SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, ~~D.C.~~DC 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. ) __)

Filed by the ~~Registrant /X/~~ registrant x

Filed by a ~~Party~~party other than the ~~Registrant / /~~ registrant ¨

Check the appropriate box: ~~/X/~~

¨ Preliminary ~~Proxy Statement / /~~proxy statement

¨ Confidential, for ~~Use~~use of the Commission ~~Only~~only (as permitted by Rule 14a-6(e)(2)) ~~/ /~~

x Definitive ~~Proxy Statement / /~~proxy statement

¨ Definitive ~~Additional Materials / /~~additional materials

¨ Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12 B.H.I.T. Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- (Namematerial under Rule 14a-12

BANYAN RAIL SERVICES INC.

(Name of Registrant as Specified In Its Charter)

________________________

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of ~~Filing Fee~~filing fee (Check the appropriate box): ~~/X/~~

x No fee ~~required / /~~required.

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1)

(1) Title of each class of securities to which transaction applies: ~~------------------------------------------------------------------------- 2)~~

________________________

(2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------- 5) Total fee paid: ------------------------------------------------------------------------- / /

________________________

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined.)

(4)

Proposed maximum aggregate value of transaction:

(5)

Total Fee Paid:

¨ Fee paid previously with preliminary materials. ~~/ /~~

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the ~~Form~~form or ~~Schedule~~schedule and the date of its filing. 1)

(1) Amount ~~Previously Paid: ---------------------------------------------------------------------------- 2)~~previously paid:

(2) Form, Schedule or Registration Statement No.: ~~---------------------------------------------------------------------------- 3)~~

(3) Filing ~~Party: ---------------------------------------------------------------------------- 4)~~party:

(4) Date ~~Filed: ----------------------------------------------------------------------------~~ ~~NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS OF B.H.I.T.~~filed:

May 26, 2010

Dear Fellow Stockholder:

You are cordially invited to attend the 2010 annual meeting of stockholders of Banyan Rail Services Inc. on Thursday, July 1, 2010, starting at 11:00 A.M. local time at 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431.

As more fully described in the attached notice of annual meeting and the accompanying proxy statement, the principal business to be addressed at the meeting is the election of directors, the approval of our 2010 Stock Option and Award Plan and the ratification of our independent auditor for 2010. In addition, our management will report on our results and will be available to respond to your questions.

Your vote is important to us. Whether or not you plan to attend the annual meeting, please return the enclosed proxy card as soon as possible to ensure your representation at the meeting. You may choose to vote in person at the annual meeting even if you have returned a proxy card.

On behalf of the directors and management of Banyan, I would like to thank you for your support and confidence and look forward to seeing you at the meeting.

Sincerely,

Gary O. Marino

Chairman of the Board, President and

Chief Executive Officer

BANYAN RAIL SERVICES INC. ~~FORMERLY BANYAN HOTEL INVESTMENT FUND TO BE HELD JULY __, 2000~~

2255 Glades Road

Suite 342-W

Boca Raton, Florida 33431

Notice Of Annual Meeting Of Stockholders

To Be Held On July 1, 2010

To the Stockholders of ~~B.H.I.T.~~Banyan Rail Services Inc. ~~NOTICE IS HEREBY GIVEN that a Special Meeting in lieu of the~~:

The Annual Meeting of the Stockholders of ~~B.H.I.T.~~Banyan Rail Services Inc. ~~(the "Company")~~, a Delaware corporation, will be held on Thursday, July ~~__, 2000,~~1, 2010, at ~~10:~~2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431, beginning at 11:00 A.M., local time, ~~at __________________for~~for the following purposes: ~~1. To elect four (4) directors to hold office~~

To elect four directors to serve for a one year term until the next annual meeting or until their successors are duly elected and qualified;

To approve our 2010 Stock Option and Award Plan;

To ratify the appointment of Daszkal Bolton LLP as our independent auditor for the fiscal year ending December 31, 2010; and

To transact such other business as may properly come before the meeting or any adjournment of the meeting.

These items of business are more fully described in the next Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified; 2. To consider and vote upon a proposal to amend the Company's Certificate of Incorporation to eliminate provisions relating to the Company's former status as a Real Estate Investment Trust ("REIT"), and which will limit the number of shares of the Company's Common Stock which may be acquired by any Stockholder of the Company; 3. To consider and vote upon a proposal to amend and restate the By-Laws of the Company to eliminate provisions relating to the Company's former status as a REIT; 4. To consider and vote upon a proposal to sell the Company's 50% interest in Metro Franchising Commissary, LLC; to Harvey Polly, President and CEO of the Company; and 5. To transact such other business as may properly come before the Meeting or any adjournment or adjournments thereof. proxy statement accompanying this notice.

Only stockholders of record at the close of business on ~~June __, 2000~~May 6, 2010, are entitled to vote at the ~~Meeting~~annual meeting.

All stockholders are cordially invited to attend the meeting in person. However, to ensure your representation at the meeting, please sign and return the enclosed proxy card as promptly as possible in the postage prepaid envelope enclosed for your convenience. Any stockholder attending the meeting may vote in person even if he or any adjournments thereof. IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING: PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY. she has returned a proxy card.

By Order of the Board of Directors, ~~Celia Zisfein~~

C. Lawrence Rutstein

Vice President of Administration and Secretary ~~June __, 2000~~

BANYAN RAIL SERVICES INC.

PROXY STATEMENT B.H.I.T. INC. FORMERLY BANYAN HOTEL INVESTMENT FUND SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY __, 2000

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on July 1, 2010:

This proxy statement and our annual report for the fiscal year ending December 31, 2009 are available on our website at www.banyanrail.com.

GENERAL INFORMATION

This proxy statement is furnished in connection with the solicitation of proxies by ~~the Board~~our board of ~~Directors of B.H.I.T. Inc. (the "Company") for use~~directors to be used at the 2010 Annual Meeting of Stockholders to be held on Thursday, July ~~__, 2000, at __________, New York, New York, including~~1, 2010, and any ~~adjournment~~postponements or adjournments ~~thereof (the "Meeting"), for~~of the ~~purposes set forth in the accompanying Notice of Meeting. The Company has not had a meeting of Stockholders since 1993. Management intends to mail this~~meeting.

This proxy statement and the accompanying ~~form of~~chairman’s letter, notice and proxy card, together with our annual report on Form 10-K for the year ended December 31, 2009, are being sent to our stockholders beginning on or about ~~June __, 2000. Proxies in~~May 28, 2010.

QUESTIONS AND ANSWERS

Q:	When and where is the annual meeting?

A:	Our 2010 Annual Meeting of Stockholders will be held on Thursday, July 1, 2010, at 11:00 A.M. local time, at 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431.

Q:	What am I voting on?

A:	Proposal 1 – Election of four directors — Paul S. Dennis, Gary O. Marino, Bennett Marks and Donald D. Redfearn,

Proposal 2 – To approve our 2010 Stock Option and Award Plan, and

Proposal 3 – To ratify the appointment of Daszkal Bolton LLP as our independent auditor for the fiscal year ending December 31, 2010.

If a proposal other than the ~~accompanying form, duly executed~~listed proposals is presented at the annual meeting, your signed proxy card gives authority to C. Lawrence Rutstein or Diane T. Starzee to vote on any additional proposal.

Q:	Who is entitled to vote?

A:	Our record date is May 6, 2010. Only holders of our common stock as of the close of business on May 6, 2010 are entitled to vote at the annual meeting. Each share of common stock is entitled to one vote.

Q:	How do I vote?

A:	Sign and date each proxy card you receive and return it in the prepaid envelope. You have the right to revoke your proxy any time before the meeting by:

notifying our secretary,

voting in person, or

returning a later dated proxy.

If you return your signed proxy card, but do not indicate your voting preferences, Mr. Rutstein or Ms. Starzee will vote FOR the director nominees, FOR the approval of our 2010 Stock Option and ~~returned to~~Award Plan and FOR the ~~management~~ratification of the ~~Company~~appointment of Daszkal Bolton LLP as our independent auditor for the fiscal year ending December 31, 2010 on your behalf .

Q:	Who will count the vote?

A:	Representatives of Computershare, our transfer agent, will tabulate the votes. Mr. Rutstein will be responsible for reviewing the vote count as election inspector.

Q:	What shares are included on the proxy card and what does it mean if I receive more than one proxy card?

