 Note payable (Note 9) 155,932 105,500 ---------- ---------- TOTAL CURRENT LIABILITIES 372,977 290,331 LONG-TERM LIABILITIES Mortgage payable (Note 7) 857,489 1,084,695 ---------- ---------- TOTAL LIABILITIES 1,230,466 1,375,026 ---------- ---------- SHAREHOLDERS' EQUITY (Note 13) Preferred stock-no par value authoriz- ed-5,000,000 shares; zero issued and outstanding - - Common stock-$.01 par value author- ized-20,000,000 shares; issued and outstanding-4,116,148 shares in 1998 and 3,771,148 in 1997 41,161 37,711 Capital in excess of par value 2,891,645 2,892,195 Accumulated deficit (2,585,438) (2,605,101) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 347,368 324,805 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,577,834 $1,699,831 ========== ========== Read Accountant's Compilation Report The accompanying notes are an integral part of these financial statements. 3 EQUITY GROWTH SYSTEMS, inc. CONDENSED STATEMENT OF INCOME AND ACCUMULATED DEFICIT Three Months Ended Six Months Ended September 30, September 30, 1998 1997 1998 1997 -------------------- ------------------- Income $ 40,677 $ 54,785 $ 121,509 $ 168,251 General and Adminis- trative Expenses 40,226 48,577 141,677 281,025 --------- ---------- ---------- ---------- Net Income (Loss) Before Provisions for Income Taxes 451 6,208 (20,168) (112,774) Provisions for Income Taxes Note (10) - - - - ---------- ---------- ---------- ---------- Net Income (Loss) 451 6,208 (20,168) (112,774) Accumulated Deficit- Beginning (2,582,989) (2,611,309)(2,565,270)(2,492,327) ========== ========== ========== ========== Accumulated Deficit- Ending (2,582,538) (2,605,101)(2,585,438)(2,605,101) ========== ========== ========== ========== Earnings Per Share 0.000 0.002 (0.005) (0.030) Weighted Average of Shares Outstanding 4,116,148 3,771,148 4,047,676 3,771,148 ---------- ---------- ---------- ---------- Read Accountant's Compilation Report The accompanying notes are an integral part of these financial statements. 4 EQUITY GROWTH SYSTEMS, inc. STATEMENTS OF SHAREHOLDERS' EQUITY September 30, 1998 Capital in No. of Common Excess of Accumulated Shares Stock Par Value Deficit Balances January 1, 1995 2,822,072 28,221 $2,881,492 $(2,242,768) Common Stock Issued 949,076 9,490 10,703 Net (loss) for the year ended December 31, 1996 (249,559) ---------- ------- ---------- ----------- Balances, December 31, 1996 3,771,148 37,711 2,892,195 (2,492,327) Common Stock Issued 55,000 550 (550) Net (loss) for the year ended December 31, 1997 (72,943) ---------- ------- ---------- ----------- Balances, December 31, 1997 3,826,148 38,211 2,891,645 (2,565,270) Common Stock Issued 290,000 2,900 Net income for the six months ended September 30, 1998 (17,268) ---------- ------- ---------- ----------- Balances September 30, 1998 4,116,148 41,161 $2,891,645 $2,582,538 ========== ======= ========== =========== Read Accountant's Compilation Report The accompanying notes are an integral part of these financial statements. 5 EQUITY GROWTH SYSTEMS, inc. STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED September 30, 1998 AND 1997 1998 1997 Cash Flows From Operating Activities: Net Profit (Loss) $ (20,168) $(112,774) Adjustments to Reconcile Net Profit (Loss) to Net Cash Used for Operating Depreciation - - Decrease in other receivable 580 - Decrease in mortgages and notes receivable 91,060 357,638 Increase (decrease) in accounts payable and current liabilities 30,409 (5,378) Increase (decrease) in mortgage and notes payable (104,775) (237,851) -------- -------- Net Cash Provided (Used) by Operations (2,894) 1,635 -------- -------- Cash Flows From Financial Activities Capital stock issued 2,900 - Additional paid in capital - - -------- -------- Net Cash Provided by Financial Activities 2,900 - -------- -------- Net Increase (Decrease) in Cash 6 1,635 Cash-Beginning of Year - 962 -------- -------- Cash-End of Period $ 6 $ 2,597 ======== ======== Supplemental Cash Flows Information Cash paid for interest $ 96,909 $101,156 ======== ======== Read Accountant's Compilation Report The accompanying notes are an integral part of these financial statements. 6 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization The Company (formerly known as InfoTech, Inc.) was organized under the laws of the State of Delaware on December 8, 1964. The principal business of the Company is specializing in structuring and marketing mortgaged backed securities as well as, the acquisition of select commercial real estate for its own account. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investments with a maturity of three months or less at the time of purchase. The Company maintains cash and cash equivalent balances at a financial institution which is insured by the Federal Deposit Insurance Corporation up to $100,000. At September 30, 1998, there is no concentration of credit risk from uninsured bank balances. Fixed Assets The fixed assets are depreciated over their estimated allowable useful lives, primarily over five to seven years utilizing the modified acceleration cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. Income Taxes In February 1992, the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards 109 of "Accounting for Income Taxes". Under Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective bases. 7 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings/Loss Per Shares Primary earnings per common share are computed by dividing the net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during the year. The number of shares used for the six months ended September 30, 1998 and 1997 were $4,047,676 and $3,771,148, respectively. NOTE 2 - PROPERTY, PLANT AND EQUIPMENT 1998 & 1997 Equipment $ 2,022 ------- Less: Accumulated depreciation (2,022) - ======= Depreciation expense charged during 1998 and 1997 was $-0- and $-0-, respectively. NOTE 3 - SETTLEMENT WITH CREDITORS On October 31, 1996, the Company issued 200,000 shares of it common stock in consideration for the cancellation of $107,393 owed by the Corporation to Diversified Corporate Consulting Group, LLC for professional services rendered since 1994. Additionally, in June and October of 1997 , the Company issued an aggregate of 460,000 shares of the Company's $.01 par value common stock for advisory services performed on its behalf with a value of $4,600. On August 15, 1995, the Company issued 200,000 shares of the Company's $.01 par value of common stock for significant services to the Corporation at the request of its President with a value of $2,000. 8 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 3 - SETTLEMENTS WITH CREDITORS (Continued) In March of 1995, the Company issued 20,000 shares of the Company's $.01 par value of common stock after the reverse split in payment of legal bills of $45,734 and 6,072 shares of $.01 par value stock in payment of accounting bill of $15,360. The remaining balance of $67,832 was written off as the Company was not able to locate creditors. NOTE 4 - EMPLOYMENT AGREEMENT The Company entered into an employment agreement with Edward Granville-Smith, a chief executive officer for an initial term of five years commencing June 1, 1995. The Company registered with the Securities and Exchange Commission to issue 110,000 shares of common stock to Edward Granville-Smith for compensation for services prior to June 1, 1997. In addition, annual salary is a sum equal to the lesser of 5% of the Company's annual gross income on a calendar basis or 15% of its net pre-tax profit as determined for federal income tax purposes, without taking depreciation or tax credits into account to be paid on or before March 30, following the calendar for which salary is due; subject to availability of cash flow. Edward Granville-Smith would also be entitled to an annual bonus payable in shares of the Company's common stock, determined by dividing 5% of the Company's pre-tax profits for the subject calendar year by the average bid price for the Company's common stock during the last five trading days prior to the end of the last day of each year and the first days of the new year. During May of 1997, the Company recruited two executive officers, Messers. Gene R. Moffitt and Donald E. Homan, both with offices in Kansas City, Missouri. Such recruitment was effected in two parts, first, the Company exchanged 100,000 shares with each (200,000 shares in the aggregate), for all of the capital stock in their recently formed corporations (Moffitt Properties, Ltd., and Homan Equities, Inc., both Missouri corporations), and then the Company and the subject corporation entered into employment agreements. Each employment agreement was identical and provides for the following compensation. (a) An annual bonus payable in shares of the Company's common stock, determined by dividing 10% of the Company's pre-tax profits for the subject calendar year by the average bid price for the Company's common stock at during the last five trading days prior to the end of the last day of each year and 9 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 4 - EMPLOYMENT AGREEMENT (Continued) the initial five days of the new year, provided, however, that the employment agreement shall have been in effect for at least one half of the subject year; and, provided further that in the event of a reorganization pursuant to which another entity becomes the Company's parent, the common stock of such entity shall be issuable hereunder, rather than that of the Company. (b) An annual cash bonus equal to 40% of the Company's pre-tax profits for the subject calendar year, provided, however, that the employment agreement shall have been in effect for at least one half of the subject year. (c) A guaranteed minimum monthly draw against the annual bonus described above, in a sum equal to not be less than $6,250; subject to availability of cash flow. NOTE 5 - CONSULTING AGREEMENTS The Company had entered into two consulting agreements. One with Bolina Trading Company, S.A., a Panamanian Corporation and the second one with Warren A. McFadden. Each consultant serves as a special advisor to Mr. Granville-Smith, in conjunction with Mr. Granville-Smith's role as an officer and director of the Company, with special responsibilities in the areas of strategic planning and raising debt on equity capital required to implement the Company's strategic plans. The agreements' terms called for Bolina Trading Company, S.A. to receive as compensation 84,000 shares of the Company's common stock plus $100 per hour after 520 hours of service per year and Warren A. McFadden to receive as compensation 110,000 shares of the Company's common stock plus $100 per hour after 520 hours of service per year. Subsequent to December 31, 1995, all of the above shares of the Company's common stock were issued. In 1997, the consulting agreement with Warren A. McFadden was terminated and the 110,000 shares of common stock he received, which were subsequently acquired by Diversified Consulting, were used by Diversified as consideration to cancel a $30,000 promissory note liability owed to the Company. 10 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 6 - INDENTURE OF TRUST AND WRAP AROUND MORTGAGES RECEIVABLE On June 30, 1995, the Company issued 1,616,000 shares of common stock in payment of an indenture of trust and wrap around mortgages subject to the underlying mortgages, from the following partnerships: Pay-West Associates, Montco Associates, San-Safe Associates and San-Ten Associates. The indenture of trust consists of (2) two demand notes bearing interest at prime plus 4%. These notes are payable from the rental of the various properties less payment on the wrap around mortgages. The payment does not cover the accrued interest which is added back to the notes. The wrap around notes bear interest of 9.08% to 12.9041%. The underlying mortgages bear interest at 9.75%. The difference between payments on the wrap around mortgages and underlying mortgages are applied to debt service of the demand notes. NOTE 7 - MORTGAGES September 30, September 30, 1998 1997 ------- ------- Mortgages consist of the following: Subordinate "wrap" mortgage receivables: (a) Nevada/California Property 12.9041 $ 609,567 $ 703,842 (b) Oregon Property 9.080% 549,290 602,960 ---------- ---------- 1,158,857 1,306,802 Less: Current Portion 154,151 147,945 ---------- ---------- $1,004,706 $1,158,857 ========== ========== Original Mortgages Payable: (a) Nevada/California Property 9.750% $ 541,290 $ 678,694 (b) Oregon Property 9.750% 497,757 566,774 ---------- ---------- 1,039,125 1,245,468 Less: Current Portion 181,636 160,773 ---------- ---------- $ 857,489 $1,084,695 ========== ========== 11 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 7 - MORTGAGES (Continued) (a) The mortgage secures a promissory note and is payable in equal quarterly installments of $42,701.69 with a final payment of $291,096.92, maturing January 1, 2001. There is also an underlying "wrap" mortgage that is payable in equal quarterly installments of $42,826.50, maturing July 1, 2005, with quarterly payments decreasing to $9,314.75 for the last five years. (b) The mortgage secures a promissory note and is payable in equal quarterly installments of $26,409.87 with a final payment of $232,199.50, maturing January 1, 2002. There is also an underlying "wrap" mortgage that is payable in equal annual payments of $106,640 maturing December 31, 2002. NOTE 8 - NOTES RECEIVABLE 1998 1997 Nevada/California Property Quarterly payments of $868.55 4% above prime, currently 12.40% original amount $63,000 $165,866 $149,170 Oregon Quarterly payments of $501.13 4% above prime, currently 12.40% original amount $38,742 104,863 95,442 -------- -------- 270,729 244,612 Less Current Portion 5,480 5,480 -------- -------- $265,249 $239,132 ======== ======== NOTE 9 - NOTE PAYABLE A secured note payable including accrued interest, due on demand on interest payable quarterly at a rate of 10% per annum. This loan was assumed by the Company as part of the asset acquisition. The note has a cumulative interest clause on any short fall in payment being added to the original principal amount of $104,000 $155,932 $105,500 ======== ======== 12 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 10 - INCOME TAXES As discussed in Note 1, the Company has applied the provisions of Statement 109. The significant components of deferred income tax expense benefit for the years ended September 30, 1998 and 1997 arising from net operating losses as follows: Deferred tax benefit $11,800 $ 6,200 Valuation allowance 11,800 6,200 ------- ------- $ - $ - ======= ======= The Company has operating loss carry forwards in excess of two million dollars that can be used to offset future taxable income. NOTE 11 - RELATED PARTY TRANSACTION The chief executive officer of the Company is also an officer of the general partner in all the partnerships involved in the wrap around mortgages subject to the underlying mortgages and promissory notes. NOTE 12 - COMPENSATION No officer or director has received any compensation to date, except as discussed in Note 4. NOTE 13 - STOCKHOLDERS' EQUITY On May 18, 1995, the Company adopted a resolution to change the authorized capitalization as follows: (a) The 2,000,000 shares of common stock, $0.01 par value then authorized, all of which were currently outstanding, were reverse split into 200,000 shares, $0.01 par value; and immediately thereafter; (b) The Company's authorized common stock was increased from 200,000 shares, $0.01 par value, to 20,000,000 shares of common stock, $0.01 par value, and (c) The Company was authorized to issue 5,000,000 shares of preferred stock, the attributes of which are to be determined by the Company's Board of Directors from time to time, prior to issuance, in conformity with the requirements of Sections 151 of the Delaware General Corporation Law. 13 EQUITY GROWTH SYSTEMS, inc. NOTES TO FINANCIAL STATEMENTS September 30, 1998 NOTE 14 - LEGAL MATTERS The Company is currently not a party to any legal proceedings. Although the Company is not a party to the following proceedings directly, they involve real estate located in Kansas and Tennessee in which the Company has an interest. A. On October 20, 1997, the various parties to a wrap around mortgage transaction with the Company and the current tenant agreed to settle, but certain parties reserved claims against each other. The settlement calls for a payment from the current tenant of $150,000 in exchange for the transfer of a clear and free title of the underlying real estate. The mortgage holder Fleet National Bank received $52,000 and the balance to be held in escrow between the other parties. The Company holds the position that the ultimate disbursement of a substantial portion of these escrowed funds should be earmarked for the reduction of the wrap around mortgage and promissory note receivable. B. The Company was also in default of the mortgage on the property located in Memphis, Tennessee because it could not satisfy the balloon payment, in the original amount of $875,300, that was due on December 31, 1996. ($174,801 at 12/31/96). The mortgage holder (Lutheran Brotherhood) had refused to renegotiate or extend the term of the mortgage and would not accept any further amortization payments from the lessor of the underlying lease, other than the one made in December, 1996, which was based upon the old repayment schedule's terms. Through August 1997, the Company had received funds from Sun West N.O.P., the lessor on the underlying lease, which represented the monthly rent payments made on such lease ($4,609.38) by the tenant of the Memphis Property. Because the mortgage holder could not accept any amortization payments on their matured loan from Sun West N.O.P., the Company was using such proceeds to reduce the related wrap mortgage receivable. In August of 1997, the mortgage holder foreclosed on the mortgage payable, which resulted in a foreclosure sale of the Memphis, Tennessee property. As a result of these events of foreclosure, the Company wrote off the balance on the mortgage payable and the related wrap mortgage receivable ($251,722) and promissory note receivable ($93,686) at December 31, 1996. (See note 7 and 8). 14 EQUITY GROWTH SYSTEMS, inc. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations During the six months ended September 30, 1998, the registrant reported income of approximately $81,000 as compared to income from all sources of $113,000 during the prior six months ended. During the six months ended September 30, 1998, the registrant's cost of revenue was approximately $99,000 as compared $232,000 during the prior six months ended. The decrease was attributable to the decrease in interest expense. During the six months ended September 30, 1998, the registrant reported a net income of approximately ($18,000) or $(.005) per share, compared to ($119,000) or $(0.032) per share prior to six months ended. The $101,000 in net loss reflects the decrease in cost of operations. Liquidity and Capital Resources As of September 30, 1998, the registrant has a working capital position of approximately ($195,000) as compared to a working capital position of ($130,000) as of September 30, 1997. This reflects the write off of the Tennessee and Kansas wrap around mortgages, notes receivable and underlying mortgages. To date, the cash flow generated from operations have been adequate to meet the registrant's mortgage obligations. A shareholder has been contributing funds to meet various general and administrative expenses required to fulfill all of the registrant's obligations. No officer of the registrant has been receiving or accruing compensation at this time. 15 Part II -- Other Information As a material subsequent event, as of December 9, 1998, the Company has changed it's office address and office telephone. The Company will be sharing space at the office of the Registrant's Secretary and General Counsel at no cost for the use of space until June 30, 1999. The new address for the Company is Equity Growth Systems, inc. 1941 SE 51st Terrace, Suite 800; Ocala, Florida 34471. Telephone is 352-694-6714. Item I. Legal Proceedings The Company is currently not a party to any legal proceedings. Although the Company is not a party to the following proceedings directly, they have been involved in real estate located in Kansas and Tennessee in which the Company has an interest. A. First Ken-Co Properties, Inc., v Safeway Stores, Inc., case number 96351021/CL221148, in the Circuit Court for Baltimore County, Maryland (the "Maryland Case"); and, Associated Wholesale Grocers, Inc., v San Safe Associates, et. al., case number 97-2072-JWL, in the United States District Court for the District of Kansas (the "Kansas Case"), and First Ken Co Properties, Inc. v. J.J. Martin, et. al., case number 98-007033-CC130 in the Circuit Court of Maryland for Baltimore City, ("Baltimore City Case"). The above mentioned legal matters are discussed in detail in the 10-KSB for 1997 under legal proceedings. In summary, On October 20, 1997, the various parties to a wrap around mortgage transaction with the Company and the current tenant agreed to settle, but certain parties reserved claims against each other. The settlement calls for a payment from the current tenant of $150,000 in exchange for the transfer of a clear and free title of the underlying real estate. The mortgage holder Fleet National Bank received $52,000 and the balance to be held in escrow between the other parties. The Company holds the position that the ultimate disbursement of a substantial portion of these escrowed funds should be earmarked for the reduction of the wrap around mortgage and promissory note receivable. A lawsuit was filed January 7, 1998, entitled, First Ken-Co Properties, Inc., v. J.J. Martin, et. al., case No. 98-007033-CC130 in the Circuit Court of Maryland for Baltimore City a copy of which is attached as an Exhibit to 10-KSB for 1996. The Baltimore City lawsuit is a Complaint for Declaratory Judgment by First Ken-Co Properties, Inc. against certain limited partners of San Safe Limited Partnership, a Maryland Limited Partnership for the purposes of determining whether San Safe is entitled to receive any monies from the Escrow Fund in view of the default in the secured promissory note. The Complaint also alleges that an actual controversy exists between the parties as to whether First Ken-Co is entitled to receive any further monies by way of accounting and damages from the Limited Partners of San Safe by reasons of their acts and omissions causing loss to the property and assets of San Safe. 16 The attorney for Ken-Co is Attorney David Albright. The filing clerk of the Circuit Court of Maryland for Baltimore City has orally represented that there has been no activity in this file since the filing of the case in January, 1998: No service on Defendants; no responsive pleadings, no Defaults entered. The condition of this litigation is unknown. The clerk also informed our office that unless action is taken by January 7, 1999, the case will be dismissed for lack of prosecution. B. The Company was also in default of the mortgage on the property located in Memphis, Tennessee because it could not satisfy the balloon payment, in the original amount of $875,300, that was due on December 31, 1996. ($174,801 at 12/31/96). The mortgage holder (Lutheran Brotherhood) had refused to renegotiate or extend the term of the mortgage and would not accept any further amortization payments from the lessor of the underlying lease, other than the one made in December, 1996, which was based upon the old repayment schedule's terms. The above mentioned legal matters are discussed in detail in the 10KSB for 1997 under legal proceedings. Non Judicial Foreclosure was instituted and finalized in August, 7, 1997. Copies of the Notice of Foreclosure and advertisement of Foreclosure are included as exhibits filed with 10K-SB for 1996. Furthermore, Sound Safe is obligated to pay a wrap around mortgage that is more than the above described mortgage. The difference between the payment due and the wrap around mortgage has reduced the amount of a certain debt owed by San Safe to the Registrant. The Registrant may have a cause of action against either San Safe or Sound Safe or both for payment of the San Safe indebtedness. The registrant has used its best efforts to obtain information concerning the litigation and potential litigation issues now pending and reported above, however, David Albright, Jr., the lead counsel on most of these issues described in litigation and potential litigation, has been unwilling to effectively comment or communicate with Registrant's officers, attorney's and agents concerning the litigation and potential litigation. It is possible that Registrant is unaware of certain actions taken by Mr. Albright on behalf of Registrant concerning litigation or potential litigation. C. Through August 1997, the Company had received funds from Sun West N.O.P., the lessor on the underlying lease, which represented the monthly rent payments made on such lease ($4,609.38) by the tenant of the Memphis Property. Because the mortgage holder could not accept any amortization payments on their matured loan from Sun West N.O.P., the Company was using such proceeds to reduce the related wrap mortgage receivable. In August of 1997, the mortgage holder foreclosed on the mortgage payable, which resulted in a foreclosure sale of the Memphis, Tennessee property. As a result of these events of foreclosure, the Company wrote off the balance on the mortgage payable and the related wrap mortgage receivable ($251,722) and promissory note receivable ($93,686) at December 31, 1996. (See note 7 and 8). D. During August of 1997, Mr. Gene R. Moffitt resigned as the Registrant's President, Asset Manager and Chief Operating Officer of the Registrant. It is the Company's position that this resignation violated the terms of his employment and acquisition agreements, the Registrant is of the opinion that Mr. Moffitt should voluntarily return all of the Registrant's common stock that has been issued to him. Should such securities not be voluntarily returned, the Registrant would probably sue Mr. Moffitt for its return alleging breach of contract. E. The Board of Directors of the Registrant dismissed and removed Rafi Weiss from the position of Senior Vice President of Acquisitions. For whatever reason, known only to Mr. Weiss, he failed or refused to cooperate with counsel in an effort to prepare a basic due diligence package concerning this filing. A copy of the Board of Director's Resolution is attached as an Exhibit to form 10-KSB for the year ending December 31, 1996. Item 2. Changes in Securities and Use of Proceeds 18 (a) As a material subsequent event, during the period commencing November 1, 1998 and ending on or about November 20, 1998, the Registrant issued 1,750,000 shares of its common stock at a price of $0.02 per share (a total of $35,000) to the persons listed below, in order to pay certain obligations required to be discharged in order to induce the Registrant's recently elected officers and directors to become associated with the Registrant, and in order to secure the assistance of the subscribers in restructuring the Registrant's operations and strategic plans, required as a result of the medical emergency suffered by Edward Granville-Smith, until recently the Registrant's sole director and chief executive officer. No underwriter was used, nor were commissions paid or offering expenses incurred. Name Shares Consideration Exemption Blue Lake Capital Corp. (1) 630,000 $12,600 4(6) The Yankee Companies, Inc. (1)(2) 435,000 $ 8,750 4(6) Michelle Tucker, custodian For Shayna Tucker, a minor 108,750 $ 2,175 4(6) Michelle Tucker, custodian For Montana Tucker, a minor 108,750 $ 2,175 4(6) The Calvo Family Spendthrift Trust(2) 217,500 $ 4,350 4(6) G. Richard Chamberlin, Esquire(3) 125,000 $ 2,500 4(6) Penny Field (3) 62,500 $ 1,250 4(6) Anthony Q. Joffe (3) 62,500 $ 1,250 4(6) _______ (1) Blue Lake Capital Corp., is owned by Mrs. Tucker, whose husband owns 50% of the Yankee Companies, Inc.. (2) The Yankee Companies, Inc., is owned 50% by members of the Tucker family and 50% by the Calvo Family Spendthrift Trust. (3) Recently elected member of the Registrant's Board of Directors. Item 3. Defaults upon Senior Securities The Registrant has no senior securities nor is it directly a debtor under any mortgages. However, the Registrant has a beneficial interest in certain properties, or resulting from certain properties, where third parties are obligors under mortgages and in certain cases the status of such mortgages, or interest pertaining to said mortgages are foreclosed, disputed or in litigation. See litigation above and also litigation in 10-KSB for 1997. Item 5. Other Information The following information is presented under the Item Number designations of SEC Form 8-K. Item 1. Change in Control of Registrant A Director and CEO Incapacity During October of 1998, Edward Granville-Smith, then the Registrant's sole director and chief executive officer started negotiations with principals of the Yankee Companies, Inc., to obtain its assistance in recruiting additional officers and directors, arranging for funding and helping to develop an expanded strategic business plan, based on Mr. Granville-Smith's concern that his personal health problems were impeding his ability to adequately manage the Registrant's operations. 19 Based on Mr. Granville-Smith's oral assurances, the Yankee Companies, Inc., contacted a number of persons willing to become materially involved in the Registrant's operations, and, on November 6, 1998, Mr. Granville-Smith, as the Registrant's sole director, elected the following persons as members of the Registrant's Board of Directors: Charles J. Scimeca (the Registrant's secretary), Penny Field, Anthony Q. Joffe and G. Richard Chamberlin (formerly the Registrant's securities counsel). On November 13, 1998, after learning that Mr. Granville-Smith, had been incapacitated, Mr. Scimeca, at the suggestion of Mr. Chamberlin, called a special meeting of the Board of Directors, in order to replace Mr. Granville-Smith as the Registrant's president and chief executive officer, principally in order to assure that the Registrant could file this quarterly report within a reasonable time after its due date. At such meeting, Mr. Scimeca was elected as the acting president and Mr. Chamberlin was elected as the acting secretary. In addition, the Board voted to reorganize the Registrant by reorganizing as a holding company, to ratify the subscription agreements disclosed in this report, to enter into a formal consulting agreement with the Yankee Companies, Inc., and to enter into a settlement agreement with Mr. Granville-Smith, as a result of which all his current agreements with the Registrant would be terminated. All agreements other than the settlement agreement have been entered into. The settlement agreement is being negotiated with Mr. Granville-Smith's son, inlight of Mr. Granville-Smith's incapcity, and a number of issues remain largely based on lack of familiarity with underlying facts. Consequently, no assurances can be provided as to whether or not the settlement agreement will be entered into as proposed or at all. In the event that no settlement is reached with Mr. Granville-Smith, then the Registrant's Board of Directors would probably seek to resolve the issues involved (together with other open issues involving other creditors and former principals of the Registrant) in a reorganization under Chapter 11 of the United States Bankruptcy Code. Copies of the minutes of the Board of Directors' meetings of November 6, 1998 and November 13, 1998, the subscription agreements, the Yankee Companies, Inc., agreement and the proposed settlement agreement with Mr. Granville-Smith are filed as exhibits to this report. B. Biographies of New Directors and Officers Charges J. Scimeca, age 54, serves as the acting president and as a director of the Registrant. Since 1982 he has been a licensed real estate broker. He is managing director of Coast to coast Realty Group, Inc., located in Sarasota, Florida. The company is involved in residential and commercial real estate development as well as general real estate brokerage and business acquisition. He has been involved in real estate transactions totaling over one billion dollars, representing Fortune 500 clients, such as , Equitable Life Insurance Company, Walt Disney Corporation, Paramount Studios and TRW Real Estate Group. From 1980 until 1982, Mr. Scimeca was on sabbatical, exploring business opportunities in various industries. From 1975 until 1980, Mr. Scimeca served as chief operating officer for Andy Frain Maintenance & Security, Inc., headquartered in Chicago, Illinois. His responsibilities included budgeting and implementing cleaning services for high rise office, retail and industrial properties for such notable clients as Standard Brands, JMB Realty, John Hancock Insurance Company and other Fortune 500 companies. From 1965 until 1975, Mr. Scimeca was the owner and manager of the Mecca Restaurant, a full-service family owned multi-unit restaurant business headquartered in Chicago, Illinois. He is a member of the Clearwater, Sarasota and Manatee County Association of Realtors, the International Council of Shopping Centers and other local, regional and national real estate and mortgage related organizations. He holds a degree in Business Administration. 20 G. Richard Chamberlin. age 52, has since November 1998, served as the Registrant's secretary, as a member of it's Board of Directors (in which he serves as Chairman) and also as it's general counsel. From 1973 to 1974 he served as Trust Officer with Central Bank & Trust Company, Jonesboro, Georgia. Mr. Chamberlin is a practicing attorney and is a member of the Georgia Bar, (since 1974), and the Florida Bar, (since 1990). He is also a member of the Bars for the Federal District Court for the Northern District of Georgia, (since 1974) and the Federal District Court for the Northern District of Florida (since 1995), the Court of Appeals for the State of Georgia, (since 1974) and the Supreme Court for the State of Georgia (since 1974). Mr. Chamberlin is also a member of the Bar for the Eleventh District Court of Appeals, (since 1982). He is a graduate of Eastern Military Academy, Huntington, New York (College Prep Diploma, 1964); The Citadel, The Military College of South Carolina, (B.A., political science, 1968); and the University of Georgia School of Law, (J.D., 1971). Mr. Chamberlin earned a Certificate from the American Bankers Association, National Trust School, (1974). Mr. Chamberlin is a two term former member of the Georgia House of Representatives, (1979-1983). In the State House, Mr. Chamberlin served on the Following committees: House Journal Committee, Natural Resources Committee, Special Judiciary Committee and Labor Committee. He is a former member of the Counsel for National Policy. He is the founder of the Georgia Roundtable, Inc., and served as President from 1981 to 1986.; He is the founder of the Georgia Heritage Foundation, and served as President from 1982 to 1986. He is the former Principal of Soul's Harbor Christian Academy, Belleview, Florida, (1990-1992). Mr. Chamberlin served as National Music Chairman for the Religious Roundtable, Inc. at the premier event known as the 1992 National Affairs Briefing in Dallas, Texas wherein President George Bush was the keynote speaker. Mr. Chamberlin has received Resolutions of Commendation from the House of Representatives for the Commonwealth of Kentucky, (1985) and from the House of Representatives for the State of Georgia, (1982). He presently serves as President of the Citadel Club of Central Florida, Inc.. Mr. Chamberlin is former president and director for Atrieties Development Company, Inc., a publicly held corporation involved in the real estate industry, (1986-87), and has held licenses as a real estate agent, (Georgia and Florida). Penny Adams Field, age 43, since November, 1998, serves as a member of Registrant's Board of Directors.. Penny Adams Field is a principal and co-founder of Executive Concepts, a management consulting and investment banking advisory firm. Ms. Adams Field has technical expertise in designing and implementing financial management systems, acquisition and divestiture models, cash flow management, information systems assessment and implementations, and operational and cost system audits. Her background in strategic planning, performance measurement, comprehensive business planning, and cost structure analysis add to the breadth and depth of the Executive Concepts team skills. Ms. Adams Field is an experienced and accredited business valuation specialist and is a member of the Institute of Business Appraisers. She serves on numerous not-for- profit and corporate boards. As a management consultant, Ms. Adams Field has consulted with firms such as Monsanto, Mallinckrodt, McDonnell-Douglas, MEMC Electronic Materials Company, Maytag, Mark Andy, CyberTel, and numerous other small firms in the healthcare, manufacturing, construction, and service industries. Prior to founding Executive Concepts, Ms. Adams Field was an administrator for the John M. Olin School of Business at Washington University in St. Louis, where she helped to establish the Executive Programs division. Her responsibilities included program development in the Far East. Previous to her administrative role she served at a full-time accounting faculty instructing in financial accounting and cost management for undergraduate and graduate programs at the Olin School. Prior to graduate study at Washington University, Ms. Adams Field worked in healthcare administration and banking, including positions at Childrens' Hospital National Medical Center in Washington, D.C. and Harris Bank in Chicago. After earning a B.B.A. in Accounting and Finance, Ms. Adams Field earned her M.B.A. from the Olin School of Business at Washington University in St. Louis. Ms. Adams Field also posted several hours of Ph.D. level coursework in accounting and finance prior to making a full-time commitment to consulting. 21 Anthony Q. Joffe, age 56, since November, 1998, serves as a member of Registrant's Board of Directors. Mr. Joffe holds a degree in Aeronautical Engineering Management from Boston University, Boston, Massachusetts. Subsequent to his graduation, Mr. Joffe was employed as the Quality Control Manager for Cognitronics Corporation, a computer manufacturer, where he was responsible for overseeing the U.S. Air Force compliance testing program as well as normal day-to-day management. In 1967, Mr. Joffe was employed by General Electric as a production engineer in the insulating materials field. In 1970, Mr. Joffe was employed by King's Electronics, a RF coaxial connector manufacturer, where he was responsible for major accounts and guided the field sales force. In 1973, Mr. Joffe was one of the founders and Vice-President of J.S. Love Associates, Inc., a commodity brokerage house no longer in operation (then headquartered in New York City). In 1976, Mr. Joffe formed and served as President and Chief Operating Officer of London Futures, Ltd., a commodity broker with 275 employees in nine offices. London Futures, Ltd. was closed in 1979 and Mr. Joffe moved to Florida. From 1979 until 1986, Mr. Joffe was Vice President of Gramco Holdings, Inc. (and its predecessor companies), a firm which owned and operated a variety of companies. These companies included five cemeteries and funeral homes in Broward County, Florida, a 33 acre marina, a general contracting company, a boat title insurance underwriting firm, three restaurants, a real estate brokerage company, a mortgage brokerage company and a leasing company. His responsibilities involved supervision of the day-to-day operations and new business development. From 1986 to 1991, Mr. Joffe served as consultant and/or principal to a variety of small businesses in the South Florida area. In 1989 Mr. Joffe became President of Windy City Capital Corp., a small publicly traded, reported company that was originally formed as a "blind pool" for the express purpose of finding an acquisition candidate. Eventually, a reverse merger was consummated with a computer software company from Pennsylvania. Mr. Joffe then took the position of President of Rare Earth Metals, Inc. (and its predecessor companies), a small publicly traded company which has purchased Spinecare, Inc. a medical clinic in New York. Spinecare changed its name to Americare Health Group and relocated its state domicile to Delaware. Since March of 1993, Mr. Joffe has performed consulting services for First Commodities, Inc., an Atlanta based commodities firm, and has been involved in fund raising for the Multiple Sclerosis Foundation. He also assisted Digital Interactive Associates and IVDS Partnership with financial affairs in conjunction with their successful bid to the Federal Communications Commission for licenses in the cities of Atlanta, Georgia, Minneapolis/St. Paul, Minnesota, and Kansas City, Missouri. Mr. Joffe served as the interim president of Madison Sports & Entertainment Group, Inc., a publicly held Utah corporation then headquartered in Fort Lauderdale, Florida, from September 1, 1994, until February 16, 1994, at which time he became its vice president and vice chairman, chief operating officer, treasurer and chief financial officer until he resigned in 1996. Since 1996, he has founded a boat financing company and joined NorthStar Capital ("Northstar") as Managing Director. NorthStar is an investment banking firm with offices in Stamford, Connecticut and Boca Raton, Florida which specializes in assisting small to mid size private and publicly traded companies with business and financial planning; acquisition and divestiture; financial public relations and market position advice; and, treasury services. 22 E. Granville-Smith, Jr., age 66, is member of Registrant's Board of Directors. He was President of Equity Growth Systems, Inc., a Registrant specializing in structuring and marketing mortgage backed securities as well as the acquisition of select commercial real estate for its own account. From 1981 to the present, he has been a real estate consultant and principal involved in various aspects of commercial real estate financing and syndication, both internationally and domestically. One primary accomplishment during this period was the successful sale of the real estate assets of some twenty-nine limited partnerships to both domestic and foreign investors. From 1972 through 1980, he was Chairman of the Board, Chief Executive Officer and President of United Equity Corporation, a Registrant which was primarily involved in the structuring, financing and marketing, through the syndication of various tax incentive ventures with an aggregate valuation in excess of $100 million. From 1959 through 1972, Mr. Granville-Smith, Jr. built the Washington Insurance Agency, Inc., and became the Chairman of one of the top one percent of insurance brokerage houses in the Washington area. Mr. Granville-Smith, attended Brown University from September, 1951 through June, 1952 at which time he entered the United States Marine Corps. Upon discharge from the Marine Corps in 1955, he enrolled in the Georgetown University School of Foreign Service and graduated in June of 1959 with a B.S.F.S. degree. Mr. Granville-Smith's professional affiliations include CLU and CPCL. Item 2. Acquisition or Disposition of Assets A. Reorganization as Holding Company The Registrant's Board of Directors have authorized the reorganization of the Registrant as a holding company, with all current operations conducted through a wholly owned operating subsidiary. It is anticipated by the Board of Directors that the Registrant will seek to acquire additional operating subsidiaries, with the assistance of its newly elected Directors and the Yankee Companies, Inc. B. New Strategic Plan The Registrant has retained the Yankee Companies to assist it in developing and implementing a new strategic plan. The Yankee Companies has suggested that the Registrant's activities be divided into three different areas. First, that the current real estate operations be segregated in a new subsidiary, to be presided over by Mr. Scimeca, the Registrant's president. Second, that the Registrant's new management and directors provide consulting services to third parties that desire to attain public trading status by assisting them in preparation of Forms 10 and 10-SB in exchange for securities to be distributed directly by the client issuer to the Registrant's stockholders. Third, that the Registrant acquire operating companies that could benefit from the Registrant's public trading status and from the experience of the Registrant's directors. The Yankee Companies have also indicated that in light of the incapacity of Mr. Granville-Smith, the Registrant's ability to continue its prior operations will be impaired unless new management is able to obtain detailed information of such operations and to resolve a number of factual questions concerning such operation, including the matters currently in litigation. The Yankee Companies have suggested to the Registrant's Board of Directors that a proceeding under Chapter 11 of the Federal Bankruptcy Code would be the most effective and definitive manner for attaining such goal and the Board is considering and evaluating such proposal. Item 5.Other Events The Registrant's Board of Directors were advised that the Registrant's Bylaws on file with the Securities and Exchange Commission had been replaced at an unknown date and were provided with a copy thereof. Minutes of such replacement were not available, consequently, a special meeting of the Board was held and the subject Bylaws were ratified. A copy of the amended and restated bylaws are filed herewith. 23 Item 6. Index of Exhibits Exhibit Page Description 3.2 __ Amended & Restated Bylaws as of December, 1998. 10.22 __ Recent stock subscription agreements 10.23 __ Consulting agreement with the Yankee Companies 10.24 __ Recent settlements and releases with creditors 10.25 __ Proposed Settlement agreement and release with Mr. Granville-Smith 10.26 __ Stock purchase option agreement with Mr. Scimeca 99.12 __ Written Consent in Lieu of Special Meeting of Board of Directors for November 6, 1998 99.13 __ Minutes of Special Meeting of Board of Directors for November 27, 1998 99.14 __ Minutes of Special Meeting of Board of Directors for December 8, 1998 99.15 __ Amended Notice Special Meeting of Board of Directors for December 8, 1998 99.16 __ Minutes of Special Meeting of Board of Directors Part 1, for December 11, 1998 99.17 __ Notice of Special Meeting of Board of Directors for December 11, 1998 99.18 __ Minutes of Special Meeting of Board of Directors Part 2, for December 11, 1998 24 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant had duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized. Equity Growth Systems, inc. Dated: December 14, 1998 /s/ Charles J. Scimeca -------------------------- Charles J. Scimeca President 25 EX-3.2 2 EXHIBIT 3.2 AMENDED & RESTATED BYLAWS AS OF DECEMBER, 1998 Bylaws of Equity Growth Systems, inc. ARTICLE I STOCKHOLDERS SECTION 1. Annual Meetings (a) (1) The annual meeting of the stockholders of the Corporation shall be held at the principal office of the Corporation in the State of Delaware or at such other place within or without the State of Delaware as may be determined by the Board of Directors and as may be designated in the notice of such meeting. (2) The meeting shall be held on the 15th day of July of each year or on such other day as the Board of Directors may specify. (3) If said day is a legal holiday, the meeting shall be held on the next succeeding business day not a legal holiday. (b) Business to be transacted at such meeting shall be the election of Directors to succeed those whose terms are expiring and such other business as may be properly brought before the meeting. (c) In the event that the annual meeting, by mistake or otherwise, shall not be called and held as herein provided, a special meeting may be called as provided for in Section 2 of this Article I in lieu of and for the purposes of and with the same effect as the annual meeting. SECTION 2. Special Meetings (a) A special meeting of the stockholders of the Corporation may be called for any purpose or purposes at any time by the Chairman or President of the Corporation, by the Board of Directors or by the holders of not less than 10% of the outstanding capital stock of the Corporation entitled to vote at such meeting. (b) (1) At any time, upon the written direction of any person or persons entitled to call a special meeting of the stockholders, it shall be the duty of the Secretary to send notice of such meeting pursuant to Section 4 of this Article I. (2) It shall be the responsibility of the person or persons directing the Secretary to send notice of any special meeting of stockholders to deliver such direction and a proposed form of notice to the Secretary not less than 15 days prior to the proposed date of said meeting. (c) Special meetings of the stockholders of the Corporation shall be held at such place, within or without the State of Delaware, on such dates, and at such time as shall be specified in the notice of such special meeting. 26 SECTION 3. Adjournment (a) When the annual meeting is convened, or when any special meeting is convened, the presiding officer may adjourn it for such period of time as may be reasonably necessary to reconvene the meeting at another place and time. (b) The presiding officer shall have the power to adjourn any meeting of the stockholders for any proper purpose, including, but not limited to, lack of a quorum, securing a more adequate meeting place, electing officials to count and tabulate votes, reviewing any stockholder proposals or passing upon any challenge which may properly come before the meetings. (c) (1) When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and any business may be transacted at the adjourned meeting that might have been transacted on the original date of the meeting. (2) If, however, after the adjournment the Board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given in compliance with Section 4(a) of this Article I to each stockholder of record on the new record date entitled to vote at such meeting. SECTION 4. Notice of Meetings; Purpose of Meeting; Waiver (a) (1) Each stockholder of record entitled to vote at any meeting shall be given in person, or by first class mail, postage prepaid, written notice of such meeting which, in the case of a special meeting, shall set forth the purpose(s) for which the meeting is called, not less than 10 or more than 60 days before the date of such meeting. (2) If mailed, such notice is to be sent to the stockholder's address as it appears on the stock transfer books of the Corporation, unless the stockholder shall be requested of the Secretary in writing at least 15 days prior to the distribution of any required notice that any notice intended for him or her be sent to some other address, in which case the notice may be sent to the address so designated. (3) Notwithstanding any such request by a stockholder, notice sent to a stockholder's address as it appears on the stock transfer books of this Corporation as of the record date shall be deemed properly given. (4) Any notice of a meeting sent by United States mail shall be deemed delivered when deposited with proper postage thereon with the United States Postal Service or in any mail receptacle under its control. (b) (1) A stockholder waives notice of any meeting by attendance, either in person or by proxy, at such meeting or by waiving notice in writing either before, during or after such meeting. (2) Attendance at a meeting for the express purpose of objecting that the meeting was not lawfully called or convened, however, will not constitute a waiver of notice by a stockholder who states at the beginning of the meeting, his or her objection that the meeting is not lawfully called or convened. (c) A waiver of notice signed by all stockholders entitled to vote at a meeting of stockholders may also be used for any other proper purpose including, but not limited to, designating any place within or without the State of Delaware as the place for holding such a meeting. (d) Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders need be specified in any written waiver of notice. 27 SECTION 5. Closing of Transfer Books; Record Date; Stockholders' List (a) In order to determine the holders of record of the capital stock of the Corporation who are entitled to notice of meetings, to vote a meeting or adjournment thereof, or to receive payment of any dividend, or for any other purpose, the Board of Directors may fix a date not more than 60 days prior to the date set for any of the above-mentioned activities for such determination of stockholders. (b) If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least 10 days immediately preceding such meeting. (c) In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the date for any such determination of stockholders, such date in any case to be not more than 60 days prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. (d) If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice or to vote at a meeting of stockholders, or to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. (e) When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date under this Section for the adjourned meeting. (f) (1) The officer or agent having charge of the stock transfer books of the Corporation shall make, as of a date at least 10 days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, with the address of each stockholder and the number and class and series, if any, of shares held by each stockholder. (2) Such list shall be kept on file at the registered office of the Corporation, at the principal place of business of the Corporation or at the office of the transfer agent or registrar of the Corporation for a period of 10 days prior to such meeting and shall be available for inspection by any stockholder at any time during usual business hours. (3) Such list shall also be produced and kept open at the time and place of any meeting of stockholders and shall be subject to inspection by any stockholder at any time during the meeting. (g) The original stock transfer books shall be prima facie evidence as to the stockholders entitled to examine such list or stock transfer books or to vote any meeting of stockholders. (h) If the requirements of Section 5(f) of this Article I have not been substantially complied with, then, on the demand of any stockholder in person or by proxy, the meeting shall be adjourned until such requirements are complied with. (i) If no demand pursuant to Section 5(h) of this Article I is made, failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. (j) Section 5(g) of this Article I shall be operative only at such time(s) as the Corporation shall have 6 or more stockholders. 28 SECTION 6. Quorum (a) At any meeting of the stockholders of the Corporation, the presence, in person or by proxy, of stockholders holding a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote thereat shall be necessary to constitute a quorum for the transaction of any business. (b) If a quorum is present, the vote of a majority of the shares represented at such meeting and entitled to vote on the subject matter shall be the act of the stockholders. (c) If there shall not be a quorum at any meeting of the stockholders of the Corporation, then the holders of a majority of the shares of the capital stock of the Corporation who shall be present at such meeting, in person or by proxy, may adjourn such meeting from time to time until holders of a quorum of the shares of the capital stock shall attend. (d) At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally scheduled. SECTION 7. Presiding Officer; Order of Business (a) (1) Meetings of the stockholders shall be presided over by the Chairman of the Board, or, if he or she is not present or there is no Chairman of the Board, by the President or, if he or she is not present, by the senior Vice President present or, if neither the Chairman of the Board, the President, nor a Vice President is present, the meeting shall be presided over by a chairman to be chosen by a plurality of the stockholders entitled to vote at the meeting who are present, in person or by proxy. (2) The presiding officer of any meeting of the stockholders may delegate his or her duties and obligations as the presiding officer as he or she sees fit. (b) The Secretary of the Corporation, or, in his or her absence, an Assistant Secretary shall act as Secretary of every meeting of stockholders, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall choose any person present to act as secretary of the meeting. (c) The order of business shall be as follows: Call of meeting to order. Proof of notice of meeting. Reading minutes of last previous stockholders' meeting or a waiver thereof. Reports of Officers. Reports of committees. Election of Directors. Regular and miscellaneous business. Special matters. Adjournment. (d) (1) Notwithstanding the provisions of Section 7(c) of this Article I, the order and topics of business to be transacted at any meeting shall be determined by the presiding officer of the meeting in his or her sole discretion. (2) In no event shall any variation in the order of business or additions and deletions from the order of business as specified in Section 7(c) of this Article I invalidate any actions properly taken at any meeting. 29 SECTION 8. Voting (a) Unless otherwise provided for in the Certificate of Incorporation, each stockholder shall be entitled, at each meeting and upon each proposal to be voted upon, to one vote for each share of voting stock recorded in his name on the books of the Corporation on the record date fixed as provided for in Section 5 of this Article I. (b) (1) The presiding officer at any meeting of the stockholders shall have the power to determine the method and means of voting when any matter is to be voted upon. (2) The method and means of voting may include, but shall not be limited to, vote by ballot, vote by hand or vote by voice. (3) No method of voting may be adopted, however, which fails to take account of any stockholder`s right to vote by proxy as provided for in Section 10 of this Article I. (4) In no event may any method of voting be adopted which would prejudice the outcome of the vote. SECTION 9. Action Without Meeting (a) (1) Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of a majority of the Corporation's outstanding voting stock. (2) Such instrument may be executed in counterparts or as a unitary document. (b) In the event that the action to which the stockholders consent is such as would have required the filing of a certificate under the Delaware General Corporation Law, the effect of such consent shall be as if such action had been voted on by stockholders at a meeting thereof, however, the certificate filed under such other section shall state that written consent has been given in accordance with the provisions of Section 9 of this Article I. (c) If stockholder action is taken by written consent in lieu of meeting signed by less than all of the Corporation's stockholders, then all non participating stockholders shall be provided with written notice of the action taken within 10 days after the effective date of the written instrument taking such action. (d) No action by written consent in lieu of meeting shall be valid if it is in contravention of applicable proxy or informational rules adopted pursuant to the Securities Exchange Act of 1934, as amended, including, without limitation, the requirements of Section 14 thereof. SECTION 10. Proxies (a) Every stockholder entitled to vote at a meeting of stockholders or to express consent or dissent without a meeting, or his or her duly authorized attorney-in-fact, may authorize another person or persons to act for him or her by proxy. (b) (1) Every proxy must be signed by the stockholder or his or her attorney-in-fact. (2) No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. (3) Every proxy shall be revocable at the pleasure of the stockholder executing it, except as otherwise provided in this Section 10. 