The number of shares printed on your proxy card(s) represents all your shares. Receipt of more than one proxy card means that your shares are registered differently and are in more than one account. Sign and return all proxy cards to ensure that all your shares are voted. The number of shares printed on your proxy card(s) has been adjusted for our 1-for-10 reverse stock split effectuated on April 7, 2010.

Q:	What constitutes a quorum?

As of the record date, 3,017,791 shares of our common stock were outstanding. A majority of the outstanding shares of our common stock, present or represented by proxy, constitutes a quorum for adopting a proposal at the annual meeting. If you submit a properly executed proxy card, you will be considered part of the quorum. If you are present or represented by proxy at the annual meeting and you abstain, your abstention will have the same effect as a vote against the approval our 2010 Stock Option and Award Plan (Proposal 2). “Broker non-votes” will not be part of the voting power present, but will be counted to determine whether or not a quorum is present. A “broker non-vote” occurs when a broker holding stock in “street name” indicates on the proxy that it does not have discretionary authority to vote on a particular matter.

Q:	Who can attend the annual meeting?

A:	All stockholders as of the record date, May 6, 2010, can attend.

Q:	What percentage of stock are the directors and officers entitled to vote at the annual meeting?

A:	Together, they own 981,134 shares of our common stock, or 32.5% of the stock entitled to vote at the annual meeting. (See page 20 for more details.)

Q:	Who are our largest stockholders?

A:	Paul S. Dennis, a director, beneficially owns 364,792 shares of our common stock, or 12.1%, as of the record date and Gary O. Marino, our chairman, president and chief executive officer, beneficially owns 212,728 shares of common stock, or 7.0% as of the record date.

Q:	When is a stockholder proposal due for our next annual meeting?

In order to be considered at next year’s annual meeting, stockholder proposals must be submitted in writing by January 26, 2011, to C. Lawrence Rutstein, Vice President of Administration, Banyan Rail Services Inc., 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431, and must be in accordance with the provisions of Rule 14a-8 under the Securities Exchange Act of 1934 (the Exchange Act). (See page 22 for more details.)

Q:	How do I communicate with the board of directors?

A:	Stockholders may send communications to our board to C. Lawrence Rutstein, Vice President of Administration, Banyan Rail Services Inc., 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431. (See page 22 for more details.)

Q:	How do I nominate someone to be a director?

A stockholder may recommend any person as a nominee for director by writing to our chief executive officer at Banyan Rail Services Inc., 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431. Recommendations for next year’s annual meeting must be received no earlier than April 2, 2011, and no later than May 2, 2011, and must be in accordance with the requirements of our nomination policy. (See page 9 for more details.)

Q:	Who pays for the solicitation expenses?

The expense of soliciting proxies, including the cost of preparing, printing and mailing the proxy materials, will be paid by us. In addition to solicitation of proxies by mail, solicitation may be made personally, by telephone and by facsimile, and we may pay persons holding shares for others their expenses for sending proxy materials to their principals. No solicitation will be made other than by our directors, officers and employees.

PROPOSAL 1 — ELECTION OF DIRECTORS

At this annual meeting, four directors are to be elected to hold office until the next annual meeting of stockholders or until their respective successors are duly elected and ~~not revoked, will~~qualified. Nominees for election this year are Paul S. Dennis, Gary O. Marino, Bennett Marks and Donald D. Redfearn. Each has consented to serve until the next annual meeting or until his successor is duly elected and qualified.

If any director to be elected is unable to stand for re-election, the board may, by resolution, provide for a lesser number of directors or designate a substitute. In the latter event, shares represented by proxies may be voted atfor a substitute director. We need the ~~Meeting. Any proxy given pursuant to such solicitation may be revoked by the stockholder at any time prior to the voting~~affirmative vote of the proxy by a subsequently dated proxy, by written notification to the Secretary of the Company, or by personally withdrawing the proxy at the Meeting and voting in person. The address and telephone number of the principal executive offices of the Company are: 875 Avenue of the Americas, Suite 1808 New York, New York 10001 (212) 736-7880 OUTSTANDING STOCK AND VOTING RIGHTS Only stockholders of record at the close of business on June __, 2000 (the "Record Date") are entitled to notice of and to vote at the Meeting. As of the Record Date, there were issued and outstanding 12,403,565 shares of the Company's common stock, $.01 par value per share (the "Common Stock"), the Company's only class of voting securities. Each share entitles the holder to one vote on each matter submitted to a vote at the Meeting. 1 THE SALE OF THE COMPANY'S 50% INTEREST IN METRO FRANCHISING COMMISSARY, LLC o Assets to be Sold. The Company will sell (the "Sale") its 50% interest (the "Franchise Interest") in Metro Franchising Commissary, LLC ("Metro"). o Purchaser. The purchaser of the Franchise Interest is Harvey Polly, President and CEO of the Company. o Sale Price. The Company will sell the Franchise Interest for $1,000,000 payable in cash at the closing of the Sale. The Board of Directors believes the sale price is fair. Since the Franchise Interest is being sold to Mr. Polly, who is President and CEO of the Company, the Company retained an independent appraiser who has delivered an opinion indicating that it believed the sale price was fair. o Reasons for the Sale. Metro was only successful in developing seven of the originally scheduled sixteen retail locations and is only marginally profitable. Further development of Metro would require a substantial additional capital. Further, Arrowhead Holdings Corporation, a diversified holding company, has entered into an agreement with Harvey Polly and Sheltering Palms Foundation to purchase approximately 39% of the total of the outstanding Common Stock of the Company and has made the Sale of the Franchise Interest a condition of the closing of the purchase of such shares. As more fully set forth herein, the Board of Directors believes that it is in the best interest of the stockholders to sell the Franchise Interest to Mr. Polly to enable Arrowhead Holdings Corporation to purchase such stock. o Use of Proceeds. The Company will utilize the proceeds from the Sale of the Franchise Interest for general corporate purposes. None of the proceeds will be distributed to the stockholders of the Company. o Regulatory Matters. The Company is not aware of any regulatory or governmental approvals required to consummate the Sale for the Company or for Mr. Polly. o Accounting Treatment. The Sale will be accounted for as a sale of assets, in accordance with generally accepted accounting principles. The Company will recognize a gain for book purposes of approximately $70,000 based upon the excess of net proceeds to be received over the book value of the net assets sold. o U.S. Tax Consequences. The Company will recognize a gain on the Sale of approximately $70,000, which gain will be offset by the Company's net operating loss carryforwards. Accordingly, the Sale will have no tax effect on the Company, nor will the Sale have any tax consequence for stockholders of the Company. o Appraisal Rights. Under Delaware Law, Company stockholders are not entitled to dissenters' rights of appraisal with respect to the Sale. o Questions. Stockholders who have questions regarding the Sale or any of the other matters addressed in this proxy statement should call Mr. Harvey Polly, the Company's President and Chief Executive Officer of the Company at (212) 736-7880. The Company's mailing address is 875 Avenue of the Americas, Suite 1808, New York, New York 10001. See "APPROVAL OF THE SALE OF THE COMPANY'S 50% INTEREST IN METRO FRANCHISING COMMISSARY, LLC" herein for a more detailed discussion of this transaction. 2 ~~VOTING PROCEDURES The Directors will be elected by the affirmative vote~~holders of a plurality of the shares of ~~Common~~our common stock present or represented by proxy at the annual meeting to elect directors.

The board of directors recommends that you vote FOR Mr. Dennis, Mr. Marino, Mr. Marks and Mr. Redfearn.

BOARD OF DIRECTORS

Name	Age	Position	Director Since
Gary O. Marino	65	Chairman, President and Chief Executive Officer	2007
Bennett Marks	61	Director	2008
Paul S. Dennis	71	Director	2007
Donald D. Redfearn	58	Director	2010

Gary O. Marino joined our board in January 2007, was appointed chairman in January 2008 and president and chief executive officer in November 2008. Mr. Marino has served as chairman, president and CEO of Patriot Rail Corp., an owner and operator of short line and regional railroads, since 2005, and formerly held the same positions at RailAmerica, Inc. (NYSE: RRA), a company he founded in 1985, until his retirement in 2004. From 1984 until 1993, Mr. Marino served as chairman, president and CEO of Boca Raton Capital Corporation, a publicly owned venture capital investment company. Prior to that he spent more than ten years in commercial banking in New York as a senior loan officer and for more than five years was also president and CEO of two small business investment companies (SBICs), as well as president of a Florida-based commercial bank. Mr. Marino received his B.A. degree from Colgate University and his M.B.A. from Fordham University. From 1966 to 1969, he served as an officer of the United States Army Ordnance Corps. He has also served on the board of directors of the American Association of Railroads. We believe Mr. Marino is well qualified to serve on the board due to his extensive knowledge of the railroad industry as well as his investment banking experience.

Bennett Marks joined the board in November 2008 and served as our vice president and chief financial officer from November 2008 to May 2010. Mr. Marks has been executive vice president and CFO of Patriot Rail Corp., an owner and operator of short line and regional railroads, since 2005. Mr. Marks has served as EVP and CFO of six publicly-held and privately-owned companies in the transportation, healthcare, manufacturing, distribution and telecommunications industries. While CFO at RailAmerica, Inc. (NYSE: RRA), he developed and implemented the financial framework of the company as revenues grew from $130 million to $450 million. Mr. Marks has more than twenty years of experience in public accounting, including ten years as an audit/client services partner with KPMG where he was an Associate SEC Reviewing Partner and the Administrative Partner in Charge of the West Palm Beach office. A licensed CPA in Florida and New York, he has held leadership positions in a variety of community, charitable, and professional organizations. Mr. Marks received his degree in accounting from New York University. We believe Mr. Marks is well qualified to serve on the board due to his extensive finance and accounting knowledge as well as his experience in the railroad industry.

Paul S. Dennis joined the board in January 2007 and was appointed interim chief financial officer in February 2007 and interim chief executive officer in April 2008. Mr. Dennis stepped down as interim CEO and CFO in November 2008. Mr. Dennis has served as president and CEO of Associated Health Care Management Company, Inc. since 1977. Health Care Management is a Cleveland, Ohio based company that managed eight nursing care facilities and four congregate living facilities. The company has sold all but one of its facilities. Mr. Dennis has also been a director and officer with various companies and business ventures including gaming supply manufacturing and distribution, hardware distribution, pharmaceutical distribution and steel fabricating industries. He is a real estate developer, general contractor, owner and investor. We believe Mr. Dennis is highly qualified to serve on Banyan’s board due to his broad experience as an entrepreneur and CEO.

Donald D. Redfearn joined the board in January 2010. Mr. Redfearn has been the owner of Redfearn Enterprises, LLC, a real estate holding company, since 2007. From 2004 to 2007, he served as president of RailAmerica, Inc. (NYSE: RRA), a railroad holding company, and from 1989 to 2004 he served as executive vice president of RailAmerica. He also served as a director of RailAmerica since its inception in 1986 through 2007. Mr. Redfearn received his B.A. degree in Business Administration from the University of Miami and graduated from the School of Banking of the South at Louisiana State University. Active in local charities, Mr. Redfearn is a member of the United Way Leadership Circle. We believe Mr. Redfearn is highly qualified to serve as a director due to his experience in the railroad industry.

Director Independence

Our board has determined that two of our four directors, Paul S. Dennis and Donald D. Redfearn, are “independent” as defined by NASDAQ Stock Market Listing Rule 5605(a)(2). Although we are not listed for trading on the NASDAQ stock market, we have selected the NASDAQ rules as an appropriate guideline for determining the independence of our board members.

Board Leadership Structure

The board does not have a policy as to whether the roles of our chairman and chief executive officer should be separate. Instead, the board makes this determination based on what best serves Banyan’s needs at any given time. Currently, Mr. Marino holds the positions of chairman and chief executive officer of Banyan and the board does not have a lead independent director. We feel our current structure is appropriate at this time because we are in the early stages of our business and our board only has four members. The board believes that effective board leadership is highly dependent on the experience, skills and personal interaction between persons in leadership roles. Mr. Marino’s extensive knowledge, skills and experience provides vital leadership to Banyan and enables him to set our strategic direction, with significant input from our board, including our two independent directors. As we continue to grow and develop our business and add additional directors as we intend, the board may decide to separate the positions of chairman and chief executive officer or choose a lead independent director in the future.

Role of the Board in Risk Oversight

Although management is responsible for the day-to-day management of the risks that the company faces, our board has broad oversight responsibility for our risk management programs. In this oversight role, the board takes steps to satisfy itself that the risk management processes and risk mitigation strategies designed and implemented by our management team are functioning and effective. Our management team meets regularly to assess any significant or potentially significant operational, financial, legal, regulatory and other risks to the company. Management, including our chief executive officer, who is also a board member, reports on significant or potentially significant risks identified by management for the full board’s consideration and evaluation. In addition, our board consults with outside consultants, such as the company’s legal counsel or accountants, regarding various areas of potential risk and the steps management has taken to minimize these risks.

Attendance of Directors at Meetings

In 2009, the board of directors met six times and acted by written consent five times.

Directors are encouraged to attend the annual meeting of stockholders, either in person or by teleconference. We did not hold an annual meeting last year because we were a shell company without operations prior to our acquisition of The Wood Energy Group.

Director Nominating Process

Our board of directors does not have a nominating committee. Instead, the board believes it is in the best interests of the company to rely on the insight and expertise of all directors in the nominating process.

Our directors will recommend qualified candidates for director to the full board and nominees are subject to approval by a majority of our board members. Nominees are not required to possess specific skills or qualifications; however, nominees are recommended and approved based on various criteria including relevant skills and experience, personal integrity and ability and willingness to devote their time and efforts to Banyan. Qualified nominees are considered without regard to age, race, color, sex, religion, disability or national origin. We do not use a third party to locate or evaluate potential candidates for director.

The board of directors considers nominees recommended by stockholders according to the same criteria. A stockholder desiring to nominate a director for election must deliver a notice to our chief executive officer at our principal executive office. Nominations for next year’s annual meeting must be received no earlier than April 2, 2011, and no later than May 2, 2011. The notice must include as to each person whom the stockholder proposes to nominate for election or re-election as director:

the name, age, business address and residence address of the person,

the principal occupation or employment of the person,

the written consent of the person to being named in the proxy as a nominee and to serving as a director,

the class and number of our shares of stock beneficially owned by the person, and

any other information relating to the person that is required to be disclosed in solicitations for proxies for election of director pursuant to Rule 14a under the Securities Exchange Act of 1934;

and as to the stockholder giving the notice:

the name and record address of the stockholder, and

the class and number of our shares beneficially owned by the stockholder.

We may require any proposed nominee to furnish additional information reasonably required by us to determine the eligibility of the proposed nominee to serve as our director.

Director Compensation

The following table summarizes information with respect to the compensation paid to our directors in 2009. As an executive officer of Banyan, Gary Marino is included in our summary compensation table beginning on page 11 and, therefore, is not included in this table.

Name	Fees Earned or Paid in Cash		Option Awards(1)		All Other Compensation		Total
Paul S. Dennis		—	$	25,000		—	$	25,000
Bennett Marks		—	$	25,000		—	$	25,000
Harvey J. Polly(2)		—		—		—		—

(1)

The fair value of stock options is determined as of the date of grant. We use the Black-Scholes option pricing model to estimate compensation cost for stock option awards. Please see the table regarding the assumptions used in this calculation in Note 14, “Stock-Based Compensation” to the consolidated financial statements in our 10-K filed with the Securities and Exchange Commission on April 15, 2010.

(2)

Mr. Polly resigned as a director on February 1, 2010. Mr. Polly did not receive any stock options or other form of compensation in 2009.

Committees of the Board

We are still in the early stages of our business plan and our board currently has only four members. Because of the small size of our board, our directors have not yet designated audit, nominating or other committees. Instead, these responsibilities are handled by the entire board. Without an audit committee, we have not designated a director as an “audit committee financial expert” as defined by Securities and Exchange Commission (SEC) rules. Although we are pleased with the diverse skills and level of expertise that our directors possess, we intend to add additional directors as our operations grow. Our board plans to form appropriate committees at that time.

Code of Ethics

In March 2004, our board of directors unanimously adopted a code of conduct and ethics that applies to all of our officers, directors and employees, including our principal executive officer and principal financial and principal accounting officer. We will provide a copy of our code without charge upon written request to C. Lawrence Rutstein, Vice President of Administration, 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431.