30 (c) The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the stockholder who executed the proxy unless, before the authority is exercised, written notice of any adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of stockholders. (d) Except when other provisions shall have been made by written agreement between the parties, the record holder of shares held as pledges or otherwise as security or which belong to another, shall issue to the pledgor or to such owner of such shares, upon demand therefor and payment of necessary expenses thereof, a proxy to vote or take other action thereon. (e) A proxy which states that it is irrevocable is irrevocable when it is held by any of the following or a nominee of any of the following: (i) a pledgee; (ii) a person who has purchased or agreed to purchase the shares: (iii) a creditor or creditors of the Corporation who extend or continue to extend credit to the Corporation in consideration of the proxy, if the proxy states that it was given in consideration of such extension or continuation of credit, the amount thereof, and the name of the person extending or continuing credit; (iv) a person who has contracted to perform services as an officer of the Corporation, if a proxy is required by the contract of employment, if the proxy states that it was given in consideration of such contract of employment and states the name of the employee and the period of employment contracted for; and (v) a person designated by or under an agreement as provided in Article XI hereof. (f) (1) Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed, the debt of the Corporation is paid, the period of employment provided for in the contract of employment has terminated, or the agreement under Article XI hereof has terminated and, in a case provided for in Section 10(e) (iii) or Section 10(e) (iv) of this Article I, becomes revocable three years after the date of the proxy or at the end of the period, if any, specified therein, whichever period is less, unless the period of irrevocability of the proxy as provided in this Section 10. (2) This Section 10(f) does not affect the duration of a proxy under Section 10(b) of this Article I. (g) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provisions unless the existence of the proxy and its irrevocability is noted conspicuously on the face or back of the certificate representing such shares. (h) (1) If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of such persons present at the meeting, or if only one is present then that one, may exercise all the powers conferred by the proxy. (2) If the proxy holders present at the meeting are equally divided as to the right and manner of voting in any particular case, the voting of such shares shall be prorated. (i) If a proxy expressly so provides, any proxy holder may appoint in writing a substitute to act in his or her place. (j) Notwithstanding anything in the Bylaws to the contrary, no proxy shall be valid if it was obtained in violation of any applicable requirements of Section 14 of the Securities Exchange Act of 1934, as amended, or the Rules and Regulations promulgated thereunder. 31 SECTION 11. Voting of Shares by Stockholders (a) (1) Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent, or proxy designated by the bylaws of the corporate stockholder; or, in the absence of any applicable bylaw, by such person as the Board of Directors of the corporate stockholder may designate. (2) Proof of such designation may be made by presentation of a certified copy of the bylaws or other instrument of the corporate stockholder. (3) In the absence of any such designation, or in case of conflicting designation by the corporate stockholder, the chairman of the board, president, any vice president, secretary and treasurer of the corporate stockholder, in that order, shall be presumed to possess authority to vote such shares. (b) (1) Shares held by an administrator, executor, guardian or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. (2) Shares standing in the name of a trustee may be voted as shares held by him or her without a transfer of such shares into his name. (c) (1) Shares standing in the name of a receiver may be voted by such receiver. (2) Shares held by or under the control of a receiver but not standing in the name of such receiver, may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. (d) A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee. (e) Shares of the capital stock of the Corporation belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares. 32 ARTICLE II DIRECTORS SECTION 1. Board of Directors; Exercise of Corporate Powers (a) (1) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors except as may be otherwise provided in the Certificate of Incorporation or in a stockholders' agreement. (2) If any such provision is made in the Certificate of Incorporation or in a stockholders' agreement, the powers and duties conferred or imposed upon the Board of Directors shall be exercised or performed to such extent and by such person or persons as shall be provided in the Certificate of Incorporation or stockholders' agreement. (b) Directors need not be residents of this state or stockholders of the Corporation unless the Certificate of Incorporation so requires. (c) The Board of Directors shall have authority to fix the compensation of Directors unless otherwise provided in the Certificate of Incorporation. (d) A Director shall perform his or her duties as a Director, including his or her duties as a member of any committee of the Board upon which he may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. (e) In performing his or her duties, a Director shall be entitled to rely on information, opinions, reports or statements, including without limitation, financial statements and other financial data, in each case prepared or presented by: (i) one or more officers or employees of the Corporation whom the Director reasonably believes to be reliable and competent in the matters presented; (ii) legal counsel, public accountants or other persons as to matters which the Director reasonably believes to be within such persons' professional or expert competence; or (iii) a committee of the Board upon which he or she does not serve, duly designated in accordance with a provision of the Certificate of Incorporation or these Bylaws, as to matters within its designated authority, which committee the Director reasonably believes to merit confidence. 33 (f) A Director shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause such reliance described in Section 1(e) of this Article II to be unwarranted. (g) A person who performs his or her duties in compliance with Section 1 of this Article II shall have no liability by reason of being or having been a Director of the Corporation. (h) A Director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he or she votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 2. Number; Election; Classification of Directors; Vacancies (a) (1) The Board of Directors of this Corporation shall consist of not less than one Director. (2) The Board shall have authority, from time to time, to increase the number of Directors or to decrease it to not less than one member, provided that no decrease in the number of Directors shall deprive a serving Director of the right to serve throughout the term of his or her election. (b) Each person named in the Certificate of Incorporation as a member of the initial Board of Directors shall serve until his or her successor shall have been elected and qualified or until his or her earlier resignation, removal from office, or death. (c) (1) At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect Directors to hold office until the next succeeding annual meeting, except in case of the classification of Directors as permitted by the Delaware General Corporation Law. (2) Each Director shall hold office for the term for which he or she is elected and until his or her successor shall have been elected and qualified or until his or her earlier resignation, removal from office, or death. (d) (1) The stockholders, by amendment to these Bylaws, may provide that the Directors be divided into not more than four classes, as nearly equal in number as possible, whose terms of office shall respectively expire at different times, but no such term shall continue longer than four years, and at least one fourth of the Directors shall be elected annually. (2) If Directors are classified and the number of Directors is thereafter changed, any increase or decrease in Directorship shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. (e) (1) Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of Directors, may be filled only by the Board of Directors. (2) A Director elected to fill a vacancy shall hold office only until the next election of Directors by the stockholders. 34 SECTION 3. Removal of Directors (a) At a meeting of stockholders called expressly for that purpose, any Director or the entire Board of Directors may be removed, with or without cause, by the vote of the holders of 60% of the shares then entitled to vote at an election of Directors; provided that at least one Director remains in office or one Director is elected as a replacement Director concurrently with such removal. (b) In the event that the number of Directors is reduced below that number mandated in the Certificate of Incorporation as a result of the removal of one or more Directors by the stockholders, then the remaining Directors or the contemporaneously elected replacement Director will promptly elect replacement Directors, to serve until the next meeting of the Corporation's stockholders, and until their replacements have been elected, qualified and assume their office. SECTION 4. Director Quorum and Voting (a) A majority of the Directors fixed in the manner provided in these Bylaws shall constitute a quorum for the transaction of business. (b) A majority of the members of an Executive Committee or other committee shall constitute a quorum for the transaction of business at any meeting of such Executive Committee or other committee. (c) The act of a majority of the Directors present at a Board meeting at which a quorum is present shall be the act of the Board of Directors. (d) The act of a majority of the members of an Executive Committee present at an Executive Committee meeting at which a quorum is present shall be the act of the Executive Committee. (e) The act of a majority of the members of any other committee present at a committee meeting at which a quorum is present shall be the act of the committee. (f) Directors may, if not contrary to applicable law, vote either in person or by proxy, provided that the proxy holder must be either another Director, an officer or a stockholder of the Corporation; however, any Director who elects to vote by proxy more than three times during any single fiscal year shall, unless otherwise determined by the Board of Directors, be automatically removed as a Director. SECTION 5. Director Conflicts of Interest (a) No contract or other transaction between this Corporation and one or more of its Directors or any other corporation, firm, association or entity in which one or more of its Directors are Directors or officers or are financially interested shall be either void or voidable because of such relationship or interest or because such Director or Directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because their votes are counted for such purpose, if: 35 (i) The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested Directors; or (ii) The fact of such relationship or interest is disclosed or known to the stockholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; or (iii) The contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board, a committee, or the stockholders. (b) Interested Directors, whether or not voting, may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. SECTION 6. Executive and Other Committees; Designation; Authority (a) The Board of Directors, by resolution adopted by the full Board of Directors, may designate from among its Directors an Executive Committee and one or more other committees each of which, to the extent provided in such resolution or in the Certificate of Incorporation or these Bylaws, shall have and may exercise all the authority of the Board of Directors, except that no such committee shall have the authority to : (i) approve or recommend to stockholders actions or proposals required by the Delaware General Corporation Law to be approved by stockholders; (ii) designate candidates for the office of Director for purposes of proxy solicitation or otherwise; (iii) fill vacancies on the Board of Directors or any committee thereof; (iv) amend these Bylaws; (v) authorize or approve the re-acquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (vi) authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares, unless the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof has specified a general formula or method by resolution or by adoption of a stock option or other plan, authorized a committee to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking fund, conversion, and voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all the terms of a series for filing with the Department of State under the Delaware General Corporation Law. (b) The Board, by resolution adopted in accordance with Section 6(a) of this Article II, may designate one or more Directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee. 36 (c) Neither the designation of any such committee, the delegation thereto of authority, nor action by such committee pursuant to such authority shall alone constitute compliance by a member of the Board of Directors, not a member of the committee in question, with his responsibility to act in good faith, in manner he reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. (d) The Board of Directors shall at every organizational meeting thereof designate the following committees comprised in each case of a majority of independent Directors: (1) An audit committee; (2) A compensation committee; and (3) A regulatory compliance committee. SECTION 7. Place, Time, Notice and Call of Directors' Meeting. (a) Meetings of the Board of Directors, regular or special, may be held either within or without the State of Delaware. (b) (i) A regular meeting of the Board of Directors of the Corporation shall be held for the election of officers of the Corporation and for the transaction of such other business as may come before such meeting as promptly as practicable after the annual meeting of the stockholders of this Corporation without the necessity of notice other than this Bylaw. (ii) Other regular meetings of the Board of Directors of the Corporation may be held at such places as the Board of Directors of the Corporation may from time to time resolve without notice other than such resolution. (iii) Special meetings of the Board of Directors may be held at any time upon call of the Chairman of the Board of Directors or a majority of the Directors of the Corporation, at such time and at such place as shall be specified in the call thereof. (iv) (A) Notice of any special meeting of the Board of Directors must be given at least two days prior thereto, if by written notice delivered personally; or at least five days prior thereto, if mailed; or at least two days prior thereto, if by telegram; or at least two days prior thereto, if by telephone or E-mail, receipt confirmed. (B) If such notice is given by mail, such notice shall be deemed to have been delivered when deposited with the United States Postal Service addressed to the business address of such Director with postage thereon prepaid. 37 (C) If notice be given by telegram, such notice shall be deemed delivered when the telegram is delivered to the telegraph company. (D) If notice is given by telephone (including facsimile transmission), such notice shall be deemed delivered when the call is completed. (E) If notice is given by E-mail, such notice shall be deemed delivered when confirmation of receipt is obtained. (c) (1) Notice of a meeting of the Board of Directors need not be given to any Director who signs a waiver of notice either before or after the meeting. (2) Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a Director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. (d) Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. (e) (1) A majority of the Directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. (2) Notice of any such adjourned meeting shall be given to the Directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other Directors. (f) (1) Members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can communicate with each other at the same time. (2) Participation by such means shall constitute presence in person at a meeting. SECTION 8. Action by Directors Without a Meeting (a) (1) Any action required by the Delaware General Corporation Law to be taken at a meeting of the Directors of the Corporation, or any action which may be taken at a meeting of the Directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so to be taken, signed by all of the Directors, or all of the members of the committee, as the case may be, and is filed in the minutes of the proceedings of the Board or of the committee. (2) Such consent shall have the same effect as a unanimous vote. 38 (b) If not contrary to applicable law, Directors may take action as the Board of Directors or committees thereof through a written consent to action signed by a number of Directors sufficient to have carried a vote of the Board of Directors or committee thereof with all members present and voting; provided, that all Directors not joining in such written instrument shall be deemed for all purposes to have cast dissenting votes, and that all Directors not parties to such instrument shall receive written notice of all action taken through such instrument within three days after such instrument shall have been subscribed by the requisite number of Directors required for such action. SECTION 9. Compensation (a) The Directors and members of the Executive and any other committee of the Board of Directors shall be entitled to such reasonable compensation for their services and on such basis as shall be fixed from time to time by resolution of the Board of Directors. (b) The Board of Directors and members of any committee of that Board of Directors shall be entitled to reimbursement for any reasonable expenses incurred in attending any Board or committee meeting. (c) Any Director receiving compensation under this Section shall not be prevented from serving the Corporation in any other capacity and shall not be prohibited from receiving reasonable compensation for such other services. SECTION 10. Resignation (a) Unless he is the sole serving Director, any Director of the Corporation may resign at any time by providing the Board of Directors with written notice indicating the Director's intention to resign and the effective date thereof. (b) A sole serving Director of the Corporation must, at least concurrently with his or her resignation, elect one or more successor Director(s) at least one of whom must assume his or her office concurrently with the subject resignation, and the resignation shall be effected by providing the successor Director(s) with written notice indicating the Director's intention to resign and the effective date thereof. ARTICLE III OFFICERS SECTION 1. Election; Number; Terms of Office (a) (1) The officers of the Corporation shall consist of a Chairman of the Board of Directors whose title may be designated as "Chairman," a Chief Executive officer, a President, a Chief Operating Officer, a Chief Financial Officer, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors at such time and in such manner as may be prescribed by these Bylaws. (2) Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors. 39 (3) The officers of the Corporation shall be hereinafter collectively referred to as the "Officers." (b) All Officers and agents, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as are provided in these Bylaws, or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws. (c) Any two or more offices may be held by the same person, except for the offices of President and Secretary. (d) A failure to elect a Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, a Vice President, a Secretary or a Treasurer shall not affect the existence of the Corporation. SECTION 2. Removal (a) An Officer of the Corporation shall hold office until the election and qualification of his successor; however, any Officer of the Corporation may be removed from office by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby. (b) Such removal shall be without prejudice to the contract rights, if any, of the person so removed. (c) Election or appointment of an officer shall not of itself create any contract right to employment or compensation or create an employer - employee relationship. SECTION 3. Vacancies Any vacancy in any office from any cause may be filled for the unexpired portion of the term of such office by the Board of Directors. SECTION 4. Powers and duties (a) (1) The Chairman of the Board of Directors shall preside over meetings of the Board of Directors and the stockholders. (2) Unless a separate Chief Executive Officer is elected, the Chairman shall exercise the powers hereafter granted to that office. (3) Unless a Chairman of the Board is specifically elected, the President shall be deemed to be the Chairman of the Board. (b) (1) The Chief Executive Officer shall be the principal Officer of the Corporation to whom all other Officers shall be subordinate. (2) In the event no Chief Executive Officer is separately elected, such office shall be assumed by the Chairman of the Board, and if no such office has been filled, by the President. (3) Except where by law the signature of the President is required or unless the Board of Directors shall rule otherwise, the Chief Executive Officer shall possess the same power as the President to sign all certificates, contracts and other instruments of the Corporation which may be authorized by the Board of Directors. 40 (c) (1) The Chief Operating Officer of the Corporation shall be responsible for management of the day to day affairs of the Corporation, subject to compliance with the directions of the Board of Directors and of the Chief Executive Officer. (2) He shall be responsible for the general day-to-day supervision of the business and affairs of the Corporation. (3) He shall sign or countersign all certificates, contracts or other instruments of the Corporation, as authorized by the Board of Directors or as assigned by the Chief Executive Officer. (4) He may, but need not, be a member of the Board of Directors. (5) Unless otherwise provided by specific resolution of the Board of Directors, the President shall be the Chief Operating Officer of the Corporation. (d) (1) In the absence of a separately elected or available Chief Executive Officer or Chairman of the Board, the President shall be the Chief Executive Officer of the Corporation and shall preside at all meetings of the stockholders and the Board of Directors. (2) The Board of Directors will at all times retain the power to expressly delegate the duties of the President to any other Officer of the Corporation. (e) (1) The Chief Financial Officer shall be responsible for coordinating all financial aspects of the Corporation's operations, including strategic financial planning, supervision of the Corporation's Treasurer, Comptroller and outside auditors. (2) In the event an Audit Committee of the Board of Directors is designated and serving, he shall be responsible for keeping such committee fully and timely informed of all matters under its jurisdiction. (3) The Chief Financial Officer shall, unless otherwise specifically provided by the Board of Directors, serve as the Corporation's principal compliance officer and shall be responsible for overseeing preparation and filing of all reports of the Corporation's activities required to be filed, either periodically or on a special basis with the United States Internal Revenue Service, the Securities and Exchange Commission and with other federal, state or local governmental agencies. (f) (1) The Vice President(s), if any, in the order designated by the Board of Directors, shall exercise the functions of the President in the event of the absence, disability, death, or refusal to act of the President. (2) During the time that any Vice President is properly exercising the functions of the President, such Vice President shall have all the powers of and be subject to all restrictions upon the President. (3) Each Vice President shall have such other duties as are assigned to him from time to time by the Board of Directors or by the President of the Corporation and shall be subject to such specializing designations (e.g., "senior," executive," etc.) as the Board of Directors may select. 41 (g) (1) The Secretary of the Corporation shall keep the minutes of the meetings of the stockholders of the Corporation, and, unless provided otherwise by the Chairman at any meeting of the Board of Directors, the Secretary shall keep the minutes of the meetings of the Board of Directors of the Corporation. (2) The Secretary shall be the custodian of the minute books of the Corporation and such other books and records of the Corporation as the Board of Directors of the Corporation may direct. (3) The Secretary of the Corporation shall have the general responsibility for maintaining the stock transfer books of the Corporation, or of supervising the maintenance of the stock transfer books of the Corporation by the transfer agent, if any, of the Corporation. (3) The Secretary shall be the custodian of the corporate seal of the Corporation and shall affix the corporate seal of the Corporation on contracts and other instruments as the Board of Directors may direct. (4) The Secretary shall perform such other duties as are assigned from time by the Board of Directors, the Chief Executive Officer, the Chairman, the Chief Operating Officer or the President of the Corporation. (h) (1) The Treasurer of the Corporation shall be directly subordinate to the Chief Financial Officer. (2) In the absence of a Chief Financial Officer, such office shall be filled by the Treasurer. (3) Unless otherwise specified by the Board of Directors, the Treasurer shall have custody of all funds and securities owned by the Corporation. (4) The Treasurer shall cause to be entered regularly in the proper books of account of the Corporation full and accurate accounts of the receipts and disbursements of the Corporation. (5) The Treasurer of the Corporation shall render a statement of the cash, financial and other accounts of the Corporation whenever he is directed to render such a statement by the Board of Directors or by the President of the Corporation. (6) The Treasurer shall at all reasonable times make available the Corporation's books and financial accounts to any Director of the Corporation during normal business hours. 42 (7) The Treasurer shall perform all other acts incident to the Office of Treasurer of the Corporation, and he shall have such other duties as are assigned to him from time to time by the Board of Directors, the Chief Executive Officer, the Chairman, the Chief Operating Officer or the President of the Corporation. (i) (1) The Corporation's Board of Directors shall designate a person licensed to practice law in one of the states comprising the United States as the Corporation's General Counsel and Chief Legal Officer; (2) The Corporation's General Counsel and Chief Legal Officer shall coordinate the Corporation's legal affairs under the directions of the Board of Directors and in coordination with the Chief Executive Officer, to whom he or she shall report; (3) The Board of Directors may appoint such subordinate legal officers and assign them such functions as it may deem appropriate. (j) Other subordinate or assistant Officers appointed by the Board of Directors or by the Chief Executive Officer, the Chairman, the Chief Operating Officer or the President, if such authority is delegated to them by the Board of Directors, shall exercise such powers and perform such duties as may be delegated to them by the Board of Directors, the Chief Executive Officer, the Chief Operating Officer or by the President, as the case may be. (k) In case of the absence or disability of any Officer of the Corporation and of any person authorized to act in his place during such period of absence or disability, the Board of Directors may from time to time delegate the powers and duties of such Officer or any Director or any other person whom it may select. SECTION 5. Salaries (a) The salaries of all Officers of the Corporation shall, except as otherwise determined or required by an agreement entered into among all the stockholders of the Corporation, be fixed by the Board of Directors. (b) No Officer shall be ineligible to receive such salary by reason of the fact that he is also a Director of the Corporation and receiving compensation therefor. ARTICLE IV LOANS TO EMPLOYEES AND OFFICERS; GUARANTEE OF OBLIGATIONS OF EMPLOYEES AND OFFICERS (a) This Corporation may lend money to, guarantee any obligation of, or otherwise assist any Officer or other employee of the Corporation or of a subsidiary, including any Officer or employee who is a Director of the Corporation or of a subsidiary, whenever, in the judgment of the Directors, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation. (b) The loan, guarantee or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve including, without limitation, a pledge of shares of stock of the Corporation. 43 (c) Nothing in this Article shall be deemed to deny, limit or restrict the powers of guarantee or warranty of this Corporation at common law or under any statute. ARTICLE V STOCK CERTIFICATES; VOTING TRUSTS; TRANSFERS SECTION 1. Certificates Representing Shares (a) (1) Every holder of shares of this Corporation shall be entitled to one or more certificates, representing all shares to which he is entitled and such certificates shall be signed by the Chairman, Chief Executive Officer, Chief Operating Officer, the President or a Vice President and the Secretary or an Assistant Secretary of the Corporation and may be sealed with the seal of the Corporation or a facsimile thereof. (2) The signatures of the Chairman, the Chief Executive Officer, the Chief Operating Officer, the President or Vice President and the Secretary or Assistant Secretary may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Corporation itself or an employee of the Corporation. (3) In case any Officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such Officer before such certificate is issued, it may be issued by the Corporation with the same effect as if it were executed by the appropriate Officer at the date of its issuance. (b) Every certificate representing shares issued by this Corporation shall, if shares are divided into one or more classes or series with differing rights, state that the Corporation will furnish to any stockholder upon request and without charge a full statement of: (i) the designations, preferences, limitations, and relative rights of the shares of each class or series authorized to be issued, and (ii) the variations in the relative rights and preferences between the shares of each such series, if the Corporation is authorized to issue any preferred or special class in series and so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine, the relative rights and preferences of subsequent series. (c) Every certificate representing shares which are restricted as to sale, disposition or other transfer (including restrictions based on federal or state securities and other laws) shall state that such shares are restricted as to transfer and shall set forth or fairly summarize upon the certificate, or shall state that the Corporation will furnish to any stockholder upon request and without charge a full statement of, such restrictions. 44 (d) Each certificate representing shares shall state upon the face thereof: (i) the name of the Corporation; (ii) that the Corporation is organized under the laws of the State of Delaware; (iii) the name of the person or persons to whom issued; (iv) the number and class of shares, and the designation of the series, if any, which such certificate represents; and (v) the par value of each share represented by such certificate, or a statement that the shares are without par value. (e) No certificate shall be issued for any shares until they are fully paid for and in the event that a certificate is erroneously issued or compensation paid is subsequently discovered to be other than as represented (e.g., dishonored checks, securities of a corporation acquired in a reorganization where the representations and warranties provided prove to be materially false, etc.), then the Board of Directors shall promulgate a certified resolution detailing the nature of the misrepresented consideration, and shall submit such certified resolution to the person responsible for recording and effecting transactions in the Corporation's securities; whereupon such securities will be restricted from transfer and treated as no longer outstanding for all purposes unless the Corporation becomes subject to a judgment of a court of competent jurisdiction providing otherwise. SECTION 2. Transfer Books (a) The Corporation shall keep at its registered office or principal place of business or in the office of its transfer agent or registrar, a book (or books where more than one kind, class, or series of stock is outstanding) to be known as the Stock Book, containing the names, alphabetically arranged, addresses and Social Security numbers of every stockholder and the number of shares each kind, class or series of stock held of record. (b) Where the Stock Book is kept in the office of the transfer agent, the Corporation shall keep at its principal office copies of the stock lists prepared from said Stock Book and sent to it from time to time (but not less frequently than every month) by said transfer agent. (c) The Stock Book or stock lists shall show the current status of the ownership of shares of the Corporation provided that, if the transfer agent of the Corporation be located elsewhere, a reasonable time shall be allowed for transit or mail. 45 SECTION 3. Transfer of Shares (a) The name(s) and address(es) of the person(s) to whom shares of stock of this Corporation are issued, shall be entered on the Stock Transfer Books of the Corporation, with the number of shares and date of issue. (b) (1) Transfer of shares of the Corporation shall be made on the Stock Transfer Books of the Corporation by the Secretary or the transfer agent, subject to compliance with any restrictions specified on such certificate, only when the holder of record thereof or the legal representative of such holder of record or the attorney-in-fact of such holder of record, authorized by power of attorney duly executed and filed with the Secretary or transfer agent of the Corporation, shall surrender the Certificate representing such shares for cancellation. (2) Lost, destroyed or stolen Stock Certificates shall be replaced pursuant to Section 5 of this Article V. (c) The person or persons in whose names shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner of such shares for all purposes, except as otherwise provided pursuant to Sections 10 and 11 of Article I, or Section 4 of Article V. (d) Shares of the Corporation's capital stock shall be freely transferable without required Board of Directors' consent, unless such shares are subject to transfer restrictions under Securities and Exchange Commission Rule 144 or a consent requirement has been imposed pursuant to a binding written contract subscribed to by the holder or his or her predecessor in interest. (e) (1) All transactions in securities subject to any restrictions imposed under Securities and Exchange Commission Rule 144 ("restricted securities" and "Rule 144," respectively) shall, as a condition to transfer, require the following documentation, to be reviewed and approved by legal counsel to the Corporation: (A) An affidavit from the holder (the "Holder") providing details concerning acquisition of the subject shares; providing evidence of the date when consideration for the shares was paid in full; detailing all transactions in the Corporation's securities during the immediately preceding 90 days; affirming a present intent to dispose of the subject securities; affirming that a Form 144 has been filed with the Securities and Exchange Commission covering the proposed transaction (and providing a copy thereof); affirming compliance with any reporting obligations under Sections 13(d), 13(g) or 16(b) of the Securities Exchange Act of 1934, as amended, and providing such other facts or representations as legal counsel to the Corporation may reasonably require; (B) A written confirmation by the Corporation's transfer agent based on records available thereto of all transactions in the Corporation's securities by the Holder and anyone with whom the holder is required to aggregate sales or securities holdings for purposes of Rule 144, as well as confirmation of the percentage of outstanding securities of the Corporation held of record by the Holder and anyone with whom the holder is required to aggregate sales or securities holdings for purposes of Rule 144; 46 (C) Except as provided below, a written confirmation from the broker through whom the Holder is effecting the proposed transaction verifying that the transaction will be effected in full compliance with Rule 144; and (D) A legal opinion from counsel to the Holder (who may not also be the counsel to the Corporation) specifically addressing all aspects of Rule 144 and detailing the manner in which they are being complied with or the reasons that they are not applicable. (2) Transactions in restricted securities that are not being effected in reliance on Rule 144 shall require, as a condition to transfer, the following documentation, to be reviewed and approved by legal counsel to the Corporation: (A) An affidavit from the holder (the "Holder") providing details concerning acquisition of the subject shares; providing evidence of the date when consideration for the shares was paid in full; the identity and qualifications of the person to whom the securities are being transferred; the manner in which such person has been provided with required information concerning the Corporation; affirming compliance with any reporting obligations under Sections 13(d), 13(g) or 16(b) of the Securities Exchange Act of 1934, as amended, and providing such other facts or representations as legal counsel to the Corporation may reasonably require; (B) A legal opinion from counsel to the Holder (who may not also be the counsel to the Corporation) addressed to the Corporation in a manner creating enforceable privity between such legal counsel and the Corporation, specifically addressing all aspects of the exemptions relied on to effect the proposed transaction without registration under applicable federal and state securities laws and regulations, and detailing the manner in which they are being complied with or the reasons that they are not applicable. (3) No transactions in the Corporation's restricted securities failing to materially comply with the foregoing requirements will be honored, nor will any holding period required under Rule 144 be deemed to commence until all such requirements are materially complied with (material compliance to be determined in the sole discretion of the Corporation's Board of Directors). SECTION 4. Voting Trusts (a) (10 Any number of stockholders of the Corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed ten years, by: (i) entering into a written voting trust agreement specifying the terms and conditions of the voting trust; (ii) depositing a counterpart of the agreement with the Corporation at its registered office; and (iii) transferring their shares to such trustee or trustees for the purposes of this Agreement. (2) Prior to the recording of the agreement, the stockholder concerned shall render the stock certificate(s) described therein to the Corporate Secretary who shall note on each certificate: 47 "This Certificate is subject to the provisions of a voting trust agreement dated ..........., recorded in Minute Book ............, of the Corporation. (b) (1) Upon the transfer of such shares, voting trust certificates shall be issued by the trustee or trustees to the stockholders who transfer their shares in trust. (2) Such trustee or trustees shall keep a record of the holders of voting trust certificates evidencing a beneficial interest in the voting trust, giving the names and addresses of all such holders and the number and class or the shares in respect of which the voting trust certificates held by each are issued, and shall deposit a copy of such record with the Corporation at its registered office. (c) The counterpart of the voting trust agreement and the copy of such record so deposited with the Corporation shall be subject to the same right of examination by a stockholder of the Corporation, in person or by agent or attorney, as are the books and records of the Corporation, and such counterpart and such copy of such record shall be subject to examination by any holder of record of voting trust certificates either in person or by agent or attorney, at any reasonable time for any proper purpose. (d) (1) At any time before the expiration of a voting trust agreement as originally fixed or as extended one or more times under this Section 4(d), one or more holders of voting trust certificates may, by agreement in writing, extend the duration of such voting trust agreement, nominating the same or substitute trustees, for an additional period not exceeding 10 years. (2) Such extension agreement shall not affect the rights or obligations or persons not parties to the agreement, and such persons shall be entitled to remove their shares from the trust and promptly to have their stock certificates reissued upon the expiration of the original term of the voting trust agreement. (3) The extension agreement shall in every respect comply with and be subject to all the provisions of this Section 4, applicable to the original voting trust agreement except that the 10 year maximum period of duration shall commence on the date of adoption of the extension agreement. (e) The trustees under the terms of the agreements entered into under the provisions of this Section 4, shall not acquire the legal title to the shares but shall be vested only with the legal right and title to the voting power which is incident to the ownership of the shares. (f) Notwithstanding generally applicable prohibitions against a corporation's voting of treasury stock, if the Corporation is the trustee under a voting trust, it shall have full authority to vote such shares in accordance with the terms of the voting trust agreement, even if such agreement vests absolute and unfettered voting discretion in the trustee and notwithstanding that the voting trust was created at the prompting or direction of the Corporation, its officers or Directors. 48 SECTION 5. Lost, Destroyed, or Stolen Certificates No Certificate representing shares of stock in the Corporation shall be issued in place of any Certificate alleged to have been lost, destroyed, or stolen except on production of evidence, satisfactory to the Board of Directors, of such loss, destruction or theft, and, if the Board of Directors so requires, upon the furnishing of an indemnity bond in such amount (but not to exceed twice the fair market value of the shares represented by the Certificate) and with such terms and with such surety as the Board of Directors may, in its discretion, require. ARTICLE VI BOOKS AND RECORDS (a) The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its stockholders, Board of Directors and committees of Directors. (b) Any books, records and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. (c) Any person who shall have been a holder of record of shares, or the holder of record of voting trust certificates for, at least five percent of the outstanding shares of any class or series of the Corporation, upon written demand stating the purpose thereof, shall; subject to the qualifications contained in subsection (d) hereof, have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any purpose, its relevant books and records of account, minutes and records of stockholders and to make extracts therefrom. (d) (1) No stockholder who within two years has sold or offered for sale any list of stockholders or of holders of voting trust certificates for shares of this Corporation or any other corporation; has aided or abetted any person in procuring any list of stockholders or of holders of voting trust certificates for any such purpose; or has improperly used any information secured through any prior examination of the books and records of account, minutes, or record of stockholders or of holders of voting trust certificates for shares of the Corporation of any other corporation; shall be entitled to examine the documents and records of the Corporation as provided in Section (c) of this Article VI. (2) No stockholder who does not act in good faith or for a proper purpose in making his demand shall be entitled to examine the documents and records of the Corporation as provided in Section (c) of this Article VI. (e) Unless modified by resolution of the stockholders, this Corporation shall prepare not later than 90 days after the close of each fiscal year, audited financial statements, including all required schedules, prepared in accordance with Generally Accepted Accounting Principals ("GAAP") consistently applied; and shall prepare not later than 45 days after the close of each fiscal quarter (other than the fourth quarter), quarterly unaudited financial statements, including all required schedules, prepared in accordance with Generally Accepted Accounting Principals ("GAAP"). (f) Upon the written request of any stockholder or holder of voting trust certificates for shares of the Corporation, the Corporation shall mail to such stockholder or holder of voting trust certificates a copy of its most recent balance sheet and profit and loss statement. (g) Such financial statements shall be filed and kept for at least five years in the registered office of the Corporation in the State of Delaware and shall be subject to inspection during business hours by any stockholder or holder of voting trust certificates, in person or by agent. 49 ARTICLE VII DIVIDENDS The Board of Directors of the Corporation may, from time to time, declare, and the Corporation may pay dividends on its own shares, except when the Corporation is insolvent or when the payment thereof would render the Corporation insolvent, subject to the following provisions: (a) Dividends in cash or property may be declared and paid, except as otherwise provided in this Article VII, only out of the unreserved and unrestricted earned surplus of the Corporation or out of capital surplus, however arising, but each dividend paid out of capital surplus shall be identified as a distribution of capital surplus, and the amount per share paid from such capital surplus shall be disclosed to the stockholders receiving the same concurrently with the distribution. (b) If the Corporation shall engage in the business of exploiting natural resources or other wasting assets and if the Certificate so provides, dividends may be declared and paid in cash out of depletion or similar reserves, but each such dividend shall be identified as distribution of such reserves and the amount per share paid from such reserves shall be disclosed to the stockholders receiving the same concurrently with the distribution thereof. (c) Dividends may be declared and paid in the Corporation's treasury shares. (d) Dividends may be declared and paid in the Corporation's authorized but unissued shares, out of any unreserved and unrestricted surplus of the Corporation, upon the following conditions: (i) If a dividend is payable in the Corporations' own shares having a par value, such shares shall be issued at not less than the par value thereof and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend. (ii) If a dividend is payable in the Corporations' own shares without par value, such shares shall be issued at a stated value fixed by the Board of Directors by resolution adopted at the time such dividend is declared, and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate stated value so fixed and the amount per share so transferred to stated capital shall be disclosed to the stockholders receiving such dividend concurrently with the payment thereof. (e) No dividend payable in shares of any class shall be paid to the holders of shares of any other class unless the Certificate of Incorporation so provides or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class to which the payment is to be made. (f) A split or division of the issued shares of any class into a greater number of shares of the same class without increasing the stated capital of the Corporation shall not be construed to be a stock dividend within the meaning of this Article VII. 50 ARTICLE VIII SEAL The Board of Directors shall adopt a Corporate Seal which shall be circular in form and shall have inscribed thereon the name of the Corporation, the state of incorporation and the year of incorporation. ARTICLE IX INDEMNIFICATION This Corporation shall indemnify its officers, Directors and authorized agents for all liabilities incurred directly, indirectly or incidentally to services performed for the Corporation, to the fullest extent permitted under Delaware law existing now or hereinafter enacted. ARTICLE X MENDMENT OF BYLAWS The Board of Directors shall have the power to amend, alter, or repeal these Bylaws, and to adopt new Bylaws. ARTICLE XI FISCAL YEAR The fiscal year of this Corporation shall be determined by the Board of Directors. ARTICLE XII MEDICAL REIMBURSEMENT SECTION 1. Benefits (a) The Corporation may, subject to approval of the Board of Directors reimburse all employees for expenses incurred by themselves and their dependents, as defined in Section 152 of the Internal Revenue Code of 1986, as amended (the "IRC"), for medical care, as defined in IRC Section 213(e) or any successor section thereto, subject to the conditions and limitations hereinafter set forth. (b) It is the intention of the Corporation that the benefits payable to employees hereunder will be excluded from their gross income pursuant IRC Section 105 or any successor section thereto. SECTION 2. Employees Defined The term "employees" as used in this medical expense plan is hereby defined to include all individuals employed by the corporation except the following: (a) Employees who have not completed three months of service as is provided in IRC Section 105(h)(3) (b)(i), or any successor section thereto; (b) Employees who have not attained the age of 25 years; (c) Employees who are part-time or seasonal as is defined in IRC Section 105(h)(3)(B)(iii) or any successor section thereto; 51 (d) Employees who are included in a unit of employees covered by an agreement between employee representatives and one or more employers found to be a collective bargaining agreement; where accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer(s) as is defined in IRC Section 105(h)(3)(B)(iv) or any successor section thereto; (e) Employees who are nonresident aliens and who receive no earned income from the employer which constitutes income from sources within the United States as is further defined in IRC Section 105(h)(5)(B)(v) or any successor section thereto. SECTION 3. Limitations (a) The Corporation will reimburse any employee no more than $5,000.00 in any fiscal year for medical care expenses; (b) Reimbursement or payment provided under this plan will be made by the Corporation only in the event and to the extent that such reimbursement or payment is not provided under any insurance policy(ies), whether owned by the Corporation or the employee, or under any other health and accident or wage continuation plan; (c) In the event that there is such an insurance policy or plan in effect providing for reimbursement in whole or in part, then to the extent of the coverage under such policy or plan, the Corporation will be relieved of any and all liability hereunder. SECTION 4. Submission of Proof (a) Any employee applying for reimbursement under this plan will submit to the Corporation, at least quarterly, all bills for medical care, including premium notices for accident or health insurance, for verification by the Corporation prior to payment. (b) Failure to comply herewith, may at the discretion of the Board of Directors, terminate such employee's right to said reimbursement. 52 SECTION 5. Discontinuation This plan will be subject to termination at any time by vote of the Board of Directors; provided, however, that medical care expenses incurred prior to such termination will be reimbursed or paid in accordance with the terms of this plan. SECTION 6. Determination (a) The Chief Executive Officer will determine all questions arising from the administration and interpretation of the Plan except where reimbursement is claimed by the Chief Executive Officer. (b) Where reimbursement is claimed by the Chief Executive Officer determination will be made by the Board of Directors. * * * The Undersigned, being the duly elected and acting Secretary of the Corporation, hereby certifies that the foregoing constitute the validly adopted and true Bylaws of the Corporation, as of the date set forth below. Dated: December 8th 1998 /s/ G. Richard Chamberlin ------------------------------- G. Richard Chamberlin Secretary (Corporate Seal) 53 EX-10.22 3 EXHIBIT 10.22 RECENT STOCK PURCHASE AGREEMENTS Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration requirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,500,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. 54 (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1999, all of which is hereby incorporated by reference herein (the "34 Act Reports"). (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($30,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 435,000 shares of the Stock in consideration for $8,700 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 55 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 56 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 57 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall survive the delivery of and the payment for the Stock being subscribed for. 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: The Yankee Companies, Inc. Accredited Subscriber's Authorized Signatory: * Leonard Miles Tucker, President Accredited Subscriber's Address: 902 Clint Moore Road, Suite 136 Boca Raton, Florida 33418 Accredited Subscriber's Telephone Number: (561) 998-2025 Accredited Subscriber's Tax ** Number: 59-3532520 - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 58 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER The Yankee Companies, Inc. (Print or Type Name) By: _________________________________ Leonard Miles Tucker, President SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: __________________ ___, 1998. By: _______________________ Edward Granville-Smith President & Director Attest: _______________________ Charles J. Scimeca Director 59 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 60 FORM OF INVESTMENT LETTER Date: Edward Granville-Smith President Equity Growth Systems, inc. 3821 Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 435,000 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. 61 In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, The Yankee Companies, Inc. -------------------- Leonard Miles Tucker, President 62 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration re- quirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,750,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. 63 (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1998, all of which is hereby incorporated by reference herein (the "34 Act Reports"). (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($35,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 62,500 shares of the Stock in consideration for $1,250 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 64 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 65 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 66 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall survive the delivery of and the payment for the Stock being subscribed for. 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 8001 DeSoto Woods Drive; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: Penny Field Accredited Subscriber's Authorized Signatory: * Penny Field Accredited Subscriber's Address: 2424 Long Boat Drive; Naples, Florida 34104 Accredited Subscriber's Telephone Number: (941) 435-0627 Accredited Subscriber's Tax ** Number: ###-##-#### - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 67 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER -------------------- Penny Field SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: November ___, 1998. By: _______________________ Charles J. Scimeca President & Director 68 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 69 FORM OF INVESTMENT LETTER Date: Charles J. Scimeca President Equity Growth Systems, inc. 8001 DeSoto Woods Drive Sarasota, Florida 34243 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 62,500 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. 70 In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, -------------------- Penny Field 71 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration re- quirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,750,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. 72 (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1998, all of which is hereby incorporated by reference herein (the "34 Act Reports"). (c) ( 1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($35,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 62,500 shares of the Stock in consideration for $1,250 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 73 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 74 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 75 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall sur- vive the delivery of and the payment for the Stock being subscribed for. 