EXECUTIVE OFFICERS

Name	Age	Position
Gary O. Marino	65	Chairman, President and Chief Executive Officer
Larry Forman	55	Chief Financial Officer
C. Lawrence Rutstein	65	Vice President of Administration and Secretary
Greg Smith	47	President of Wood Energy
Andy C. Lewis	41	Vice President of Wood Energy

* Information for Mr. Marino can be found under “Board of Directors.”

Larry Forman joined us as chief financial officer on May 26, 2010. Mr. Forman served as vice president and corporate controller of Gulfstream International Group, Inc., a publicly owned regional airline from January 2009 until May of 2010. From August 2005 to December 2008 he served as vice president of finance for Dynalco Controls, a subsidiary of Crane Co., a $2.7 billion publicly traded company. From 1982 through 2005 he served as CFO, COO and vice president of finance for several publicly traded and private companies in New York, Washington, D.C. and South Florida. Mr. Forman was a senior auditor for Grant Thornton and Company from 1979 to 1982. Mr. Forman is a certified public accountant and received his bachelor of science in accounting degree from Queens College in New York City.

C. Lawrence Rutstein has served as our vice president of administration and secretary since 2008. He also serves as vice president – contracts and administration for Patriot Rail Corp. Mr. Rutstein has over 40 years of legal and business experience. From 1968 through 1970, Mr. Rutstein practiced securities law and corporate banking for several major Philadelphia law firms. In 1971 to 1972, he served as Assistant Attorney General and Chief Counsel to the Pennsylvania Department of Banking and later in 1972 became the first in-house counsel for Continental Bank. In 1982, Mr. Rutstein founded Parker & Rutstein, a corporate law firm in Philadelphia. In 1989, he led an IPO for Cedar Group, Inc., and served as its CEO until 1991. From 1995 to 2006 Mr. Rutstein has served as a consultant to a number of public and private companies both in Philadelphia and south Florida and has served as an executive, director and entrepreneur with several of them. Mr. Rutstein earned his undergraduate degree from the University of Massachusetts and his law degree from Harvard Law School.

Greg Smith has served as president of our Wood Energy subsidiary since he founded the company in 2001. Mr. Smith has been in the business of railroad tie reclamation and disposal since 1991. He founded Wood Waste Energy and built it into the country’s largest railroad tie recovery service. Wood Waste Energy was the first company to produce railroad tie-derived fuel, with Mr. Smith developing a patented design for processing used ties. He also developed an efficient system for crews to pick up rail ties behind railroad system gangs. He has worked as a contractor for many large railroads, namely BNSF (1997 to 2001); Union Pacific (1991 to present); Norfolk Southern (1994 to 2000); Illinois Central (1997 to 2001); and Kansas City Southern (1998 to 2001). Mr. Smith sold Wood Waste Energy in 1999 and it remains the largest railroad tie recovery company in the U.S. Mr. Smith is a graduate of the University of Kansas.

Andy C. Lewis has served as vice president of our Wood Energy subsidiary since 2001. Mr. Lewis has been managing railroad tie pick-up crews since 1997, and has extensive experience in managing field crew employees, hi-rail boom trucks, tie-cranes, railcars and semi-tractor trailers. He has worked with many of the Class I railroads over the past 12 years as a manager of Wood Waste Energy and as vice president of Wood Energy.

EXECUTIVE COMPENSATION

Executive Officer Compensation Decisions

Mr. Marino, our chairman, president and chief executive officer, generally recommends the compensation for our executive officers and compensation is then approved by the full board, including our independent directors. We do not have a compensation committee. Our board believes a compensation committee is not necessary at this time because our board only has four members, no member of our board is paid a salary for serving as an officer, and executive officer compensation is approved by our full board.

Summary Compensation Table

The following table summarizes the compensation paid by us to our chairman, president and chief executive officer and our other most highly compensated executive officers receiving more than $100,000 annually.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)		All Other Compensation ($)		Total ($)
Gary O. Marino	2009		—		—		—		25,000		25,000
Chairman, President and Chief Executive Officer*	2008		—		—		—		—		—
Greg Smith	2009		194,154		—		—		—		194,154
President of Wood Energy	2008		313,000		—		—		—		313,000
Andy C. Lewis	2009		194,154		—		—		—		194,154
Vice President of Wood Energy	2008		283,222		—		—		—		283,222

Mr. Marino does not receive compensation for service as our chairman, president and chief executive officer. “All other compensation” consists of option awards granted to Mr. Marino for service as a director. Mr. Marino was appointed our chief executive officer in November 2008. The fair value of stock options is determined as of the date of grant. We use the Black-Scholes option pricing model to estimate compensation cost for stock option awards. Please see the table regarding the assumptions used in this calculation in Note 14, “Stock-Based Compensation” to our consolidated financial statements in our 10-K filed with the SEC on April 15, 2010.

Outstanding Equity Awards at December 31, 2009

The following table summarizes information with respect to the stock options held by the executive officers in our summary compensation table as of December 31, 2009.

Name	Number of Underlying Unexercised Options Exercisable		Number of Underlying Unexercised Options Unexercisable		Option Exercise Price		Option Expiration Date
Gary O. Marino		25,000		—	$	3.50		06/01/2014	(1)
		25,000		—	$	3.50		10/23/2010	(2)

(1)	Options vested on June 1, 2009, the date of grant.
(2)	Options vested on October 23, 2007, the date of grant.

PROPOSAL 2 — APPROVAL OF OUR 2010 STOCK OPTION AND AWARD PLAN

Our board of directors has adopted, subject to stockholder approval, our 2010 Stock Option and Award Plan (the plan). The plan was adopted by our board of directors on May 21, 2010. The market price of our common stock as of the close of trading on the record date, May 6, 2010, was $3.50.

Our board believes that the plan is necessary because it enables us to attract, retain and motivate key employees, executive officers and directors and to align their interests with our stockholders. A summary of the basic features of the plan is set forth below. This summary is subject to the specific provisions contained in the full text of the plan attached as Annex A to this proxy statement.

Purpose. The purpose of the plan is to provide additional incentive to attract and retain qualified and competent persons who are key to the company, including our executive officers, key employees and directors and to encourage them to acquire a proprietary and vested interest in our growth and performance to generate increased incentive to contribute to our future success and prosperity, thus enhancing our value for the benefit of our stockholders.

Administration. The plan is administered by the board or a subcommittee of the board. Under the terms of the plan, the board has the authority to select the participants, make awards in amounts and form as the board may determine, impose restrictions, terms and conditions upon such awards as the board deems appropriate, interpret and administer the plan or any agreements under the plan, and establish such rules and regulations and appoint such agents as it deems appropriate for the proper administration of the plan.

Eligibility. Any of our officers, employees or directors is eligible to receive awards under the plan. Awards under the plan are be made by the board or a subcommittee of the board.

Section 409A. Section 409A of the Internal Revenue Code (the tax code) made important changes to the tax treatment of nonqualified deferred compensation. Awards held by participants that are subject to but fail to comply with Section 409A are subject to a penalty tax of 20% in addition to ordinary income tax, as well as to interest charges. In addition, the failure to comply with Section 409A may result in an acceleration of the timing of income inclusion with respect to awards for income tax purposes. Awards granted under the plan are intended to be exempt from the rule of Section 409A and will be administered accordingly. The board will administer any award resulting in a deferral of compensation subject to Section 409A consistent with the requirements of Section 409A to the maximum extent possible, as determined by the board.

Awards. All awards are evidenced by an award agreement between us and the individual participant that is approved by the board. In the discretion of the board, an eligible participant may receive awards from one or more of the categories described below, and more than one award may be granted to an eligible participant.

Types of awards under the plan include:

Stock Options. The board may grant incentive stock options or nonstatutory stock options. An incentive stock option is intended to be an “incentive stock option” within the meaning of Section 422 of the tax code. A nonstatutory stock option is any other stock option granted by the board that is not specifically designated as an incentive stock option. The exercise price of stock options is determined by the board, but the exercise price cannot be less than 100% of the fair market value of our common stock as of the close of business on the grant date. The term of each stock option is determined by the board, but the term of an incentive stock option cannot exceed 10 years, or 5 years if granted to a 10% stockholder. Options may be exercised in whole or in part, and the option price may be satisfied in cash or, if permitted by the board, by surrendering previously acquired shares of our common stock having a fair market value on the exercise date equal to the total option price or other consideration.

Restricted Shares. Restricted shares are shares of our common stock granted to a participant, subject to such restrictions as the board deems appropriate, including restrictions on the sale or transfer of the shares and the requirement that the shares be forfeited upon termination of employment for any reason before the award vests. Terms of the restricted shares that may be imposed by the board may include restrictions on the right to receive cash dividends and the right to vote the stock. Except as specified in the restricted share award agreement, the holder of a restricted share award will have all the rights of a holder of our common stock.

Number of Awards. The maximum number of shares of our common stock for which awards may be granted under the plan may not exceed 300,000. The limit on the number of shares described in this paragraph and the number of shares subject to any award under the plan are subject to proportional adjustment as determined by the board to reflect changes in our stock, such as stock dividends and stock splits.

Change of Control. In order to preserve the participants’ rights, and unless otherwise provided in any option agreement, all stock options will become fully vested and exercisable if there is a “change in control” of the company, as that term is defined in the plan.

Federal Tax Consequences. The following is a brief summary of the federal income tax consequences of the awards under the plan based on current provisions of the tax code. The following is not intended to be complete and does not describe any state or local tax consequences.

Stock Options. The grant of a stock option under the plan does not result in taxable income at the time of grant for the participant or us.

Nonstatutory Stock Option. A participant generally recognizes taxable income, subject to income tax withholding, upon exercise of a nonstatutory stock option equal to the excess of the fair market value of the shares purchased on the exercise date over the exercise price. We are entitled to a corresponding deduction as a business expense in the year the participant recognizes income.

Incentive Stock Option. A participant does not recognize income, except for purposes of the alternative minimum tax, upon exercise of an incentive stock option. If the shares acquired by exercise of an incentive stock option are held for the longer of two years from the date the option was granted or one year from the date it was exercised, any gain or loss arising from a subsequent disposition of such shares is taxed as long-term capital gain or loss, and we are not entitled to any deduction. If, however, such shares are disposed of within the above-described period, then in the year of such disposition, the participant recognizes taxable income equal to the lesser of:

the amount realized upon such disposition, or

the excess of the fair market value of such shares on the date of exercise over the exercise price.

In either case, we are entitled to a corresponding deduction as a business expense.

Restricted Share Awards. Generally, when a restricted share award vests and is no longer subject to forfeiture the fair market value of the shares received at the time of vesting is ordinary income to the participant and is allowed as a deduction for federal income tax purposes by us.

Amendments and Termination. The board may amend, alter or discontinue the plan, but no amendment, alteration or discontinuation can be made that would impair the rights of any participant under an award, without the participant’s approval. In addition, no amendment, alteration or discontinuation of the plan can be made without the approval of our stockholders that would:

increase the number of shares reserved under the plan, or

change the individuals eligible to participate in the plan.

The board may amend the terms of any award granted, but such amendment cannot impair the rights of a participant without the participant’s consent. The board may also substitute new awards for previously granted awards, including previously granted options having higher option prices.

Term of the plan and effective date. The plan will be effective on July 1, 2010, if approved by our stockholders on that date. The plan will terminate on July 1, 2020, ten years from the date the plan is approved by our stockholders. Awards outstanding at the end of the ten years will be subject to their terms but no further award will be granted after the termination date of the plan.

Vote Required

The affirmative vote of the holders of a majority of our common stock present in person or represented by proxy at the ~~Meeting, provided a quorum exists. A quorum~~annual meeting is ~~present if, as~~required to approve the amendment and restatement of the ~~Record Date,~~plan. The enclosed proxy will be voted FOR this proposal unless the proxy holders are otherwise instructed.

The board of directors recommends that you vote FOR the approval of our 2010 Stock Option and Award Plan.

PROPOSAL 3 — RATIFICATION OF

DASZKAL BOLTON LLP AS OUR INDEPENDENT AUDITOR

On April 29, 2010, the board of directors approved the dismissal of Grant Thornton LLP as our independent registered public accounting firm and the appointment of Daszkal Bolton LLP to serve as our registered public accounting firm for the year ending December 31, 2010. Although our bylaws do not require the selection of our independent auditor to be submitted to stockholders for approval, this selection is being presented to you for ratification at ~~least~~the annual meeting. A representative of Daszkal is expected to attend the annual meeting to answer appropriate questions and make a statement if he desires. Representatives of Grant Thornton will not attend the meeting.

We need the affirmative vote of the majority of ~~the outstanding~~ shares ~~of Common Stock are~~ present in person or by proxy at the Meeting. The proposal to amend the Company's Certificate of Incorporation will be approved upon receiving the affirmative vote of the holders of a majority of the shares of Common Stock outstanding on the Record Date. The proposal to amend and restate the By-Laws of the Company will be approved upon receiving the affirmative vote of the holders of a majority of the shares of Common Stock, present in person or represented by proxy at the Meeting. The proposal to sell the Company's Franchise Interest in Metro will be approved upon receiving the affirmative vote of the holders of a majority of the shares of Common Stock outstanding on the Record Date. It is a condition of Arrowhead Holdings Corporation in its agreement to purchase the shares of Common Stock of the Company held by Mr. Polly and Sheltering Palms Foundation that for purposes of such approval the shares held by Mr. Polly and Sheltering Palms Foundation not be counted, which condition can be waived at Arrowhead Holdings Corporation in its sole discretion. All other matters at the Meeting will be decided by the affirmative vote of the holders of a majority of shares of Common Stock with respect thereto, provided a quorum exists. It is currently anticipated that votes will be counted and certified by an Inspector of Election who is currently expected to be an employee of the Company or its legal counsel. In accordance with Delaware law, abstentions and "broker non-votes" (i.e. proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owner or other persons entitled to vote shares as to a matter with respect to which the brokers or nominees do not have discretionary power to vote) will be treated as present for purposes of determining the presence of a quorum. For purposes of determining approval of a matter presented at the Meeting, abstentions will be deemed present and entitled to vote ~~and will, therefore, have the same legal effect as a vote "against" a matter presented~~ at the ~~Meeting. Broker non-votes will be deemed~~meeting in order to ratify Daszkal as our independent accountants for the fiscal year ending December 31, 2010. Although stockholder approval of this appointment is not ~~entitled to vote~~required by law or binding on the ~~subject matter~~board, the board believes that stockholders should be given the opportunity to express their views. If our stockholders do not ratify the appointment of Daszkal as our independent registered public accounting firm, the board will consider this vote in determining whether or not to ~~which~~continue the ~~non-vote is indicated. Because~~engagement of the requirement for an absolute majority of the outstanding Common Stock to approve the proposal amending and restating the Certificate of Incorporation and approving the sale of the Franchise Interest in Metro, broker non-votes will also have the same effect as a vote "against" the proposal amending and restating the Certificate of Incorporation and the proposal to sell the Franchise Interest in Metro. Broker non-votes will, however, have no legal effect on the vote on any other particular matter which requires the affirmative vote of the holders of a majority of the shares of Common Stock represented at the Meeting. 3 Daszkal.

The enclosed ~~proxies will be voted in accordance with the instructions thereon. Unless otherwise stated, all shares represented by such~~ proxy will be voted ~~as instructed. Proxies may be revoked as noted above. The entire cost of soliciting proxies, including the costs of preparing, assembling, printing and mailing~~FOR this ~~Proxy Statement,~~proposal unless the proxy ~~and any additional soliciting material furnished to stockholders will be borne by~~holders have otherwise instructed.

The board of directors recommends that you vote FOR the ~~Company. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to the beneficial owners~~ratification of stock, and such persons may be reimbursed for their expenses by the Company. Proxies may also be solicited by directors, officers or employees of the Company in person or by telephone, telegram or other means. No additional compensation will be paid to such individuals for these services. ELECTION OF DIRECTORS At this year's Meeting, four (4) directors will be elected to hold office for a term expiring at the Annual Meeting of Stockholders to be held in the year 2001. Each director will be elected to serve until a successor is elected and qualified or until the director's earlier resignation or removal. At this year's Meeting, the proxies granted by stockholders will be voted individuallyDaszkal Bolton LLP as our independent auditors for the election, as directors of the Company, of the persons listed below, unless a Proxy specifies that it is not to be voted in favor of a nominee for directors. In the event any of the nominees listed below shall be unable to serve, it is intended that the Proxy will be voted for such other nominees as are designated by the Board of Directors. Each of the persons named below, each of whom has been a director since 1995, has indicated to the fiscal year ending December 31, 2010.