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 8001 DeSoto Woods Drive; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: Anthony Q. Joffe . Accredited Subscriber's Authorized Signatory: * Anthony Q. Joffe Accredited Subscriber's Address: 101 Southwest 11th Avenue; Boca Raton, Florida 33486 Accredited Subscriber's Telephone Number: (561) 392-6010 Accredited Subscriber's Tax ** Number: ###-##-#### - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 76 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER Anthony Q. Joffe By: _________________________________ Anthony Q. Joffe SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: November ___, 1998. By: _______________________ Charles J. Scimeca President & Director 77 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 78 FORM OF INVESTMENT LETTER Date: Charles J. Scimeca President Equity Growth Systems, inc. 8001 DeSoto Woods Drive Sarasota, Florida 34243 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 62,500 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. 79 In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, -------------------- Anthony Q. Joffe 80 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration requirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,750,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1999, all of which is hereby incorporated by reference herein (the "34 Act Reports"). 81 (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($35,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 125,000 shares of the Stock in consideration for $2,500 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 82 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 83 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 84 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall sur- vive the delivery of and the payment for the Stock being subscribed for. 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: G. Richard Chamberlin . Accredited Subscriber's Authorized Signatory: * G. Richard Chamberlin Accredited Subscriber's Address: ost Office Box 3370; Belleview, Florida 34421 Accredited Subscriber's Telephone Number: (352) 245-4848 Accredited Subscriber's Tax ** Number: ###-##-#### - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 85 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER G. Richard Chamberlin By: _________________________________ G. Richard Chamberlin SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: November ___, 1998. By: _______________________ Charles J. Scimeca President & Director 86 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 87 FORM OF INVESTMENT LETTER Date: Charles J. Scimeca President Equity Growth Systems, inc. 8001 DeSoto Woods Drive Sarasota, Florida 34243 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 125,000 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. 88 In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, -------------------- G. Richard Chamberlin 89 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration requirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,500,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1999, all of which is hereby incorporated by reference herein (the "34 Act Reports"). 90 (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($30,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 217,500 shares of the Stock in consideration for $4,350 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 91 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 92 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall sur- vive the delivery of and the payment for the Stock being subscribed for. 93 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name: The Calvo Family Spendthrift Trust Accredited Subscriber's Authorized Signatory: * Cyndi Noyes Calvo, Trustee Accredited Subscriber's Address: 1941 Southeast 51st Terrace Ocala, Florida 34471 Accredited Subscriber's Telephone Number: (352) 694-9182 Accredited Subscriber's Tax ** Number: 59-6849665 - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 94 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER The Calvo Family Spendthrift Trust By: _________________________________ Cyndi N. Calvo, Trustee SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: __________________ ___, 1998. By: _______________________ Edward Granville-Smith President & Director Attest: _______________________ Charles J. Scimeca Director 95 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 96 FORM OF INVESTMENT LETTER Date: Edward Granville-Smith President Equity Growth Systems, inc. 3821 Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 217,500 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. 97 In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, The Calvo Family Spendthrift Trust By: _________________________________ Cyndi N. Calvo, Trustee 98 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration requirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,500,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1999, all of which is hereby incorporated by reference herein (the "34 Act Reports"). 99 (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($30,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 630,000 shares of the Stock in consideration for $12,600 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 100 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 101 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 102 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall survive the delivery of and the payment for the Stock being subscribed for. 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: Blue Lake Capital Corp. Accredited Subscriber's Authorized Signatory: * Michelle Tucker, President Accredited Subscriber's Address: 902 Clint Moore Road, Suite 136 Boca Raton, Florida 33487 Accredited Subscriber's Telephone Number: (561) 998-2025 Accredited Subscriber's Tax ** Number: 65-0703836 - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 103 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER Blue Lake Capital Corp. By: _________________________________ Michelle Tucker, President SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: November ___, 1998. By: _______________________ Edward Granville-Smith President & Director Attest: _______________________ Charles J. Scimeca Director 104 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 105 FORM OF INVESTMENT LETTER Date: Edward Granville-Smith President Equity Growth Systems, inc. 3821 Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 630,000 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. 106 I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, Blue Lake Capital Corp. By: _________________________________ Michelle Tucker, President 107 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration requirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,500,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1999, all of which is hereby incorporated by reference herein (the "34 Act Reports"). 108 (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($30,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 108,750 shares of the Stock in consideration for $2,175 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 109 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 110 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 111 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall survive the delivery of and the payment for the Stock being subscribed for. 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: Michelle Tucker, custodian under the UGTMA for Shayna Tucker, her daughter Accredited Subscriber's Authorized Signatory: * Michelle Tucker, Custodian Accredited Subscriber's Address: 902 Clint Moore Road, Suite 136 Boca Raton, Florida 33418 Accredited Subscriber's Telephone Number: (561) 998-2025 Accredited Subscriber's Tax ** Number: ###-##-#### - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 112 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER Michelle Tucker, custodian under the UGTMA for Shayna Tucker, her daughter By: _________________________________ Michelle Tucker, Custodian SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: __________________ ___, 1998. By: _______________________ Edward Granville-Smith President & Director Attest: _______________________ Charles J. Scimeca Director 113 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 114 FORM OF INVESTMENT LETTER Date: Edward Granville-Smith President Equity Growth Systems, inc. 3821 Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 108,750 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. 115 I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, Michelle Tucker, custodian under the UGTMA for Shayna Tucker, her daughter -------------------- Michelle Tucker, Custodian 116 Equity Growth Systems, inc. Accredited Investor Subscription Agreement THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. These Securities are offered in reliance on the exemption from registration requirements imposed by the Securities Act of 1933, as amended, provided by Section 4(6) thereof and on the exemption from the registration requirements imposed by the State of Florida under Section 517.061(11), Florida Statutes TERMS: 1. General. (a) (1) This Subscription is part of a limited subscription by accredited investors, as that term is defined in Rule 501 of Securities and Exchange Commission Regulation D promulgated under authority of the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the "Act", respectively) for the acquisition of an aggregate of up to 1,500,000 shares of the common stock of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities currently registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Company" and the "Stock"). (2) The hereinafter described subscriber is an "accredited investor" as that term is defined in Rule 501 of Regulation D. (3) The issuance of the Stock is to be effected pursuant to the exemptive provisions of Section 4(6) of the Act, providing for the issuance of securities solely to accredited investors. (4) The Company will, immediately following closing on the first subscription accepted in this limited offering, file a Form D with the Securities and Exchange Commission, as required to permit the contemplated subscription. (b) Current information concerning the Company is contained on the SEC's EDGAR web site on the Internet, including certified financial statements for the period ended December 31, 1997, and unaudited quarterly updates thereto for the period ended June 30, 1999, all of which is hereby incorporated by reference herein (the "34 Act Reports"). 117 (c) (1) Annexed hereto and made a part hereof as exhibit 1(c) is a schedule describing the contemplated use of the proceeds of this limited offering. (2) The Company may elect to borrow funds required for the purposes identified in exhibit 1(c) and to repay such loans using proceeds of this limited offering. (3) The Company's management is of the opinion that the net proceeds from the offering ($30,000) would be sufficient to permit the Company to operate until it acquires one or more compatible businesses and in conjunction therewith, obtains additional capital. However, unforeseen circumstances, including favorable opportunities, may develop which may render the assessment of the Company's management inaccurate. (4) The Company may temporarily invest any unexpended balances on hand in government securities, certificates of deposit, money market funds. The Company intends to make such investments only temporarily in order to avoid any requirement to register the Company under the Investment Company Act of 1940. Any income realized from investment of the net proceeds of this limited offering will be general revenues of the Company. (5) The Company shall provide Accredited Subscribers with reports on the actual use of proceeds on a quarterly basis until all proceeds have been expended. THE ESTIMATES IN EXHIBIT 1(C) ARE SUBJECT TO MATERIAL CHANGE IF, IN THE OPINION OF THE COMPANY'S BOARD OF DIRECTORS, THE ACTUAL OPERA- TIONS OF THE COMPANY JUSTIFY DIFFERENT EXPENDITURES OR A DIFFERENT AL- LOCATION OF PRIORITIES. (d) The Company will not pay any commissions or grant of any discounts in conjunction therewith. 2. Subscription Consideration. (a) The undersigned Accredited Subscriber hereby subscribes for 108,750 shares of the Stock in consideration for $2,175 in the aggregate and will tender payment in full therefor immediately following receipt of an executed copy of this Agreement evincing acceptance of this subscription by the Company. (b) Within 72 hours after receipt of payment for the Stock, the Company's transfer agent will issue and deliver to the Accredited Subscriber, at the Company's expense, a certificate for the Stock. 118 3. Accredited Subscriber's Representations, Warranties and Covenants. As a material inducement to the Company's consideration of the Accredited Subscriber's offer to acquire Stock(s), the Accredited Subscriber represents, warrants and covenants to the Company, as follows: (a) The Accredited Subscriber is familiar with the requirements for treatment as an "accredited investor" under Regulation D and Section 4(6) of the Securities Act of 1933, as amended (the "Act") and meets one or more of the definitions of an "accredited investor" contained in Rule 501 promulgated under authority of the Act and has, alone or together with his Offeree's Representative, if any, (as hereinafter defined) such knowledge and experience in financial matters that the Accredited Subscriber is capable of evaluating the relative risks and merits of this subscription; (b) The Accredited Subscriber acknowledges that he, she or it has, based on his, her or its own substantial experience, the ability to evaluate the transactions contemplated hereby and the merits and risks thereof in general and the suitability of the transaction for the Accredited Subscriber in particular; (c) (1) The Accredited Subscriber understands that the offer and issuance of the Stock is being made without the use of a Private Placement Memorandum, the Accredited Subscriber having become totally familiar with the business and condition of the Company and having been provided with access to all corporate records and personnel, and has availed himself of such access and has received all exhibits described in this Agreement. (2) The Accredited Subscriber is fully aware of the material risks associated with becoming an investor in the Company and confirms that he, she or it was previously informed that all documents, records and books pertaining to this investment have been available from the Company and that all documents, records and books pertaining to this transaction requested by the Accredited Subscriber have been made available to the Accredited Subscriber; (d) The Accredited Subscriber has had an opportunity to ask questions of and receive answers from the officers of the Company concerning: (1) the terms and conditions of this Subscription Agreement and the transactions contemplated hereby, as well as the affairs of the Company and related matters; and (2) any arrangements or proposed arrangements of the Company relating to any of its Stockholders that are not identical to those relating to all of its Stockholders; (e) The Accredited Subscriber has had an opportunity to obtain additional information necessary to verify the accuracy of the information referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as to supplement the information in the 34 Act Reports, as called for by Florida Rule 3E-500.005. (f) The Accredited Subscriber has provided the Company with the personal and business financial information concerning himself which he, she or it agrees demonstrates the Accredited Subscriber's general ability to bear the risks of the subject transaction and suitability as a subscriber in a private offering and the Accredited Subscriber hereby affirms the correctness of such information; 119 (g) The Accredited Subscriber acknowledges and is aware that: (1) The Stock is a speculative investment with no assurance that the Company will be successful, or if successful, that such success will result in payments to the Accredited Subscriber or to realization of capital gains by the Accredited Subscriber on disposition of the Stock; and (2) The Stock being subscribed for has not been registered under the Securities Act or under any state securities laws, accordingly the Accredited Subscriber may have to hold such Stock and may not be able to liquidate, pledge, hypothecate, assign or transfer such Stock; (h) The Accredited Subscriber has obtained its own oral opinion from his, her or its legal counsel to the effect that after an examination of the transactions associated herewith and the applicable law, no action needs to be taken by either the Accredited Subscriber or the Company in conjunction with this Subscription and the issuance of the Stock in conjunction therewith, other than such actions as have already been taken, in order to comply with the securities law requirements of the Accredited Subscriber's state of domicile; and (i) (1) The Stock will bear a restrictive legend and the Company's transfer agent will be instructed not to transfer the subject Stock unless it has been registered pursuant to Section 5 of the Securities Act of 1933, as amended, or an opinion of counsel satisfactory to legal counsel to the Company and the Company's president has been provided, to the effect that the proposed transaction is exempt from registration requirements imposed by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state or foreign laws. (2) The legend shall read as follows: "The securities represented by this certificate were issued without registration under the Securities Act of 1933, as amended, or comparable state laws in reliance on the provisions of Section 4(6) of such act, and comparable state law provisions. These securities may not be transferred pledged or hypothecated unless they are first registered under applicable federal, state or foreign laws, or the transaction is demonstrated to be exempt from such requirements to the Company's satisfaction." 4. Responsibility. (a) The officers of the Company will endeavor to exercise their best judgment in the con- duct of all matters arising under this Subscription Agreement; provided, however, that this provision shall not enlarge, limit or otherwise affect the liability of the Company or its officers. (b) The Accredited Subscriber shall indemnify and hold harmless the Company; any cor- poration or entity affiliated with the Company; the officers, directors and employees of any of the foregoing; or any professional adviser thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees at trial or on appeal, to which said entities and persons may be subject or which said entities and persons incur by reason of or in connection with any misrepresentation made by the Accredited Subscriber, any breach of any of the Accredited Subscriber's warranties or the Accredited Subscriber's failure to fulfill any of the covenants or agreements under this Subscription Agreement. 5. Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements contained herein shall sur- vive the delivery of and the payment for the Stock being subscribed for. 120 6. Notices. Any and all notices, designations, consents, offers, acceptances or any other com- munication provided for herein shall be given in writing by registered or certified mail which shall be addressed in the case of the Company to Equity Growth Systems, inc.; 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949; and, in the case of the Accredited Subscriber, to the address set forth at the end of this Agreement, or to the address appearing on the books of the Company or to such other address as may be designated by the Accredited Subscriber or the Company in writing. Accredited Subscriber Information Please Print the following Information Accredited Subscriber's Name:: Michelle Tucker, custodian under the UGTMA for Shayna Tucker, her daughter Accredited Subscriber's Authorized Signatory: * Michelle Tucker, Custodian Accredited Subscriber's Address: 902 Clint Moore Road, Suite 136 Boca Raton, Florida 33418 Accredited Subscriber's Telephone Number: (561) 998-2025 Accredited Subscriber's Tax ** Number: ###-##-#### - ------ * If applicable (e.g., if the Subscriber is a corporation, partnership, joint venture, etc.) ** FEIN or Social Security number 7. Miscellaneous. (a) This Agreement shall be governed by, construed and enforced in accordance within the laws of the State of Delaware, both substantive, procedural (except for choice of law provisions) and remedial. (b) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. (c) This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors, assigns, executors and administrators, but this Agreement and the respective rights and obligations of the Parties hereunder shall not be assumable by any Party hereto without the prior written consent of the other. (d) This Agreement represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof; and cannot be amended, supplemented or modified except by an instrument in writing signed by the Party against whom enforcement of any such amendment, supplement or modification is sought. (e) The failure or any provision of this Agreement shall in no manner affect the right to enforce the other provisions of same, and the waiver of any Party of any breach of any provision of this Agreement shall not be construed to be a waiver by such Party of any succeeding breach of such provision or waiver by such Party of any breach of any provision. 121 * * * IN WITNESS WHEREOF, I have executed this Agreement on behalf of the Ac- credited Subscriber this ___ day of November, 1998. ACCREDITED SUBSCRIBER Michelle Tucker, custodian under the UGTMA for Shayna Tucker, her daughter By: _________________________________ Michelle Tucker, Custodian SUBSCRIPTION ACCEPTED: Equity Growth Systems, inc. Dated: __________________ ___, 1998. By: _______________________ Edward Granville-Smith President & Director Attest: _______________________ Charles J. Scimeca Director 122 Exhibit Index Exhibit Description 1(c) Use of Proceeds 3(f) Investment Letter 123 FORM OF INVESTMENT LETTER Date: Edward Granville-Smith President Equity Growth Systems, inc. 3821 Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 Re.: Stock Subscription Dear Sir: I hereby certify and warrant that I am acquiring 108,750 shares of Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the "Stock"). I hereby certify under penalty of perjury that upon receipt of the Stock, I will be accepting it for my own account for investment purposes without any intention of selling or distributing all or any part thereof. I represent and warrant that I qualify as an accredited investor (as that term is defined in rule 501 of Regulation D promulgated under authority of the Securities Act of 1933, as amended) or have been specifically excused from such requirement, in writing by the Company's management, or, in the alternative, that I am sophisticated in financial affairs, or have relied on the advice of someone sophisticated in financial affairs, and I able to bear the economic risks of this investment and I do not have any reason to anticipate any change in my circumstances, financial or otherwise, nor any other particular occasion or event which should cause me to sell or distribute, or necessitate or require my sale or distribution of the Stock. No one other than me has any beneficial interest in the Stock. I further certify that I have consulted with my own legal counsel who, after having been apprized by me of all the material facts surrounding this transaction, opined to me, for the benefit of the Company, that this transaction was being effected in full compliance with the applicable securities laws of my state of domicile. I agree that I will in no event sell or distribute any of the Stock unless in the opinion of your counsel (based on an opinion of my legal counsel) the Stock may be legally sold without registration under the Securities Act of 1933, as amended, and/or registration and/or other qualification under then-applicable State and/or Federal statutes, or the Stock shall have been so registered and/or qualified and an appropriate prospectus, shall then be in effect. 124 I am fully aware that the Stock is being offered and sold by the corporation to me in reliance on the exemption provided by Sections 3(b), 4(2) or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of securities by an issuer where no public offering is involved, and on my certifications and warranties. In connection with the foregoing, I consent to your legending my certificates represent- ing the Stock to indicate my investment intent and the restriction on transfer contemplated hereby and to your placing a "stop transfer" order against the Stock in the Company's stock transfer books until the conditions set forth herein shall have been met. I acknowledge by my execution hereof that I have had access to your books, records and properties, and have inspected the same to my full and complete satisfaction prior to my acquisition of the Stock. I represent and warrant that because of my experience in business and investments, I am competent to make an informed investment decision with respect thereto on the basis of my inspection of your records and my questioning of your officers. I further certify that my domicile is located at the address listed in this letter. Very truly yours, Michelle Tucker, custodian under the UGTMA for Shayna Tucker, her daughter -------------------- Michelle Tucker, Custodian 125 EX-10.23 4 EXHIBIT 10.23 CONSULTING AGREEMENT WITH THE YANKEE COMPANIES Consulting Agreement This Consulting Agreement (the "Agreement") is made and entered into by and between Equity Growth Systems, inc., a publicly held Delaware corporation with a class of equity securities registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and currently trading on the over the counter bulletin board operated by but not a part of NASDAQ ("Client"); and, The Yankee Companies, Inc., a Florida corporation ("Yankees"; Client and Yankees being hereinafter collectively referred to as the "Parties" and generically as a "Party"). Preamble : WHEREAS, Client is engaged in the business more particularly described in the reports filed by Client with the Securities and Exchange Commission ("SEC" or "Commission"), as disclosed in the SEC's EDGAR web site on the Internet at "http//sec.gov/Archives/edgar/data; and WHEREAS, Yankees has substantial strategic business experience, acumen and contacts, and Client desires to avail itself of Yankees' services in conjunction with development and implementation of strategic plans designed to increase profitability, expand operations, and to assure attainment of such goals by securing Yankees's assistance to develop proper investment banking relationships, develop ongoing access to debt and equity capital markets, and develop growth through acquisition of complementary business operations; and WHEREAS, Client's current business plans have been negatively effected by the health of Edward Granville-Smith, until recently its sole director and principal officer, as well as the person most knowledgeable as to Client's business, and Client desires engage Yankees to assist it to restructure its management and its strategic business plans; and WHEREAS, Yankees is agreeable to making its services available to Client, on the terms and subject to the conditions hereinafter set forth: NOW, THEREFORE, in consideration for Yankees's agreement to render the hereinafter described services as well as of the premises, the sum of TEN ($10) DOLLARS, and other good and valuable consideration, the receipt and adequacy of which is hereby acknow- ledged, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: ARTICLE ONE OBLIGATIONS OF THE PARTIES 1.1 Description of Services (A) Yankees's areas of expertise include corporate structure, organization and reorganization; mergers, acquisitions and divestitures; strategic corporate development; corporate financial and equity analysis; market strategy planning and implementation; corporate communication, financial public relations and stockholder relations consulting; business plan development and implementation; marketing sales and analysis; executive and professional recruitment; coordination and supervision of professional services; development and implementation of regulatory compliance procedures (the "Services"). 126 (B) During the Initial Term of this Agreement (as hereinafter defined), Yankees shall provide Client with the Services, on a reasonable, as required basis, consistent with Yankees's other business activities. (C) Because of Client's status under federal securities laws, in any circumstances where Yankees is describing the securities of Client to a third Party, Yankees shall disclose to such person the compensation received from Client to the extent required under any applicable laws, including, without limitation, Section 17(b) of the Securities Act of 1933, as amended; however, the Parties acknowledge they do not contemplate that Yankees shall be involved in any activities on behalf of Client requiring such descriptions or disclosures, or that the Services involve any activities subject to regulation under federal or state securities laws other than the prohibitions of the Foreign Corrupt Practices Act, except for the introduction of Client and its principals to licensed broker dealers in securities, securities analysts and appropriate corporate information and stockholder relations specialists. 