Board of Directors Oversight of Audit Process

The firm of Grant Thornton LLP, our independent registered public accounting firm in 2009, was responsible for expressing opinions on the conformity of our consolidated audited financial statements with U.S. generally accepted accounting principles in 2009. In fulfilling its oversight responsibilities, the board of directors reviewed and discussed our consolidated audited financial statements with management and Grant Thornton. The board also discussed with Grant Thornton the matters required by Statement on Auditing Standards No. 114, as amended, “The Auditor’s Communication with Those Charged with Governance.”

In discharging its oversight responsibility as to the audit process, the board received from our independent auditors the written disclosures and the letter required by the Public Company Accounting Oversight Board regarding our independent auditor’s communications with the board concerning independence and discussed with the auditors any relationships between the independent auditor and us that may impact their objectivity and independence. In considering the auditors’ independence, the board also considered whether the non-audit services performed by the auditors on our behalf, if any, were compatible with maintaining the independence of the Company that he or she will be available to serve. Name Position ---- -------- Harvey Polly President, Chief Executive Officerauditors.

In reliance upon (1) the board’s reviews and ~~Director Morton I. Kalb Vice President, Chief Financial Officer~~discussions with management and ~~Director Willis G. Ryckman, III Director Leo Yarfitz Director Harvey Polly, age 71, is a Director, President and Chief Executive officer~~Grant Thornton, (2) management’s assessment of the ~~Company. Mr. Polly also serves~~effectiveness of our internal control over financial reporting, and (3) the receipt of an opinion from Grant Thornton, dated April 14, 2010, stating that the company’s 2009 financial statements are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, the board determined that these audited financial statements be included in our annual report on Form 10-K for the year ended December 31, 2009, for filing with the SEC.

Gary O. Marino

Paul S. Dennis

Bennett marks

Donald D. Redfearn

Change in Our Independent Accounting Firm

On April 29, 2010, our board of directors approved the dismissal of Grant Thornton LLP as ~~Chief Executive Officer~~our independent registered public accounting firm. Concurrent with this action, our board of directors appointed Daszkal Bolton LLP as our new independent registered public accounting firm. Daszkal is located at 2401 NW Boca Raton Boulevard, Boca Raton, Florida 33431.

Our financial statements for the years ended December 31, 2009 and 2008 were audited by Grant Thornton. Grant Thornton’s reports on our financial statements for the two most recent fiscal years did not contain an adverse opinion, a ~~stockholder~~disclaimer of ~~H/R Industries, Inc. H/R Industries, Inc. is essentially a personal holding 4~~ ~~company~~opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2009 and 2008 and through the date of termination of Grant Thornton’s engagement as our independent registered public accounting firm, there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which ~~was formed in 1984 under~~disagreements, if not resolved to the ~~name Helena Rubinstein, Inc., and was engaged from 1984 until 1988 in various aspects~~satisfaction of Grant Thornton, would have caused it to make reference to the subject matter of the ~~cosmetic business.~~ disagreement in its reports on our financial statements for such periods.

In ~~1988,~~connection with our management’s assessment of our internal control over financial reporting for 2009, management identified the ~~name~~following material weaknesses in Banyan’s internal control over financial reporting as of December 31, 2009:

Banyan acquired The Wood Energy Group, Inc. in September 2009. The company’s management began to integrate Wood Energy into Banyan, and enhance the internal controls structure and policies and procedures surrounding financial reporting. As of December 31, 2009, all of these enhancements had not been finalized, specifically the recording of deferred revenues and costs associated with projects in process and timely reconciliation of certain balance sheet accounts. Further, Banyan was in need of an additional resource to handle the increase in business activities, and resulting GAAP financial statement and SEC reporting requirements, as a result of the ~~corporation~~recent acquisition.

Based upon their evaluation, and as a result of the material weaknesses discussed above, our chief executive officer and chief financial officer each concluded that our internal control over financial reporting was changed to Elite Industries, Ltd., and in 1990 the name was changed to H/R Industries, Inc. Mr. Polly has been involved in the railroad business for approximately twenty five years. In 1973, he founded and became a major stockholder in Emons Industries, Inc., which was formed on the basisnot effective as of December 31, 2009. However, since the acquisition of Wood Energy was consummated in September 2009, we have made changes to the ~~Maryland~~internal control procedures of Wood Energy to strengthen these controls and ~~Pennsylvania Railroad Company. Since~~to remediate the ~~founding~~material weaknesses discussed above. For example, among other things, we have (1) added a controller and an assistant to the president to the staff of ~~Emons Industries, Inc., Mr. Polly has been involved in~~Wood Energy, (2) increased the ~~railroad freight car business. Mr. Polly has been, since 1975, Chief Executive Officer~~oversight provided by Banyan’s executives over Wood Energy’s operations and ~~a stockholder~~financial activities, and (3) instituted procedures to more accurately identify direct costs incurred for each of ~~Railway Freight Car Service, Inc., which is involved in the railroad boxcar leasing business.~~Wood Energy’s contracts. In 1994 and 1995, Mr. Polly was Chairman of CAGY Industries, Inc., the publicly held holding company for the Columbus and Greenville Railway, the Chattooga and Chicamauga Railway and the Redmont Railway and was the largest stockholder with approximately 40% of the outstanding shares of common stock. Mr. Polly sold his shares and resigned from the Board effective February 16, 1995. From 1988 to 1997, he has served on the Board of Directors of the Delaware Otsego Corp., which was a publicly held corporation that operated the New York Susquehanna and Western Railroad. In prior years, Mr. Polly was also a stockholder and heavily involved in the operations of the Louisiana Midland Railroad. He is also presently a stockholder and officer of SLF of Martin County, Inc., a real estate development company. From 1987 to 1990, he was a principal shareholder, Chief Executive Officer and Director of Hanover Bank of Florida, a publicly held corporation. Morton I. Kalb, age 66, is a Director, Vice President and Chief Financial Officer of the Company. Mr. Kalb has served as Vice President and Chief Financial Officer of the Company since 1995. Mr. Kalb served as Vice President of H/R Industries, Inc. since July 1984. Mr. Kalb is also a Certified Public Accountant. Willis G. Ryckman, age 54, is a Director of the Company. Mr. Ryckman has served as Chairman of the Board of Directors of Tri-Tech Labs since August 1990. From December 1966 through August 1990, Mr. Ryckman was Senior Vice President of Manufacturers Hanover Trust Company. Leo Yarfitz, age 83, is a Director of the Company. Mr. Yarfitz has been a financial consultant with Sterling Management of Florida since June 1990. From October 1987 until October 1989, Mr. Yarfitz served as Chief Financial Officer of Hanover Bank of Florida. From October 1989 until December 1989, Mr. Yarfitz served as President of Hanover Bank of Florida. Upon closing of the transactions between Mr. Polly, Sheltering Palms Foundation and Arrowhead Holdings Corporation described herein, it is anticipated that Mr. Yarfitz and Mr. Ryckman will resign as directors of the Corporation and that two individuals designated by Arrowhead Holdings Corporation will be electedaddition, we recently hired Larry Forman to serve as ~~two members~~our full-time chief financial officer, which will assist in the process of establishing effective internal controls over all processes. Management believes that our internal control over financial reporting has significantly improved.

As a result of the material weaknesses discussed above, Grant Thornton advised Banyan that not all internal controls necessary for Banyan to develop reliable financial statements were present at December 31, 2009. Banyan and Grant Thornton did not express any difference of opinion on this matter.

During the years ended December 31, 2009 and 2008 and through the date of termination of Grant Thornton’s engagement as our independent accountant, other than as disclosed above, there were no events reportable under 304(a)(1)(v) of Regulation S-K.

During the years ended December 31, 2009 and 2008 and through the date of termination of Grant Thornton’s engagement as our independent accountant, neither Banyan nor anyone on Banyan’s behalf consulted with Daszkal, our new independent registered public accounting firm appointed on April 28, 2010, regarding either (1) the application of accounting principles to a specified transaction, either contemplated or proposed, or the type of audit opinion that might be rendered on Banyan’s financial statements or (2) any matter that was either the subject of a ~~four member Board~~disagreement or a reportable event under 304(a)(1)(iv) or (v), respectively, of ~~Directors~~Regulation S-K.