1.2 Fiduciary Obligation to Client In rendering its services, Yankees shall not disclose to any third party any confidential non-public information furnished by Client or otherwise obtained by it with respect to Client. 1.3 Limitations on Services (A) The Parties recognize that certain responsibilities and obligations are imposed by federal and state securities laws and by the applicable rules and regulations of stock exchanges, the National Association of Securities Dealers, Inc. (collectively with its subsidiaries being hereinafter referred to as the "NASD"), in-house "due diligence" or "compliance" depart- ments of licensed securities firms, etc.; accordingly, Yankees agrees that it will not release any information or data about Client to any selected or limited person(s), entity, or group if the Consultant is aware that such information or data has not been generally released or promulgated. (B) Yankees shall restrict or cease, as directed by Client, all efforts on behalf of Client, including all dissemination of information regarding Client, immediately upon receipt of instructions (in writing by fax or letter) to that effect from Client. 1.4 Consultant's Compensation (A) Except as described below with reference to certain of the services described above, which are to be completed within the initial 365 days of this Agreement: (1) Yankees will bill at its standard hourly rates for all work as to which a prior written arrangement with different terms has not been entered into, however, no hourly billable services will be provided except at Client's specific request. (2) Any documents prepared by Yankees or provided to Client's advisors, at Client's request, on existing forms will be subject to a $50 per page initial licensing fee augmented by the time spent in personalizing the subject form. 127 (B) Notwithstanding the provisions of Section 1.4(a) above, during the first 365 days of this Agreement (the "Initial Term"), Yankees will accept and Client will pay to Yankees: (1) Options (the "Class A Options") to purchase shares of Client's outstanding or reserved common stock (all reserved common stock being treated as outstanding for purposes of such calculation), on the following terms (the"Stock Signing Fee."): (a) The quantity of Client common stock subject to the Class A Options shall be equal to 10% of Client's outstanding or reserved common stock, immediately following complete exercise of all the Class A Options; (b) The Class A Option term will commence on the 60th day after execution of this Agreement and will terminate at the close of business on the 45th business day after the Class A Options and the shares of common stock into which they can be exercised are registered for sale to the public under applicable federal and state securities laws, however, Yankees shall have the option of exercising the Class A Options prior to such registration at a 50% discount from the otherwise applicable exercise price, subject to the resale restrictions imposed by SEC Rule 144, but subject to the piggy back and registration provisions, as reflected in the form of warrant agreement annexed hereto and made a part hereof as composite exhibit 1.4(B), which form shall constitute the basis for and terms of the Class A Options, other than as specifically modified hereby. (c) The exercise price of the Class A Options will be based on the number of shares outstanding at the time of exercise, pro rated in accordance with the following formula: in the event that an aggregate of 6,000,000 shares of capital stock are outstanding or reserved for future issuance under reasonably definable terms (e.g. options, warrants, pending acquisitions, obligations under employment agreements, etc.), then the number of shares purchasable would be 600,000 and the exercise price would be $0.10 per share, any increase or decrease in the outstanding and reserved shares resulting in a corresponding adjustment to the Class A Option exercise quantity and price; (d) Yankees shall have the right to cashless exercise of the options, as reflected in the form of warrant agreement annexed hereto and made a part hereof as composite exhibit 1.4(B). (2) If, for any reason (other than a stock split also affecting Yankees's shares issued as the Stock Signing Fee) Client's outstanding securities exceed those contemplated as the basis for determining the Class A Option exercise prices within 12 months following the end of the exercise term, then additional shares in an amount to such difference on a pro rated basis (based on the options exercised) shall be issued to Yankees. 128 (3) The foregoing compensation is in lieu of document license fees and of required cash payments for up to an aggregate of 200 hours of Yankees's hourly fees during the initial six month term of this Agreement (but not those of its associated entities), and, for tax purposes, shall be valued at an aggregate of $20,000. (4) Client has been informed that a portion of the Stock Signing Fee will be transferred by Yankees to third party independent consultants who will assist Yankees in the performance of its duties hereunder. (5) The Class A Options may be exercised, in whole or in part, there being no minimum exercise requirements. (C) In addition to the compensation described above with reference to services during the Initial Term of this Agreement and whether or not the following services are rendered during such Initial Term: (1) In the event that Yankees arranges or provides funding for Client on terms more beneficial than those reflected in Client's current principal financing agreements, copies of which are included among Client's records available through the SEC's EDGAR web site, the subject Consultant shall be entitled, at its election, to either: (a) A fee equal to 25% of such savings, on a continuing basis; or (b) If equity funding is provided though Yankees or any affiliates thereof, a discount of 10% from the bid price for the subject equity securities, if they are issuable as free trading securities, or, a discount of 50% from the bid price for the subject equity securities, if they are issuable as restricted securities (as the term restricted is used for purposes of SEC Rule 144); and (2) In the event that Yankees generates business for Client, then, on any sales resulting therefrom, Yankees shall be entitled to a commission equal to 10% of the gross income derived by Client therefrom, on a continuing basis. (3) In the event that Yankees or any affiliate thereof arranges for an acquisition by Client, then Yankees shall be entitled to compensation equal to 10% of the compensation paid for such acquisition, in addition to any compensation negotiated and received from the acquired entity or its affiliates. (4) In addition to all other compensation reflected in this Agreement, Client shall, on and after the 365 day period following execution of this Agreement, pay to Yankees the sum of $5,000 per month, on or before the monthly anniversary date of this Agreement, throughout the balance of this Agreement or any renewals thereof, the first such payment to be tendered by Client on or before the 395th day following execution of this Agreement (the "Cash Consulting Fee"); provided, however, that at Client option, it may apply such payments to exercise of the Class A Options, whereupon Client shall issue to Yankees the quantity of common stock called for pursuant to the foregoing Class A Option exercise provisions. (D) Client will assure that its legal counsel promptly prepares all reports which then existing holders of Client's securities (including Yankees, its affiliates and successors in interest) are required to file with the Securities and Exchange Commission as a result of Client's reporting status, including Securities and Exchange Commission Forms 3, 4 and 5, Schedules 13(d) and Schedules 13(g), and shall submit all such reports to the subject stockholders for prompt execution and timely filing with the Securities and Exchange Commission. 129 (E) (1) In addition to payment of fees, Client will be responsible for payment of all costs and disbursements associated with Yankees's services either: (a) Involving less than $50 per item and $200 in the aggregate during the preceding 30 day period; or (b) Reflected in an operating budget approved by Client; or (c) Approved in writing by Client; provided, however, that the refusal by Client to approve expenditures required for the proper performance of Yankees's services will excuse performance of such services. (2) All of Yankees's statements will be paid within 10 days after receipt. (3) In the event additional time for payment is required, Yankees will have the option of selling the account receivable and Client agrees to pay interest thereon at the monthly rate of 1%. (4) In the event collection activities are required, Client agrees to pay all of Yankees's out of pocket costs associated therewith. (5) There will be no change or waiver of the provisions contained herein, unless such charge is in writing and signed by Client and Yankees. 1.5 Client's Commitments (A).(1) All work requiring legal review will be submitted for approval by Client to Client's legal counsel prior to its use. (2) Final drafts of any matters prepared for use by Yankees in conjunction with the provision of the Services will be reviewed by Client and, if legally required, by Client's legal counsel, to assure that: (a) All required information has been provided; (b) All materials are presented accurately; and, (c) That no materials required to render information provided "not misleading" are omitted. (2) Only after such review and approval by Client and, if required, Client's legal counsel, will any documents be filed with regulatory agencies or provided to Yankees or third parties. (3) (a) Financial data will be reviewed by competent, independent, certified public accountants to be separately retained by Client. (b) Such accountants will be required to review and approve all financially related filings, prior to release to Yankees, other third parties or submission to the appropriate regulatory authorities. 130 (B) (1) Client shall supply Yankees on a regular and timely basis with all approved data and information about Client, its management, its products, and its operations and Client shall be responsible for advising Yankees of any fact which would affect the accuracy of any prior data and information supplied to Yankees. (2) Client shall use its best efforts to promptly supply Yankees with full and complete copies of all filings with all federal and state securities agencies; with full and complete copies of all shareholder reports and communications whether or not prepared with Yankees's assistance, with all data and information supplied to any analyst, broker-dealer, market maker, or other member of the financial community; and with all product/services brochures, sales materials, etc. (3) Client shall promptly notify Yankees of the filing of any registration statement for the sale of securities and/or of any other event which triggers any restrictions on publicity. (4) Client shall be deemed to make a continuing representation of the accuracy of any and all material facts, material, information, and data which it supplies to Yankees and Client acknowledges its awareness that Yankees will rely on such continuing representation in performing its functions under this Agreement. (5) Yankees, in the absence of notice in writing from Client, may rely on the continuing accuracy of material, information and data supplied by Client. ARTICLE TWO TERM, RENEWALS & EARLIER TERMINATION 2.1 Term. This Agreement shall be for an initial term of 730 days, commencing on the date of its complete execution by all Parties, as evinced in the execution page hereof (the "Initial Term"). 2.2 Renewals. This Agreement shall be renewed automatically, after expiration of the original term, on a continuing annual basis, unless the Party wishing not to renew this Agreement provides the other Party with written notice of its election not to renew ("Termination Election Notice") on or before the 30th day prior to termination of the then current term. 2.3 Final Settlement. (A) Upon termination of this Agreement and payment to Yankees of all amounts due it hereunder, Yankees or its representative shall execute and deliver to Client a receipt for such sums and a release of all claims, except such claims as may have been submitted pursuant to the terms of this Agreement and which remain unpaid, and, shall forthwith tender to Client all records, manuals and written procedures, as may be desired by Client for the continued conduct of its business; and (B) Client or its representative shall execute and deliver to Yankees a receipt for all materials returned and a release of all claims, except such claims as may have been submitted pursuant to the terms of this Agreement and which remain unpaid, and, shall forthwith tender to Yankees all records, manuals and written procedures, as may be desired by Yankees for the continued conduct of its business. 131 ARTICLE THREE CONSULTANT'S CONFIDENTIALITY & COMPETITION COVENANTS 3.1 General Provisions. (A) Yankees acknowledges that, in and as a result of its entry into this Agreement, it will be making use of confidential information of special and unique nature and value relating to such matters as Client's trade secrets, systems, procedures, manuals, confidential reports; consequently, as material inducement to the entry into this Agreement by Client, Yankees hereby covenants and agrees that it shall not, at anytime during the term of this Agreement, any renewals thereof and for two years following the terms of this Agreement, directly or indirectly, use, divulge or disclose, for any purpose whatsoever, any of such confidential information which has been obtained by or disclosed to it as a result of its entry into this Agreement or provision of services hereunder. (B) In the event of a breach or threatened breach by Yankees of any of the provisions of this Article Three, Client, in addition to and not in limitation of any other rights, remedies or damages available to Client, whether at law or in equity, shall be entitled to a permanent injunction in order to prevent or to restrain any such breach by such Consultant, or by its partners, directors, officers, stockholders, agents, representatives, servants, employers, employees, affiliates and/or any and all persons directly or indirectly acting for or with it. 3.2 Special Remedies. In view of the irreparable harm and damage which would undoubtedly occur to Client and its clients as a result of a breach by Yankees of the covenants or agreements contained in this Article Three, and in view of the lack of an adequate remedy at law to protect Client's interests, Yankees hereby covenants and agrees that Client shall have the following additional rights and remedies in the event of a breach hereof: (A) Yankees hereby consents to the issuance of a permanent injunction enjoining it from any violations of the covenants set forth in this Article Three; and (B) Because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which Client or its clients may sustain prior to the effective enforcement of such injunction, Yankees hereby covenants and agrees to pay over to Client, in the event it violates the covenants and agreements contained in this Article Three, the greater of: (1) Any payment or compensation of any kind received by it because of such violation before the issuance of such injunction, or (2) The sum of One Thousand Dollars per violation, which sum shall be liquidated damages, and not a penalty, for the injuries suffered by Client or its clients as a result of such violation, the Parties hereto agreeing that such liquidated damages are not intended as the exclusive remedy available to Client for any breach of the covenants and agreements contained in this Article Three, prior to the issuance of such injunction, the Parties recognizing that the only adequate remedy to protect Client and its clients from the injury caused by such breaches would be injunctive relief. 3.3 Cumulative Remedies. Yankees hereby irrevocably agrees that the remedies described in this Article Three shall be in addition to, and not in limitation of, any of the rights or remedies to which Client and its clients are or may be entitled to, whether at law or in equity, under or pursuant to this Agreement. 132 3.4 Acknowledgment of Reasonableness. (A) Yankees hereby represents, warrants and acknowledges that its members or officers and directors have carefully read and considered the provisions of this Article Three and, having done so, agrees that the restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of Client, its members, officers, directors, consultants, agents and employees; consequently, in the event that any of the above-described restrictions shall be held unenforceable by any court of competent jurisdiction, Yankees hereby covenants, agrees and directs such court to substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and, Yankees hereby covenants and agrees that if so modified, the covenants contained in this Article Three shall be as fully enforceable as if they had been set forth herein directly by the Parties. (B) In determining the nature of this limitation, Yankees hereby acknowledges, covenants and agrees that it is the intent of the Parties that a court adjudicating a dispute arising hereunder recognize that the Parties desire that these covenants not to compete or circumvent be imposed and maintained to the greatest extent possible. 3.5 Exclusivity. Yankees shall not be required to devote all of its business time to the affairs of Client, rather it shall devote such time as it is reasonably necessary in light of its other business commitments. ARTICLE FOUR Client' CONFIDENTIALITY & COMPETITION COVENANTS 4.1 General Prohibitions (A) Client acknowledges that, in and as a result of its engagement of Yankees, Client will be making use of confidential information of special and unique nature and value relating to such matters as Yankees's business contacts, professional advisors, trade secrets, systems, procedures, manuals, confidential reports, lists of clients, potential customers and funders; consequently, as material inducement to the entry into this Agreement by Yankees, Client hereby covenants and agrees that it shall not, at anytime during the term of this Agreement, any renewals thereof an for two years following the terms of this Agreement, directly or indirectly, use, divulge or disclose, for any purpose whatsoever, any of such confidential information which has been obtained by or disclosed to it as a result of its employment of Yankees, or Yankees's affiliates. (B) In the event of a breach or threatened breach by Client of any of the provisions of this Article Four, Yankees, in addition to and not in limitation of any other rights, remedies or damages available to Yankees, whether at law or in equity, shall be entitled to a permanent injunction in order to prevent or to restrain any such breach by Client, or by Client's partners, directors, officers, stockholders, agents, representatives, servants, employers, employees, affiliates and/or any and all persons directly or indirectly acting for or with it. 133 4.2 Special Remedies. In view of the irreparable harm and damage which would undoubtedly occur to Yankees as a result of a breach by Client of the covenants or agreements contained in this Article Four, and in view of the lack of an adequate remedy at law to protect Yankees's interests, Client hereby covenants and agrees that Yankees shall have the following additional rights and remedies in the event of a breach hereof: (A) Client hereby consents to the issuance of a permanent injunction enjoining it from any violations of the covenants set forth in this Article Four is and (B) Because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which Yankees may sustain prior to the effective enforcement of such injunction, Client hereby covenants and agrees to pay over to Yankees, in the event it violates the covenants and agreements contained in this Article Four, the greater of: (1) Any payment or compensation of any kind received by it because of such violation before the issuance of such injunction, or (2) The sum of One Thousand Dollars per violation, which sum shall be liquidated damages, and not a penalty, for the injuries suffered by Yankees as a result of such violation, the Parties hereto agreeing that such liquidated damages are not intended as the exclusive remedy available to Yankees for any breach of the covenants and agreements contained in this Article Four, prior to the issuance of such injunction, the Parties recognizing that the only adequate remedy to protect Yankees from the injury caused by such breaches would be injunctive relief. 4.3 Cumulative Remedies. Client hereby irrevocably agrees that the remedies described in this Article Four shall be in addition to, and not in limitation of, any of the rights or remedies to which Yankees is or may be entitled to, whether at law or in equity, under or pursuant to this Agreement. 4.4 Acknowledgment of Reasonableness. (A) Client hereby represents, warrants and acknowledges that its officers and directors have carefully read and considered the provisions of this Article Four and, having done so, agree that the restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of Yankees, its members, officers, directors, consultants, agents and employees; consequently, in the event that any of the above-described restrictions shall be held unenforceable by any court of competent jurisdiction, Client hereby covenants, agrees and directs such court to substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and, Client hereby covenants and agrees that if so modified, the covenants contained in this Article Four shall be as fully enforceable as if they had been set forth herein directly by the Parties. (B) In determining the nature of this limitation, Client hereby acknowledges, covenants and agrees that it is the intent of the Parties that a court adjudicating a dispute hereunder recognize that the Parties desire that these covenants not to compete or circumvent be imposed and maintained to the greatest extent possible. 134 ARTICLE FIVE MISCELLANEOUS 5.1 Notices. All notices, demands or other written communications hereunder shall be in writing, and unless otherwise provided, shall be deemed to have been duly given on the first business day after mailing by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: To Yankees: 902 Clint Moore Road, Suite 136; Boca Raton, Florida 3418 Telephone (561) 998-2025; Fax (561) 998-3425 Attention: Leonard Miles Tucker, President and 1941 Southeast 51st Terrace; Ocala, Florida 34471 Telephone (352) 694-9179; Fax (352) 694-9178 Attention: Vanessa H. Mitchem, Chief Administrative Officer To Client: Equity Growth Systems, inc. At such address, telephone and fax numbers as are reflected on the SEC's EDGAR Internet site; Attention: Charles J. Scimeca, President & Chief Executive Officer in each case, with copies to such other address or to such other persons as any Party shall designate to the others for such purposes in the manner hereinabove set forth. 5.2 Amendment. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by Parties. 5.3 Merger. (A) This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. (B) All prior agreements whether written or oral are merged herein and shall be of no force or effect. 5.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 5.5 Severability. If any provision or any portion of any provision of this Agreement, other than a conditions precedent, if any, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 135 5.6 Governing Law and Venue. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceeding arising between the Parties in any matter pertaining or related to this Agreement shall, to the extent permitted by law, be held in Palm Beach County, Florida. 5.7 Dispute Resolution in lieu of Litigation. (A) In the event of any dispute arising under this Agreement, or the negotiation thereof or inducements to enter into the Agreement, the dispute shall, at the request of any Party, be exclusively resolved through the following procedures: (1) (a) First, the issue shall be submitted to mediation before a mediation service in Palm Beach County, Florida to be selected by lot from six alternatives to be provided, three by Yankees and three by Client. (b) The mediation efforts shall be concluded within ten business days after their initiation unless the Parties unanimously agree to an extended mediation period; (2) In the event that mediation does not lead to a resolution of the dispute then at the request of any Party, the Parties shall submit the dispute to binding arbitration before an arbitration service located in Palm Beach County, Florida, to be selected by lot, from six alternatives to be provided, in the manner set forth above for selection of a mediator; (3) (A) Expenses of mediation shall be borne by the Parties equally if successful but if unsuccessful, expenses of mediation and of arbitration shall be borne by the Party or Parties against whom the arbitration decision is rendered. (B) If the terms of the arbitral award do not establish a prevailing Party, then the expenses of unsuccessful mediation and arbitration shall be borne by Client and by Yankees. (B) Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. (C) In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. 5.8 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, jointly and severally, their successors, assigns, personal representatives, estate, heirs and legatees. 5.9 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 5.10 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 5.11 Further Assurances. The Parties hereby agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 136 5.12 Status. (A) Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship. (B) Throughout the term of this Agreement, Yankees shall serve an independent contractor, as that term is defined by the United States Internal Revenue Service, and in conjunction therewith, shall be responsible for all of his own tax reporting and payment obligations. (C) In amplification of the foregoing, Yankees shall, subject to reasonable reimbursement on a pre-approved budgetary basis, be responsible for providing its own office facilities and supporting personnel. 5.13 Counterparts. (A) This Agreement may be executed in any number of counterparts delivered through facsimile transmission. (B) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. 5.14 License. (A) (1) This Agreement is the property of Yankees. (2) The use hereof by the Parties is authorized hereby solely for purposes of this transaction and, the use of this form of agreement or of any derivation thereof without Yankees' prior written permission is prohibited. (3) This Agreement shall not be construed more stringently or interpreted less favorably against Yankees' based on authorship. (B) Each of the Parties hereby acknowledge that Yankees is not a law firm and has not provided it with any advice, legal or otherwise, in conjunction with this Agreement, but rather, has suggested that it rely solely on its own experience and advisors in evaluating or interpreting this Agreement. In Witness Whereof, the Parties have executed this Agreement, effective as of the last date set forth below. Signed, Sealed & Delivered In Our Presence Equity Growth Systems, inc. ____________________________ By: ____________________________ Charles J. Scimeca, President Dated: _____________________ The Yankee Companies, Inc. ____________________________ By: ____________________________ Leonard Miles Tucker, President Dated: _____________________ 137 EX-10.24 5 EXHIBIT 10.24 RECENT SETTLEMENTS AND RELEASES WITH CREDITORS Settlement Agreement This Settlement Agreement (the "Agreement") is made and entered into by and among Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities and Exchange Act of 1934, as amended ("Equity Growth Systems" and the "Exchange Act," respectively) and Liberty Transfer Co., it's affiliates, agents or assigns hereinafter referred to as "Liberty ", who for longer than the past 5 years has served as a stock transfer company and consultant for Equity Growth Systems being collectively referred to as the "Parties" and each being sometimes hereinafter generically referred to as a "Party"). Preamble: WHEREAS, Liberty has provided acted as a stock transfer agentcert and has provided consulting services for the benefit of the Company and has submitted in writing it's claim for payment for services rendered and all costs incurred in the amount of approximately $9,100.00 for services rendered, and has offered to settle all claims he may have under employment, accounting, consulting and creditor relationships with Equity Growth Systems, as hereinafter described: NOW, THEREFORE, in consideration of the premises, as well as the mutual covenants hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: First: Terms of Settlement Liberty and Equity Growth Systems hereby agree to settle all of their outstanding claims against each other and their members, partners, officers, directors, agents and affiliates, on the following terms: C. In full payment of all obligations to Liberty and it's affiliates owed by Equity Growth Systems, Inc., and its affiliates, from the beginning of time until the date of this Agreement, as well as in consideration for the extinguishment of all agreements between them, Equity Growth Systems will, within 7 days after receipt of a copy of this signed agreement shall pay to Liberty the sum of $3,600.00. D. Liberty hereby relinquishes all rights under any agreements between him or his affiliates and Equity Growth Systems and its affiliates, other than those created by this Agreement. E. Liberty will cooperate with present and successor management and present and future accounting firms or persons concerning work that Liberty has performed for the Company. Second Mutual Releases In consideration for the exchange of covenants reflected above but excepting only the obligations created by this Agreement, the Parties hereby each release, discharge and forgive the other, and each of the others' members, officers, directors, partners, agents and employees from any and all liabilities, whether current or inchoate, from the beginning of time until the date of this Agreement. Third: Miscellaneous 138 3.1 Amendment. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is evinced by a written instrument, subscribed by the Party against which such modification, waiver, amendment, discharge or change is sought. 3.2 Notice. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given on the first business day after mailing by United States registered or unaudited mail, return receipt requested, postage prepaid, addressed as follows: To Equity Growth Systems: 902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487 Attention: Charles J. Scimeca, President. To : Liberty Transfer Co. 23 Green Street, Box 558 Huntington, New York 11743 or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. 3.3 Merger. This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral are merged herein and shall be of no force or effect. 3.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 3.5 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 3.6 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in Palm Beach County, Florida. 139 3.7 Indemnification. Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise; provided that, such claims are asserted by third parties unrelated to the Parties. In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 3.8 Litigation. In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. 3.9 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees. 3.10 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 3.11 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 3.12 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 3.13 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship, rather, the relationships established hereby are those of settling debtor and creditor. 140 3.14 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (c) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. * * IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed effective as of the ____ day of November, 1998. Signed, sealed and delivered In Our Presence: Equity Growth Systems, inc. - --------------------------------- _________________________________ By: --------------------------------- Charles J. Scimeca, President (CORPORATE SEAL) Liberty : - --------------------------------- - --------------------------------- --------------------------------- Liberty Transfer Co. Al Sander, for the firm 141 Settlement Agreement This Settlement Agreement (the "Agreement") is made and entered into by and among Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities and Exchange Act of 1934, as amended ("Equity Growth Systems" and the "Exchange Act," respectively) and Baum & Company, P.A., a Florida Corporation, hereinafter referred to as "Baum", it's affiliates, agents or assigns, who for longer than the past 5 years has served as an accountant and consultant for Equity Growth Systems being collectively referred to as the "Parties" and each being sometimes hereinafter generically referred to as a "Party"). Preamble: WHEREAS, Baum has provided certain accounting and consulting services for the benefit of the Company and has submitted in writing his claim for payment for services rendered and all costs incurred in the amount of $8,000.00 for services rendered, and has offered to settle all claims he may have under employment, accounting, consulting and creditor relationships with Equity Growth Systems, as hereinafter described: NOW, THEREFORE, in consideration of the premises, as well as the mutual covenants hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: First: Terms of Settlement Baum and Equity Growth Systems hereby agree to settle all of their outstanding claims against each other and their members, partners, officers, directors, agents and affiliates, on the following terms: F. In full payment of all obligations to Baum and his affiliates owed by Equity Growth Systems, Inc., and its affiliates, from the beginning of time until the date of this Agreement, as well as in consideration for the extinguishment of all agreements between them, Equity Growth Systems will, within 7 days after receipt of a copy of this signed agreement shall pay to Baum the sum of $2,000.00. G. Baum hereby relinquishes all rights under any agreements between him or his affiliates, agents or assigns, and Equity Growth Systems and its affiliates, other than those created by this Agreement. H. Baum will cooperate with present and successor management and present and future accounting firms or persons concerning work that Baum has performed for the Company. Second Mutual Releases In consideration for the exchange of covenants reflected above but excepting only the obligations created by this Agreement, the Parties hereby each release, discharge and forgive the other, and each of the others' members, officers, directors, partners, agents and employees from any and all liabilities, whether current or inchoate, from the beginning of time until the date of this Agreement. Third: Miscellaneous 142 3.1 Amendment. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is evinced by a written instrument, subscribed by the Party against which such modification, waiver, amendment, discharge or change is sought. 3.2 Notice. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given on the first business day after mailing by United States registered or unaudited mail, return receipt requested, postage prepaid, addressed as follows: To Equity Growth Systems: 902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487 Attention: Charles J. Scimeca, President. To Baum: Baum & Company, P.A. 1515 University Drive, Suite 209 Coral Springs, Florida 33071 or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. 3.3 Merger. This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral are merged herein and shall be of no force or effect. 3.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 3.5 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 3.6 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in Palm Beach County, Florida. 143 3.7 Indemnification. Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise; provided that, such claims are asserted by third parties unrelated to the Parties. In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 3.8 Litigation. In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. 3.9 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees. 3.10 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 3.11 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 3.12 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 3.13 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship, rather, the relationships established hereby are those of settling debtor and creditor. 144 3.14 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (c) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. * * IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed ef- fective as of the ____ day of November, 1998. Signed, sealed and delivered In Our Presence: Equity Growth Systems, inc. - --------------------------------- _________________________________ By: --------------------------------- Charles J. Scimeca, President (CORPORATE SEAL) Baum: - --------------------------------- - --------------------------------- --------------------------------- Saul B. Baum & Company Joel Baum, for the firm 145 Settlement Agreement This Settlement Agreement (the "Agreement") is made and entered into by and among Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities and Exchange Act of 1934, as amended ("Equity Growth Systems" and the "Exchange Act," respectively) and Saul B. Lipson & Company, a Florida Corporation, hereinafter referred to as "Lipson", it's affiliates, agents, assigns who for longer than the past 5 years has served as an accountant and consultant for Equity Growth Systems being collectively referred to as the "Parties" and each being sometimes hereinafter generically referred to as a "Party"). Preamble: WHEREAS, Lipson has provided certain accounting and consulting services for the benefit of the Company and has submitted in writing his claim for payment for services rendered and all costs incurred in the amount of $8,000.00.00 for services rendered and has offered to settle all claims he may have under employment, accounting, consulting and creditor relationships with Equity Growth Systems, as hereinafter described: NOW, THEREFORE, in consideration of the premises, as well as the mutual covenants hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: First: Terms of Settlement Lipson and Equity Growth Systems hereby agree to settle all of their outstanding claims against each other and their members, partners, officers, directors, agents and affiliates, on the following terms: I. In full payment of all obligations to Lipson and his affiliates owed by Equity Growth Systems, Inc., and its affiliates, from the beginning of time until the date of this Agreement, as well as in consideration for the extinguishment of all agreements between them, Equity Growth Systems will, within 7 days after receipt of a copy of this signed agreement shal pay to Lipson the sum of $2,000.00. J. Lipson hereby relinquishes all rights under any agreements between him or his affiliates and Equity Growth Systems and its affiliates, other than those created by this Agreement. K. Lipson will cooperate with present and successor management and present and future accounting firms or persons concerning work that Lipson has performed for the Company. Second Mutual Releases In consideration for the exchange of covenants reflected above but excepting only the obligations created by this Agreement, the Parties hereby each release, discharge and forgive the other, and each of the others' members, officers, directors, partners, agents and employees from any and all liabilities, whether current or inchoate, from the beginning of time until the date of this Agreement. Third: Miscellaneous 146 3.1 Amendment. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is evinced by a written instrument, subscribed by the Party against which such modification, waiver, amendment, discharge or change is sought. 3.2 Notice. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given on the first business day after mailing by United States registered or unaudited mail, return receipt requested, postage prepaid, addressed as follows: To Equity Growth Systems: 902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487 Attention: Charles J. Scimeca, President. To : Mr. Lipson: Saul B. Lipson & Company 1515 University Drive, Suite 222 Coral Springs, Florida 33031 or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. 3.3 Merger. This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral are merged herein and shall be of no force or effect. 3.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 147 3.5 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 3.6 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in Palm Beach County, Florida. 3.7 Indemnification. Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise; provided that, such claims are asserted by third parties unrelated to the Parties. In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 3.8 Litigation. In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. 3.9 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees. 3.10 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 3.11 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 3.12 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 3.13 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship, rather, the relationships established hereby are those of settling debtor and creditor. 148 3.14 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (c) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. * * IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed ef- fective as of the ____ day of November, 1998. Signed, sealed and delivered In Our Presence: Equity Growth Systems, inc. - --------------------------------- _________________________________ By: --------------------------------- Charles J. Scimeca, President (CORPORATE SEAL) Mr. Lipson: - --------------------------------- - --------------------------------- --------------------------------- Saul B. Lipson & Company Saul B Lipson, for the firm 149 Settlement Agreement This Settlement Agreement (the "Agreement") is made and entered into by and among Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities and Exchange Act of 1934, as amended ("Equity Growth Systems" and the "Exchange Act," respectively) and Leo J. Paul, his affiliates, agents, or assigns, and any entity Mr. Paul may do business as an officer, director, stockholder, or partner, Hereinafter referred to as Mr. Paul, who for longer than the past 5 years has served as an accountant and consultant for Equity Growth Systems being collectively referred to as the "Parties" and each being sometimes hereinafter generically referred to as a "Party"). Preamble: WHEREAS, Mr. Paul has provided certain accounting and consulting services for the benefit of the Company and has submitted in writing his claim for payment for services rendered and all costs incurred in the amount of $22,500.00 for services rendered, and has offered to settle all claims he may have under employment, consulting and creditor relationships with Equity Growth Systems, as hereinafter described: NOW, THEREFORE, in consideration of the premises, as well as the mutual covenants hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: First: Terms of Settlement Mr. Paul and Equity Growth Systems hereby agree to settle all of their outstanding claims against each other and their members, partners, officers, directors, agents and affiliates, on the following terms: L. In full payment of all obligations to Mr. Paul and his affiliates owed by Equity Growth Systems, Inc., and its affiliates, from the beginning of time until the date of this Agreement, as well as in consideration for the extinguishment of all agreements between them, Equity Growth Systems will, within 7 days after receipt of a copy of this signed agreement shall pay to Mr. Paul the sum of $9,000.00. M. Mr. Paul hereby relinquishes all rights under any agreements between him or his affiliates and Equity Growth Systems and its affiliates, other than those created by this Agreement. N. Mr. Paul will cooperate with present and successor management and present and future accounting firms or persons concerning work that Mr. Paul has performed for the Company. Second Mutual Releases In consideration for the exchange of covenants reflected above but excepting only the obligations created by this Agreement, the Parties hereby each release, discharge and forgive the other, and each of the others' members, officers, directors, partners, agents and employees from any and all liabilities, whether current or inchoate, from the beginning of time until the date of this Agreement. Third: Miscellaneous 150 3.1 Amendment. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is evinced by a written instrument, subscribed by the Party against which such modification, waiver, amendment, discharge or change is sought. 3.2 Notice. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given on the first business day after mailing by United States registered or unaudited mail, return receipt requested, postage prepaid, addressed as follows: To Equity Growth Systems: 902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487 Attention: Charles J. Scimeca, President. To Mr. Paul: Leo J. Paul 407 Lincoln Road Ste 4-C Miami, Florida 33139 or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. 3.3 Merger. This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral are merged herein and shall be of no force or effect. 3.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 3.5 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 3.6 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in Palm Beach County, Florida. 151 3.7 Indemnification. Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise; provided that, such claims are asserted by third parties unrelated to the Parties. In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 3.8 Litigation. In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. 3.9 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees. 3.10 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 3.11 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 3.12 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 3.13 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship, rather, the relationships established hereby are those of settling debtor and creditor. 152 3.14 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (c) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. * * IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed ef- fective as of the ____ day of November, 1998. Signed, sealed and delivered In Our Presence: Equity Growth Systems, inc. - --------------------------------- _________________________________ By: --------------------------------- Charles J. Scimeca, Acting President (CORPORATE SEAL) Mr. Paul: - --------------------------------- - ------------------------------- By: _____________________________________ Leo J. Paul 153 EX-10.25 6 EXHIBIT 10.25 PROPOSED SETTLEMENT AGREEMENT AND RELEASE WITH MR. GRANVILLE-SMITH Proposed Settlement Agreement This Settlement Agreement (the "Agreement") is made and entered into by and among Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities and Exchange Act of 1934, as amended ("Equity Growth Systems" and the "Exchange Act," respectively) and Edward Granville-Smith, a Florida resident who for longer than the past three years has served as the sole director and the chief executive officer of Equity Growth Systems (the "Retiring Principal;" Equity Growth Systems and the Retiring Principal being collectively referred to as the "Parties" and each being sometimes hereinafter generically referred to as a "Party"). Preamble: WHEREAS, the Retiring Principal desires to retire from his official roles as an officer and director of Equity Growth Systems and in order to induce new individuals to assume successor roles, has offered to settle all claims he may have under employment, consulting and creditor relationships with Equity Growth Systems, as hereinafter described: NOW, THEREFORE, in consideration of the premises, as well as the mutual covenants hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows: Witnesseth: First: Terms of Settlement The Retiring Principal and Equity Growth Systems hereby agree to settle all of their outstanding claims against each other and their members, partners, officers, directors, agents and affiliates, on the following terms: O. In full payment of all obligations to the Retiring Principal and his affiliates owed by Equity Growth Systems, Inc., and its affiliates, from the beginning of time until the date of this Agreement, as well as in consideration for the extinguishment of all agreements between them, Equity Growth Systems will, within 72 hours after receipt of a copy of the Bolina Note (as hereinafter described), pay to the Retiring Principal the sum of $5,000. P. The Retiring Principal hereby relinquishes all rights under any agreements between him or his affiliates and Equity Growth Systems and its affiliates, other than those created by this Agreement. Q. The Retiring Principal will, subject to physical capabilities and limitations based on his health: 8. Cooperate with successor management to terminate all agreements with former officers, directors and consultants not specifically ratified by new management and in recovery of securities issued pursuant thereto, including, without limitation, Messrs. Holman, Moffitt and Salyer; 9. Cooperate with successor management to negotiate with and identify creditors; 10. Make management aware of Equity Growth Systems business operations and provide assistance in its continuation or termination; and, 11. Upon resumption of normal physical capabilities, resume a more active role in management, subject to negotiation of reasonable compensation arrangements. 154 R. The Retiring Principal will, as soon as possible after execution of this Agreement, provide to Leonard Miles Tucker of Boca Raton, Florida, copies of the notes reflected in correspondence from Equity Growth Systems to WEFT Trust dated June 14, 1996 (hereinafter and heretofore collectively referred to as the Bolina Note[s]"), together with an estoppel letter pertaining thereto from Mr. Spellman, the principal of the WEFT Trust, attesting to the current status of all obligations pertaining thereto or arising thereunder. S. The Retiring Principal hereby represents and warrants that, to the best of his knowledge under his current physical and mental circumstances, Equity Growth Systems has no liabilities not reflected in the financial statements heretofore filed by it with the securities and Exchange Commission, except as specified in exhibit 1-D annexed hereto and made a part hereof. Second Mutual Releases In consideration for the exchange of covenants reflected above but excepting only the obligations created by this Agreement, the Parties hereby each release, discharge and forgive the other, and each of the others' members, officers, directors, partners, agents and employees from any and all liabilities, whether current or inchoate, from the beginning of time until the date of this Agreement. Third: Miscellaneous 3.1 Amendment. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is evinced by a written instrument, subscribed by the Party against which such modification, waiver, amendment, discharge or change is sought. 3.2 Notice. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given on the first business day after mailing by United States registered or unaudited mail, return receipt requested, postage prepaid, addressed as follows: To Equity Growth Systems: 902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487 Attention: Charles J. Scimeca, Acting President. To the Retiring Principal: Edward Granville-Smith. 3821 B Tamiami Trail, Suite 201; Port Charlotte, Florida 33949 or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. 3.3 Merger. This instrument, together with the instruments referred to herein, contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral are merged herein and shall be of no force or effect. 3.4 Survival. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 155 3.5 Severability. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 3.6 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in Palm Beach County, Florida. 3.7 Indemnification. Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise; provided that, such claims are asserted by third parties unrelated to the Parties. In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 3.8 Litigation. In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. 3.9 Benefit of Agreement. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees. 3.10 Captions. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 3.11 Number and Gender. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 3.12 Further Assurances. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time, be required herein to effect the intent and purpose of this Agreement. 156 3.13 Status. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship, rather, the relationships established hereby are those of settling debtor and creditor. 3.14 Counterparts. (a) This Agreement may be executed in any number of counterparts. (b) All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. (c) Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. 3.15 License. (a) This Agreement is the property of the Yankee Companies, Inc, a Florida corporation ("Yankees"). (b) The use hereof by the Parties is authorized hereby solely for purposes of this transaction and, the use of this form of agreement or of any derivation thereof without Yankees' prior written permission is prohibited. (c) The Parties hereby acknowledge that Yankees is not a law firm or regulated entity and has not provided any Party with any advice concerning this Agreement, rather, it has informed each Party, as a condition to their use of this form that they must obtain independent legal advice. * * * IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed effective as of the ____ day of December, 1998. Signed, sealed and delivered In Our Presence: Equity Growth Systems, inc. - --------------------------------- _________________________________ By: --------------------------------- Charles J. Scimeca, Acting President (CORPORATE SEAL) The Retiring Principal: - --------------------------------- - --------------------------------- --------------------------------- Edward Granville-Smith by Mark Granville- Smith, his son and attorney-in-fact acting by virtue of his power of attorney, a copy of which is annexed hereto and made a part hereof, immediately following this signature page. 157 EX-10.26 7 EXHIBIT 10.26 STOCK PURCHASE OPTION AGREEMENT WITH MR. SCIMECA Equity Growth Systems, inc. COMMON STOCK PURCHASE WARRANT No sale, offer to sell or transfer of the securities represented by this certificate or any interest therein shall be made unless a registration statement under the Federal Securities Act of 1933, as amended, with respect to such transaction is then in effect, or the issuer has received an opinion of counsel satisfactory to it that such transfer does not require registration under that Act. Unless extended as hereinafter provided, this Warrant will be void after 3:00 p.m. Eastern Standard or Daylight Savings Time on December 31, 2002. THIS CERTIFIES THAT, for the value received Charles J. Scimeca, a Florida resident whose social security number is ###-##-#### and who has a mailing address at c/o Coast to Coast Realty Group, Inc., 8001 DeSoto Woods Drive; Sarasota, Florida 34243, or registered assigns (the "Holder"), is entitled to subscribe for and purchase from Equity Growth Systems, inc., incorporated under the laws of the State of Delaware (the "Company"), at any time from the date hereof until 3:00 p.m. Eastern Standard or Daylight Savings Time on December 31, 2000, at a price of $0.02 per share, up to 200,000 fully paid and non-assessable shares of the Company's common stock, $0.001 par value (the "Holder's Shares"). TERMS: 1. Form of Exercise This Warrant may be exercised by the holder hereof, in whole or in part (but not as to a fractional Warrant or share of Common Stock), by the surrender of this Warrant properly endorsed, at the principal office of the Company`s transfer agent, Liberty Transfer Co., with a mailing address at Post Office Box 558; Huntington, New York 11743-0558 (or such other office or agency as the Company may designate in writing to the Warrant holder, at the address of such holder appearing on the books of the Company), and payment to it, for the account of the Company, by cash, certified check or bank draft, of the purchase price for the Holder's Shares to be purchased. The Company agrees that the Holder's Shares so purchased shall be issued to the Warrant holder within a reasonable time, not exceeding 10 days after this Warrant shall have been exercised, and unless this Warrant has expired, a new Warrant representing the number of Holder's Shares, if any, with respect to which this Warrant shall not then have been exercised, shall also be issued to the Warrant holder hereof within such time. 2. Restrictions on Transfer In no event shall this Warrant be sold, transferred, assigned or hypothecated except in conformity with the applicable provisions of the Securities Act of 1933, as amended (the "Act"), or any similar federal statute then in force, and all applicable blue sky laws. 3. Registration Requirements (a) The holder of this Warrant, by acceptance hereof, agrees that, prior to the disposition of any Holder's Shares purchased upon the exercise hereof, under circumstances that might require registration of such Holder's Shares under the Act, or any similar federal statute then in force, such holder will give written notice to the Company expressing such holder's intention of effecting such disposition, and describing briefly such holder's intention as to the disposition to be made of Holder's Shares issued upon exercise hereof. 158 (b) Promptly upon receiving such notice, the Company shall present copies thereof to its counsel and the provisions of the following subdivisions shall apply: (i) If, in the opinion of such counsel, the proposed disposition does not require registration under the Act or qualification pursuant to Regulation A promulgated under the Act, or any similar federal statute then in force, of the Holder's Shares issuable or issued upon the exercise of this Warrant, the Company shall, as promptly as practicable, notify the holder hereof of such opinion, whereupon such holder shall be entitled to dispose of such Holder's Shares issued upon the exercise hereof, all in accordance with the terms of the notice delivered by such holder to the Company. (ii) If, in the opinion of such counsel, such proposed disposition requires such registration or qualification under the Act, or similar federal statute then in effect, of the Holder's Shares issuable or issued upon the exercise of this Warrant, then the Holder may not engage in any transactions except in compliance with all applicable laws. 4. Indemnification The Company agrees to indemnify and hold harmless the holder of this Warrant, or the Holder's Shares issuable or issued upon the exercise hereof, from and against any claims and liabilities caused by any untrue statement of a material fact, or omission to state a material fact required to be stated, in any such registration statement, prospectus, notification or offering circular under Regulation A, except insofar as such claims or liabilities are caused by any such untrue statement or omission based on information furnished in writing to the Company by such holder, or by any other such holder affiliated with the holder who seeks indemnification, as to which the holder hereof, by acceptance hereof, agrees to indemnify and hold harmless the Company. 5. Company's Covenants The Company covenants and agrees that all Holder's Shares that may be issued upon the exercise of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issue thereof (other than taxes relating to any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that, during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient quantity of its Holder's Shares and its Common Stock to provide for the exercise of this Warrant. 6. Definitions As used herein, the term "Common Stock" shall mean and include the Company's Common Stock authorized on the date hereof and shall also include any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding-up of the Company; provided, however, that the shares purchasable pursuant to this Warrant shall include only shares of the such class referred to in the first paragraph hereof designated in the Company's Articles of Incorporation as Common Stock on the date of the original issue of the Warrants, or, in case of any reorganization, reclassification, consolidation, merger or sale of assets of the character referred to in Paragraph 6 hereof, the Common Stock or assets provided for in such Paragraph. 159 7. Exchange This Warrant is exchangeable, upon its surrender by the registered holder at such office or agency of the Company as may be designated by the Company, for new Warrants of like tenor, representing, in the aggregate, the right to subscribe for and purchase hereunder, each of such new Warrants to represent the right to subscribe for and purchase such number of Holder's Shares as shall be designated by the registered holder at the time of such surrender. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of any such loss, theft or destruction, upon delivery of a bond of indemnity satisfactory to the Company, or, in the case of such mutilation, upon surrender or cancellation of this Warrant, the Company will issue to the registered holder a new Warrant of like tenor, in lieu of this Warrant, representing the right to subscribe for and purchase the number of Holder's Shares that may be subscribed for and purchased hereunder. Nothing herein is intended to authorize the transfer of this Warrant except as permitted under Paragraph 2. 8. Holder's Covenants Every holder hereof, by accepting the same, agrees with any subsequent holder hereof and with the Company that this Warrant and all rights hereunder are issued and shall be held subject to all of the terms, conditions, limitations and provisions set forth in this Warrant, and further agrees that the Company and its transfer agent may deem and treat the registered holder of this Warrant as the absolute owner hereof for all purposes and shall not be affected by any notice to the contrary. 9. Notices All notices required hereunder shall be given by certified mail, return receipt requested, postage prepaid. If given by the holder hereof, such notice should be addressed to the Company in care of its secretary and general counsel, G. Richard Chamberlin, Esquire, 1941 Southeast 51st Terrace, Suite 800; Ocala, Florida 34471, or such other address as the Company may designate in writing to the holder hereof; and if given by the Company, such notice should be addressed to the holder at the address of the holder shown on the books of the Company. 10. Governing Law The validity, construction and enforcement of this Warrant shall be governed by the laws of the State of Delaware and jurisdiction is hereby vested in the Courts of said State in the event of the institution of any legal action under this Warrant. * * * IN WITNESS WHEREOF, Equity Growth Systems, inc. has caused this Warrant to be signed by its duly authorized officers under its corporate seal, to be dated December___, 1998. Equity Growth Systems, inc. By: _______________________ Charles J. Scimeca, President Attest: _______________________ G. Richard Chamberlin, Esquire Secretary & General Counsel (Corporate Seal) 160 Equity Growth Systems, inc. Holder's Shares Purchase Warrant EXERCISE FORM Date: _________ ___, ____ The Undersigned hereby irrevocably elects to exercise the subject Warrant to the extent of purchasing ___ Holder's Shares and hereby makes payment of $______, the actual exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Please type or print in block letters --------------------- (Name) -------------------------------- -------------------------------- (Address) * * * Signature: _______________________ NOTICE: The signatures to this partial assignment of Warrant must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL EXCHANGE OR BY A COMMERCIAL BANK OR A TRUST COMPANY! 161 ASSIGNMENT FORM FOR VALUE RECEIVED, ____________ hereby sells, assigns and transfer unto: (Please type or print in block letters) -------------------- (Name) -------------------------------- -------------------------------- (Address) the right to purchase Holder's Shares represented by this Warrant to the extent of ___ Holder's Shares to which the within Warrant relates, and does hereby irrevocably constitute and appoint ________________ attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Dated: _____________ ___, _____ Signature: _______________________ NOTICE: The signatures to this partial assignment of Warrant must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL EXCHANGE OR BY A COMMERCIAL BANK OR A TRUST COMPANY! 162 EX-99.12 8 EXHIBIT 99.12 WRITTEN CONSENT IN LIEU OF SPECIAL MEETING OF BOARD OF DIRECTORS The Undersigned, being the sole members of the board of directors of Equity Growth Systems, inc., a publicly held Delaware corporation with a class of securities registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and with information thereon, including copies of its current articles of incorporation and bylaws publicly available on the Securities and Exchange Commission's Internet web site through the EDGAR system (the "Corporation"), pursuant to authority granted under Section Sections 141(f) or 228 of the Delaware General Corporation Law, and as permitted by the Corporation's constituent instruments, hereby take the following actions and adopt the following resolutions: WITNESSETH: RESOLVED, that the following persons are hereby elected, effective immediately to serve as members of the Corporation's Board of Directors, to serve in such positions starting on the first business day following the date of this instrument until their successors assume their office immediately following the next annual meeting of the Corporation's stockholders, or until their resignations are earlier accepted: Name Edward Granville-Smith * Charles J. Scimeca * Anthony Q. Joffe Penny Field G. Richard Chamberlin, and be it FURTHER - ------ Re-elected. RESOLVED, that Leonard Miles Tucker, a resident of Boca Raton, Florida, be authorized to open financial accounts at banks, savings and loan associations and securities brokerage firms, on behalf of the Corporation, and that he be designated as the appropriate signatory for the Corporation on any such accounts, and be it FURTHER RESOLVED, that the Corporation transfer all funds and securities currently held in financial accounts into accounts established by Mr. Tucker pursuant to authorization of this instrument. IN WITNESS WHEREOF, the undersigned have caused this instrument to be executed, effective as of the 6th day of November, 1998. Equity Growth Systems, inc. A Delaware Corporation ------------------------------ Edward Granville-Smith Director ------------------------------ Charles J. Scimeca Director 163 EX-99.13 9 EXHIBIT 99.13 MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS FOR NOVEMBER 27, 1998 Equity Growth Systems, inc. A publicly held Delaware corporation Minutes of Special Meeting of Board of Directors A special meeting of the Board of Directors for Equity Growth Systems, inc. (the "Board" and the "Company," respectively), was held by telephone conference on November 27, 1998, at 10:30 A.M., after provision of notice to all members by telephone and facsimile transmission. A copy of such notice is appended hereto as exhibit "A". All exhibits were provided to the participants by facsimile transmission. The following Directors were present at the telephone conference meeting held on November 27, 1998: Mr. Scimeca, Mr. Joffe, Ms. Field, Mr. Chamberlin. The following Directors were absent: Mr. Edward "Ted" Granville-Smith. Unable to attend for health reasons. The meeting was called for the following purposes: 1) ratification of agreement dated May 6, 1998 for service rendered by Carrington Capital Corporation; and 2) the approval of subscription agreements and direction to General Counsel to issue opinion letters for transfer of stock upon payment for stock by each subscriber; and 3) authorization to Yankee Companies and certain directors to compromise certain debts and liabilities of the Company; and 4) authorization for the transfer of 50,000 shares of the company's common stock to the Yankee Companies for reimbursement for stock transferred by the Calvo Family Spendthrift Trust to Carrington Capital Corporation, for the benefit of the Company. 1. On May 6, 1998, the Company entered an agreement with Carrington Capital Corporation for services agreeing to transfer 50,000 shares of .01 common stock as follows: 25,000 shares as of May 6, 1998, and an additional 25,000 shares once trading of the shares commenced on the OTCBB. The stock began trading on November 18, 1998. This agreement should be ratified by the Board of Directors. Agreement is attached as Exhibit "B" 2. At Mr Granville-Smith's request, The Yankee Companies, Inc, formed a small investment group (compromised of Yankee and persons associated therewith), which entered into a series of subscription agreements with the Corporation designed to provide emergency capital required to discharge current obligations. Signed copies for which are attached hereto in the composite Exhibit "C". 3. Numerous individuals and entities claim certain compensation for services rendered or claim to be otherwise creditors of the Company, a list of whom is attached and marked Exhibit "D". The Company President has requested that the Board authorize The Yankee Companies, Inc., to compromise the debts listed on Exhibit "D" except for the debt with William A. Calvo, III who is a principal with The Yankee Companies, Inc and who has indicated to the Company President that a conflict of interest exists only as to his own claim for fees. The Company President requests that the Board of Directors authorize him and Director Tony Joffe and Director Penny Fields to negotiate on behalf of the Company any compromise with Mr. Calvo. 164 4. Earlier this year, at Mr Granville-Smith's request, the Calvo Family Spendthrift Trust transferred to Carrington Capital Corporation 50,000 shares of privately owned stock in the Company as an enticement for Carrington to participate with the Company. The newly elected President has requested the Company reimburse the Yankee Companies, Inc., with the issuance of 50,000 shares of Common Stock. Mr. Chamberlin was elected by the members participating to act as the Chairman of the meeting and also acted as secretary, and after discussions and due procedures, the Board (except for Mr. Granville Smith, who was medically unable to attend) unanimously adopted the following resolutions: 1 Resolved, The agreement dated May 6, 1998, entered with Carrington Capital Corporation for services rendered agreeing to transfer 50,000 shares of .01 common stock as follows: 25,000 shares as of May 6, 1998, and an additional 25,000.00 shares once trading of the shares commenced on the OTCBB is hereby ratified. Furthermore the Transfer Agent is hereby directed to issue to Carrington Capital Corporation the above described shares of the Company's Common Stock. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 2. Resolved, That the Corporation's entry into the Subscription Agreements attached hereto are hereby ratified and that the Board authorizes it's officers to execute any signed or unsigned Subscription Agreement not yet executed but attached hereto except that each Director will refrain from voting for the Subscription Agreement for himself or herself. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 3. The Board hereby directs that the transfer agent issue to the following persons an amount of the Company's Common Stock as follows: Blue Lake Capital Corp. 630,000 Michelle Tucker custodian for Shayna Tucker 108,750 Michelle Tucker custodian for Montana Tucker 108,750 The Yankee Companies 435,000 The Calvo Family Spendthrift Trust 217,500 G. Richard Chamberlin 125,000 Anthony Q. Joffe 62,500 Penny L. Adams Field 62,500 Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 4. Resolved, The Board hereby authorizes the Yankee Companies, Inc., to compromise the debts listed on Exhibit "E, Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 165 5. Resolved, The Board hereby directs that the transfer agent issue to The Yankee Companies 50,000 shares of the Company's Common Stock. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 6. Resolved, that the Corporation's transfer agent place stop transfer notations among its stop transfer records prohibiting any transactions in the subject certificates except in full compliance with the terms of the subject legend evinced by written instructions from the President of the Corporation or a court order provided by the holder; and be it further Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 7. Resolved, that the Corporation's officers and transfer agent be, and they are hereby, authorized, empowered and directed to take all actions either necessary or expedient to accomplish all of the foregoing directives. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ 8. Resolved, that the Corporation's Board of Director's shall have Director's meetings every other alternate Friday at 10:30 A.M. beginning January 8, 1999. In the Month of December the Board shall have a regular monthly meeting on Friday, December 11, 1998 at 10:30 A.M. All meetings will be by conference call unless otherwise specified in a Notice of Director's Meeting. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ Having adopted the foregoing resolutions, upon motion duly made, seconded and unanimously adopted, the Board meeting was terminated. The foregoing, based on our best recollection and notes, constitute the actions taken at such special meeting of the Board, and by our execution of these minutes and initials on each page and under each resolution adopted, we do so confirm, effective as of this ___th day of December, 1998. ------------ G. Richard Chamberlin Chairman and Secretary of the Meeting Director -------------- Charles J. Scimeca Director ------------ Anthony Q. Joffe Director ------------- Penny Field Director 166 Exhibit "A" List of new subscribers for Equity Growth Systems, inc. Subscriber: Shares: Consideration Blue Lake Capital Corp. 630,000 $12,600 Michelle Tucker custodian for Shayna Tucker 108,750 $ 2,750 Michelle Tucker custodian for Montana Tucker 108,750 $ 2,750 The Yankee Companies 435,000 $ 8,700 The Calvo Family Spendthrift Trust 217,500 $ 4,350 The Yankee Companies 50,000 $ * G. Richard Chamberlin 125,000 $ 2,500 Anthony Q. Joffe 62,500 $ 1,250 Penny L. Adams Field 62,500 $ 1,250 Carrington Caital Corporartion 25,000 all of the above shares to be subject to Rule 144 and as such should be properly legended by the stock transfer agent. * Reimbursement for 50,000 shares paid by The Calvo Family Spendthrift Trust to Carrington Capital Corporation for the benefit of the Company. 167 Exhibit "B" List of known outstanding payables for Equity Growth Systems, inc. 1. Liberty Stock Transfer Company $ 7,200.00 2. Leo J. Paul $ 22,500.00 3. Joel Baum, Saul Lipson $ 8,000.00 4. Coutro & Co $ 1,600.00 5. G. Richard Chamberlin, Esq $ 276.27 6. Jerry Spellman $130,000.00 7. William A. Calvo III $ 50,000.00 8. William A. Calvo III $100,000.00 168 EX-99.14 10 EXHIBIT 99.14 MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS FOR DECEMBER 8, 1998 Equity Growth Systems, inc. A publicly held Delaware corporation Minutes of Special Meeting of Board of Directors A special meeting of the Board of Directors for Equity Growth Systems, inc. (the "Board" and the "Company," respectively), was held by telephone conference on December 8, 1998, at 10:30 A.M., after provision of notice to all members by telephone and facsimile transmission. A copy of such notice is appended hereto as exhibit "A". All exhibits were provided to the participants by facsimile transmission. The following Directors were present at the telephone conference meeting held on December 8, 1998: Mr. Scimeca, Mr. Joffe, Ms. Field, Mr. Chamberlin. The following Directors were absent: Mr. Edward "Ted" Granville-Smith. Unable to attend for health reasons. The meeting was called for the following purposes: 1) Adopting, Ratifying, Confirming New By-Laws and Repealing old By-Laws,. Wherefore, It appears by the records of the Corporation that confusion exists as to the By- Laws presently in operation for the Company; Wherefore, It appears that the former Sole Director of the Company, due to illness, is unable clarify the confusion that exists with regard to the By-Laws in operation; Wherefore, it appears that the last By-Laws of record were those By-Laws filed on Form 10- K for the fiscal year ending December 31, 1991, however the directors have reason to believe that the By-laws have been since amended but cannot be located; Mr. Chamberlin was elected by the members participating to act as the Chairman of the meeting and also acted as secretary, and after discussions and due procedures, the Board (except for Mr. Granville Smith, who was medically unable to attend) unanimously adopted the following resolutions: 1 Resolved, That the By-Laws attached herewith and dated December 8, 1998 are hereby adopted, ratified, and confirmed. Furthermore all previous By-Laws, amended or otherwise, are hereby repealed this date Please Initial: Mr. Chamberlin: ___ Mr. Scimeca: ___ Mr. Joffe: ___ Ms. Field: ___ Having adopted the foregoing resolutions, upon motion duly made, seconded and unanimously adopted, the Board meeting was terminated. The foregoing, based on our best recollection and notes, constitute the actions taken at such special meeting of the Board, and by our execution of these minutes and initials on each page and under each resolution adopted, we do so confirm, effective as of this ___th day of December, 1998. ------------ G. Richard Chamberlin Chairman and Secretary of the Meeting Director -------------- Charles J. Scimeca Director ------------ Anthony Q. Joffe Director ------------- Penny Field Director 169 Exhibit "A" Copy of By-Laws dated December 8, 1998. 170 EX-99.15 11 EXHIBIT 99.15 AMENDED NOTICE OF SPECIAL MEETING OF BOARD OF DIRECTORS FOR DECEMBER 8, 1998 Equity Growth Systems, inc. A publicly held Delaware corporation Amended Notice of Special Meeting of Board of Directors By Facsimile Transmission to: Edward Granville-Smith 941-766- 8529 (fax) G. Richard Chamberlin 352-694-9178 (fax) Charles J. Scimeca 941-358-8423 (fax) Anthony Q. Joffe 561-392-6070 (fax) Penny Field 941-435-9359 (fax) A special meeting of the Board of Directors for Equity Growth Systems, inc. (the "Board" and the "Corporation," respectively), will be held by telephone conference on the 8th day of December, 1998, at 10:30 A.M., notice being provided to all members by telephone and facsimile transmission. Exhibits referred to at such meeting will be provided to the participants by facimile transmissionl or by U.S mail or by E-mail. The meeting is required for the following purposes: 1) Adopting, Ratifying, Confirming New By- Laws and Repealing Old By-Laws Please contact G. Richard Chamberlin, Esquire, at (352) 694-6714 to make arrangements to participate. Very truly yours Equity Growth Systems, inc. ------------- G. Richard Chamberlin Secretary 171 EX-99.16 12 EXHIBIT 99.16 MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS PART 1 FOR DECEMBER 11 1998 Equity Growth Systems, inc. A publicly held Delaware corporation Minutes of Special Meeting of Board of Directors A special meeting of the Board of Directors for Equity Growth Systems, inc. (the "Board" and the "Company," respectively), was held by telephone conference on December 11, 1998, at 10:30 A.M., after provision of notice to all members by telephone and facsimile transmission. A copy of such notice is appended hereto as exhibit "A". All exhibits were provided to the participants by facsimile transmission. The following Directors were present at the telephone conference meeting held on December 11, 1998: Mr. Scimeca, Mr. Joffe, Ms. Field, Mr. Chamberlin. The following Directors were absent: Mr. Edward "Ted" Granville-Smith. Unable to attend for health reasons. 1) ratifying and approving option to purchase Company common stock through executed Common Stock Purchase Warrant between the Company and Charles J. Scimeca dated December 9, 1998. 12. Wherefore, It appears by the statements of Charles Scimeca that he has made reasonable expenditures on behalf of the Company and has expended substantial time on behalf of the Company in preparing the 1997 KSB and other documents; 13. Wherefore Mr. Scimeca shall not seek reimbursement for past expenditures or investment in time or assets and by signing this resolution so acknowledge that he waives and all rights, title and interest he may have for any reimbursement for expenses or for time expended on behalf of the Company prior to November 1, 1998. 14. Wherefore, Mr. Scimeca is interested in purchasing 200,000 shares of Common Stock of the Company for .02 Cents per share; Mr. Chamberlin was elected by the members participating to act as the Chairman of the meeting and also acted as secretary, and after discussions and due procedures, : 1 Resolved, That the Common Stock Purchase Agreement attached hereto and made apart hereof and marked Exhibit "B" between Charles J. Scimeca and the Company dated December 9, 1998 is hereby adopted, ratified, and confirmed and that Mr. Scimeca shall have the right to purchase 200,000 shares of the Company's common stock for .02 per share on or before 3:00 P.M., December 31, 2000. Please Initial: Mr. Chamberlin: ___ Mr. Joffe: ___ Ms. Field: ___ 2. Resolved, The Board hereby directs that at the appropriate time of exercise , the transfer agent issue to The Yankee Companies 50,000 shares of the Company's Common Stock. And at the appropriate time, the Corporation's transfer agent place stop transfer notations among its stop transfer records prohibiting any transactions in the subject certificates except in full compliance with the terms of the subject legend evinced by written instructions from the President and Secretary of the Corporation or a court order provided by the holder; and be it further Please Initial: Mr. Chamberlin: ___ Mr. Joffe: ___ Ms. Field: ___ 172 3. Resolved, that the Corporation's officers and transfer agent be, and they are hereby, authorized, empowered and directed to take all actions either necessary or expedient to accomplish all of the foregoing directives. Please Initial: Mr. Chamberlin: ___ Mr. Joffe: ___ Ms. Field: ___ Having adopted the foregoing resolutions, upon motion duly made, seconded and unanimously adopted, the Board meeting was terminated. The foregoing, based on our best recollection and notes, constitute the actions taken at such special meeting of the Board, and by our execution of these minutes and initials on each page and under each resolution adopted, we do so confirm, effective as of this ___th day of December, 1998. ------------ G. Richard Chamberlin Chairman and Secretary of the Meeting Director -------------- Charles J. Scimeca (For purposes of waiving further claims of Back pay or back expenditures but otherwise abstains from voting for reason of conflict of interest. Director --------- Anthony Q. Joffe Director ------------- Penny Field Director 173 Exhibit "A" Copy of By-Laws dated December 8, 1998. 174 EX-99.17 13 EXHIBIT 99.17 NOTICE OF SPECIAL MEETING OF BOARD OF DIRECTORS FOR DECEMBER 11, 1998 Equity Growth Systems, inc. A publicly held Delaware corporation Notice of Special Meeting of Board of Directors By Facsimile Transmission to: Edward Granville-Smith 941-766- 8529 (fax) G. Richard Chamberlin 352-694-9178 (fax) Charles J. Scimeca 941-358-8423 (fax) Anthony Q. Joffe 561-392-6070 (fax) Penny Field 941-435-9359 (fax) A special meeting of the Board of Directors for Equity Growth Systems, inc. (the "Board" and the "Corporation," respectively), will be held by telephone conference on the 11th day of December, 1998, at 10:30 A.M., notice being provided to all members by telephone and facsimile transmission. Exhibits referred to at such meeting will be provided to the participants by facimile transmissionl or by U.S mail or by E-mail. The meeting is required for the following purposes: 1) issuance of option to purchase 200,000 shares of Company Common Stock to Charles Schimeca Please contact G. Richard Chamberlin, Esquire, at (352) 694-6714 to make arrangements to participate. Dated: December 8, 1998. Very truly yours Equity Growth Systems, inc. ------------- G. Richard Chamberlin Secretary 175 EX-99.18 14 EXHIBIT 99.18 MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS PART 2 FOR DECEMBER 11, 1998 Equity Growth Systems, inc. A publicly held Delaware corporation Minutes of Special Meeting of Board of Directors A special meeting of the Board of Directors for Equity Growth Systems, inc. (the "Board" and the "Company," respectively), was held by telephone conference on December 11, 1998, at 10:30 A.M., after provision of notice to all members by telephone and facsimile transmission. A copy of such notice is appended hereto as exhibit "A". All exhibits were provided to the participants by facsimile transmission. The following Directors were present at the telephone conference meeting held on December 11, 1998: Mr. Scimeca, Mr. Joffe, Ms. Field, Mr. Chamberlin. The following Directors were absent: Mr. Edward "Ted" Granville-Smith. Unable to attend for health reasons. 1) election of officers. Wherefore, It appears that the Board has not formerly elected officers, and it is necessary for officers to be elected. Wherefore the President of the Company is presently incapacitated and unable to function as an officer for the Company. Mr. Chamberlin was elected by the members participating to act as the Chairman of the meeting and also acted as secretary, and after discussions and due procedures, : 1 Resolved, That the following persons are elected as the sole officers for the Company: Acting President Charles J. Scimeca Acting Secretary G. Richard Chamberlin Please Initial: Mr. Chamberlin: ___ Mr. Scimeca, Mr. Joffe: ___ Ms. Field: ___ 2. Resolved, That Mr. Edward "Ted" Granville Smith, Jr., is hereby removed as an officer of the Company. The Board will consider is re-election as an officer atl such time his health improves and he indicates to the Board his desire to serve as an officer of the Company. Mr. Don Homan is r hereby removed as an officer of the Company. The Board will reconsider his re-election should Mr Homan indicate a desire to serve as an officer of the Company. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca, Mr. Joffe: ___ Ms. Field: ___ 176 3. Resolved, that all official acts taken by Charles J. Scimeca as acting president or as president of the Company since November 7, 1998 to present and all official acts taken by G. Richard Chamberlin as acting secretary or as secretary of the Company since November 7, 1998 to present, are hereby ratified and approved and the powers of each officer shall relate back to each offical act by said officer. Please Initial: Mr. Chamberlin: ___ Mr. Scimeca, Mr. Joffe: ___ Ms. Field: ___ The foregoing, based on our best recollection and notes, constitute the actions taken at such special meeting of the Board, and by our execution of these minutes and initials on each page and under each resolution adopted, we do so confirm, effective as of this ___th day of December, 1998. ------------ G. Richard Chamberlin Chairman and Secretary of the Meeting Director -------------- Charles J. Scimeca --------- Anthony Q. Joffe Director ------------- Penny Field Director 177 Exhibit "A" Copy of By-Laws dated December 8, 1998. 178 EX-27 15 FDS --
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 6 0 159,631 0 0 159,637 0 0 1,577,834 372,977 0 0 0 41,161 2,891,645 1,577,834 121,509 121,509 0 141,677 0 0 0 (20,168) 0 (20,168) 0 0 0 (20,168) (.005) (.005)
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