Independent Accounting Firm Fees

We paid Grant Thornton $282,000 in 2009 and $38,809 in 2008 for audit fees. Grant Thornton did not render any other services to Banyan during 2009 or 2008.

Because of the ~~Company for~~small size of our board, the ~~remainder~~directors have not designated an audit committee. Instead, these responsibilities are handled by the entire board, which considers and pre-approves any audit or non-audit services to be performed by our independent auditors. Our board believes the services provided by Grant Thornton in 2009 were compatible with maintaining our auditor’s independence.

PRINCIPAL STOCKHOLDERS

The following table lists the stock ownership of ~~the term~~our directors, executive officers listed under executive compensation and significant stockholders as of ~~such directors or until their successors are duly elected.~~ May 26, 2010.

Name and Address(1)	Common Stock		Stock Options(2)		Preferred Stock(3)		Total		Percentage(4)
Gary O. Marino(5) Patriot Equity, LLC 2255 Glades Road, Suite 342-W Boca Raton, FL 33431		212,728		56,250		50,000		318,978		10.2	%
Paul S. Dennis(6) 16330 Vintage Oaks Lane, Delray Beach, FL 33484		364,792		56,250		200,000		621,042		19.0	%
Bennett Marks Patriot Rail, LLC 2255 Glades Road, Suite 342-W Boca Raton, FL 33431		31,135		56,250		—		87,385		2.8	%
Donald D. Redfearn(7) 4629 Gleneagles Drive Boynton Beach, FL 334316		1,000		6,250		25,000		32,250		1.1	%
Greg Smith(8) 100 Chesterfield Business Pkwy Suite 200 Chesterfield, MO 63005		166,667		—		100,000		266,667		8.6	%
Andy C. Lewis(9) 100 Chesterfield Business Pkwy Suite 200 Chesterfield, MO 63005		166,667		—		100,000		266,667		8.6	%
All directors, and executive officers as a group (8 individuals)		981,134		190,625		500,000		1,671,759		45.1	%

(1)	Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power over the shares of stock owned.

(2)	Shares of common stock the beneficial owners have the right to acquire through stock options that are or will become exercisable within 60 days.

(3)	Shares of common stock into which shares of series A preferred stock held by the beneficial owner are currently convertible.

(4)	Assumes the exercise of options and conversion of series A preferred stock into common stock by that beneficial owner, but no others.

(5)	All shares of common stock and preferred stock are held by Patriot Equity, LLC, a limited liability company of which Mr. Marino is sole member.

(6)	297,042 shares of common stock and all shares of preferred stock are owned by Paul S. Dennis, Trustee under the Paul S. Dennis Trust Agreement dated August 9, 1983, as modified.

(7)	Shares of preferred stock held by Redfearn Enterprises LLC.

(8)	All shares of common stock and preferred stock are held by the Stephanie G. Smith Trust u/a dated December 20, 1995, as amended, Stephanie G. Smith and Greg Smith, Trustees.

(9)	All shares of common stock and preferred stock are held by the Andy C. Lewis and Michelle D. Lewis Revocable Trust.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires ~~the Company's~~our directors and executive officers, ~~and directors~~ and persons who own more than 10% of ~~a registered class of the Company's equity securities,~~our common stock, to ~~file reports of ownership and changes in 5~~ ~~ownership~~make filings with the ~~Securities~~SEC reporting their ownership of our common stock and ~~Exchange Commission ("SEC"). Officers, directors, and greater than 10% shareholders are required by SEC regulations~~ to furnish ~~the Company~~us with copies of these filings. Based solely on our review of copies of reports furnished to us, we believe that all Section 16(a) ~~forms they file. Based solely~~filing requirements were met in 2009. Copies of these filings are available on the ~~Company's~~SEC’s website at www.sec.gov.

Equity Compensation Plan Information

Our directors received a total of 200,000 options, or 50,000 options each, as compensation for serving on our board in 2007 and 2008. 12,500 of these options were subsequently cancelled upon a board member’s resignation from the board. In 2008, a newly appointed director and officer received 12,500 options in connection with joining the board and 12,500 options for serving as an officer. In 2009, 87,500 options were issued, 25,000 to each of three directors and 12,500 to a member of senior management. We have not issued any other options, warrants or rights in 2009. Our directors and a former director exercised a total of 75,000 options in 2009. Our equity plans are summarized in the following table.

Plan category	Number of securities to be issued upon exercise of outstanding options		Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders		—		—		—
Equity compensation plans not approved by security holders		225,000	$	3.20		—
Total		225,000	$	3.20		—

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Banyan has entered into an agreement with Patriot Rail Corp. for office space and administrative services at our Boca Raton, Florida headquarters. Our chairman, president and chief executive officer, Gary O. Marino, our director and former chief financial officer, Bennett Marks, and our vice president of administration, C. Lawrence Rutstein, are officers and significant stockholders of Patriot Rail. Banyan pays Patriot Rail $5,000 a month for these services and the term of the agreement is month to month. We believe that Banyan would not be able to obtain these services from an unrelated third party on terms equivalent to those offered by Patriot Rail. We did not engage in any other transaction with related parties in 2009.

On-going and future transactions with related parties will be:

on terms at least as favorable as those that we could obtain from unrelated parties,

for bona fide business purposes, and

approved by a majority of disinterested and non-employee directors.

Related Person Transaction Policy

Our entire board of directors is responsible for reviewing and approving or ratifying all material transactions between us and any related person. Any transaction must be approved by a majority of disinterested directors. To identify these transactions, we require our directors and officers to complete an annual questionnaire identifying any transactions with us in which the officer or director or their immediate family members have an interest. When the board reviews, approves or ratifies transactions with related persons, any director associated with the transaction must abstain from voting and is not present while discussions and deliberations are held. In approving these transactions, the board considers whether the transactions are on terms at least as favorable as terms we could have obtained from unrelated parties and for bona fide business purposes. The board believes that the agreement described above meets this criteria. Our related party transaction policy is in writing and has been approved by our board.

STOCKHOLDER PROPOSALS AND COMMUNICATIONS

A stockholder intending to present a proposal, to be included in our proxy statement or otherwise, for our 2011 annual meeting of stockholders must deliver a notice, in accordance with the requirements of Rule 14a-8 under the Exchange Act, to our chief executive officer at our principal executive office no later than January 26, 2011. The notice must set forth as to each matter the stockholder proposes to bring before the meeting:

a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting,

the name and record address of the stockholder proposing such business,

the number of shares of our common stock that are beneficially owned by the stockholder, and

any material interest of the stockholder in such business.

Our board of directors also provides a process for our stockholders to send communications to our board. Stockholders may mail any communications to our vice president of administration at 2255 Glades Road, Suite-W, Boca Raton, Florida 33431. Our vice president of administration will review all communications and forward to the board of directors all communications other than solicitations for products or services or trivial or obscene items. Mail addressed to a particular director or committee of the board will be forwarded to that director or committee. All other communications will be forwarded to our chairman for the review of the ~~copies~~entire board.

OTHER MATTERS

Our board of directors is not aware of any other matters to be submitted to the annual meeting. If any other matters properly come before the annual meeting, it is the intention of the persons named in the accompanying proxy to vote the shares they represent as the board of directors may recommend.

You are urged to sign and return your proxy card promptly to make certain your shares will be voted at the annual meeting. For your convenience, a return envelope is enclosed requiring no additional postage if mailed in the United States.

By Order of the Board of Directors,


C. Lawrence Rutstein
Vice President of Administration and Secretary

Annex A

Banyan Rail Services Inc.

2010 Stock Option And Award Plan

(_____________, 2010)

1. Purpose.

(a) The purpose of this Banyan Rail Services Inc. 2010 Stock Option and Award Plan is to advance the interests of Banyan Rail Services Inc., a Delaware corporation (the “Company”), by providing additional incentive to attract and retain qualified and competent persons who are key to the Company, including key employees, Officers and Directors, and upon whose efforts and judgment the success of the Company is largely dependent, by encouraging such ~~forms received~~persons to own stock in the Company.

(b) Section 409A. This Plan and any Awards granted hereunder are intended to be exempt from the requirements of Section 409A, and shall be interpreted and administered in a manner consistent with those intentions.

2. Definitions. As used herein, the following terms shall have the meaning indicated:

(a) “Award” shall mean, individually or collectively, a grant under the Plan of Non-Statutory Stock Options, Incentive Stock Options or Restricted Shares.

(b) “Board” shall mean the Board of Directors of the Company.

(d) “Change of Control” shall mean the date on which any one of the following occurs:

(i) any one person, or more than one person acting as a group (as determined under Section 409A), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company;

(ii) a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of that appointment or election;

(iii) any one person, or more than one person acting as a group (as determined under Section 409A), acquires ownership of stock of the Company that, together with stock held by that person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; or

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(iv) any one person, or more than one person acting as a group (as determined under Section 409A), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that person or persons) assets from the Company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all of the assets of the Company before such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, without regard to any liabilities associated with those assets.

(e) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(f) “Committee” shall mean the compensation committee appointed by the ~~Company,~~Board pursuant to Section 15 hereof or, if not appointed, the ~~Company believes~~full Board.

(g) “Common Stock” shall mean the Company’s Common Stock, par value $0.01 per share.

(h) “Controlled Entity” shall mean any trust, partnership, limited liability company or other entity in which such person that ~~during~~receives Non-Statutory Stock Options or Restricted Shares under this Plan acts as trustee, managing partner, managing member or otherwise controls; provided that, to the ~~year ended December 31, 1998, all filing requirements applicable~~extent any such Non-Statutory Stock Options or Restricted Shares received under this Plan is awarded to ~~its officers, directors,~~a spouse pursuant to any divorce proceeding, such interest shall be deemed to be terminated and ~~greater~~forfeited notwithstanding any vesting provisions or other terms herein or in the agreement evidencing such Non-Statutory Stock Options or Restricted Shares.

(i) “Director” shall mean a member of the Board.

(j) “Effective Date” has the meaning set forth in Section 18.

(k) “Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows (in order of applicability): (i) if on the Grant Date or other determination date the Share is listed on an established national or regional stock exchange, is admitted to quotation on The NASDAQ Stock Market, Inc. or is publicly traded on an established securities market, the Fair Market Value of a Share shall be the closing price of the Share on that exchange or in that market (if there is more than ~~10% beneficial owners were complied~~one such exchange or market the Committee shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on that trading day) or, (ii) if no sale of Shares is reported for that trading day, on the next preceding day on which any sale has been reported. If the Share is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Share as determined by the determined by such methods or procedures as shall be established from time to time by the Committee in good faith in a manner consistent with except that Form 4's covering the transfer of 635,000 shares by Mr. Polly were not timely filed. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES NAMED ABOVE. EXECUTIVE COMPENSATION A. DIRECTOR COMPENSATION No arrangements currently existSection 409A.

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(l) “Grant Date” means, with respect to ~~payments~~an Award, the date such Award is granted to a Participant. The Grant Date of an Award shall not be earlier than the ~~Directors for their service on~~date the ~~Company's Board~~Award is approved by the Committee.

(m) “Incentive Stock Option” shall mean an incentive stock option as defined in Section 422 of ~~Directors, and no fees have been paid in 1999, 1998 or 1997. B. EXECUTIVE COMPENSATION Harvey Polly has served as President, Chief Executive Officer and~~the Code.

(n) “Non-Employee Director” shall mean a Director who: (i) is not an officer or employee of the Company ~~since February 1995 and has~~or any Subsidiary; (ii) does not ~~received~~(A) receive compensation, for such services. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 1, 1999, the following persons or entities were known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock of the Company: Amount Name of and Nature Beneficial of Beneficial Percent Title of Class Owner Ownership of Class - -------------- ---------- ------------- -------- Shares of Common Harvey Polly 3,345,983 27% Stock, $.01 Par Value The following table sets forth the ownership of shares owned directly or indirectly, byfrom the ~~Directors~~Company or any Subsidiary for services rendered as a consultant or in any other capacity other than as a Director, except for an amount that does not exceed the dollar amount for which disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R. Section 229.404(a), or (B) possess an interest in any transaction for which disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R. Section 229.404(a); and ~~Principal~~(iii) is not engaged in a business relationship for which disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R. Section 229.404(a).

(o) “Non-Statutory Stock Option” shall mean an Option which is not an Incentive Stock Option.

(p) “Officer” shall mean the Company’s chairman of the board, chief executive officer, president, chief financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice president of the Company in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company. Officers of Subsidiaries shall be deemed Officers of the Company ~~as of December 1, 1999: 6~~ Amount Name of and Nature Beneficial of Beneficial Percent Title of Class Owner Ownership of Class - -------------- ---------- ------------- -------- Shares of Common Harvey Polly 3,345,983(l)(2) 27%if they perform such policy-making functions for the Company. As used in this paragraph, the phrase “policy-making function” does not include policy-making functions that are not significant.

(q) “Option” shall mean any Incentive Stock $.01 Par Director, shares Value President and Chief Executive Officer Shares of Common Morton I. Kalb 75,000 shares 1%Option or Non-Statutory Stock $.01 Par Director, Value Vice President and Chief Financial Officer Shares of Common Leo Yarfitz 100,000 shares 1% Stock, $.01 Par Director Value Shares of Common All Directors 3,520,983 shares 29% Stock, $.01 Par and Officers of ValueOption granted under this Plan.

(r) “Option Agreement” shall mean the agreement entered into between the Company asand the Participant who is to receive Options at the time of any Option grant.

(s) “Optionee” shall mean a ~~group (6 persons) (1) During 1998, Mr. Polly transferred 500,000 shares~~person to ~~Sheltering Palms Foundation,~~whom an Option is granted under this Plan or any person who succeeds to the rights of such person under Section 13 hereof.

(t) “Participant” shall mean either a ~~Charitable Trust~~person to whom Restricted Shares are granted under this Plan, an Optionee or any person who succeeds to the rights of ~~which he is President~~either such person under this Plan by reason of the death of such person.

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(u) “Plan” shall mean this 2010 Stock Option and ~~a Director and 100,000 shares to his wife. These shares are included in~~Award Plan of the ~~above figure. Mr. Polly also transferred 35,000 shares to unrelated parties which are not included above. (2) Does not include the 2,650,000~~Company.

(v) “Restricted Shares” shall mean Shares ~~which will be acquired by Mr. Polly~~granted or sold pursuant to ~~Mr. Polly's~~Section 11 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in such Section 11 has expired.

(w) “Restricted Share Agreement” shall mean the agreement ~~with~~entered into between the Company ~~entered into on August 4, 1994 and sold to Arrowhead Holdings Corporation contemporaneously with the sale of shares by Mr. Polly~~ and the ~~Foundation~~Participant who is to ~~Arrowhead Holdings Corporation. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Mr. Polly owns 2,745,983~~receive Restricted Shares at the time of any Restricted Share grant.

(x) “Section 409A” means Section 409A of the Code and the U.S. Department of Treasury regulations and other interpretive guidance issued thereunder.

(y) “Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(z) “Share(s)” shall mean a share or shares of the ~~Company's~~ Common ~~Stock and Sheltering Palms Foundation, (the "Foundation")~~Stock.

(aa) “Subsidiary” shall mean a ~~not for profit charitable entity controlled by Mr. Polly and his wife, owns 500,000 shares~~“subsidiary corporation” as defined in Section 424(f) of the ~~Company's Common~~Code.

3. Available Shares. The Company may grant to Participants from time to time an aggregate of up to 300,000 Restricted Shares or Shares exercisable under Options from Shares held in the Company’s treasury or from authorized and unissued Shares. If any Option granted under this Plan shall terminate, expire, or be canceled or surrendered as to any Shares, or if any Restricted Shares are forfeited by the holder thereof, new Options or Restricted Shares may thereafter be granted covering such Shares.

4. Option Grants. An Option granted hereunder shall be either an Incentive Stock Option or a ~~total~~Non-Statutory Stock Option as determined by the Committee at the time of 3,245,983 shares (the "Polly Shares.) In 1995, Mr. Polly acquired the Polly Shares (not including 100,000 shares later transferred to his wife) pursuant to a tender offer and an agreement with the Company made on August 4, 1994, as amended. In May of 1998, Mr. Polly transferred 500,000grant of such ~~shares to~~Option and shall clearly state whether it is an Incentive Stock Option or a Non-Statutory Stock Option. All Incentive Stock Options shall be granted within ten years from the ~~Foundation. 7~~ ~~Under~~date this Plan is adopted by the ~~terms of his agreement with~~Board or the Company, Mr. Polly has the right to acquire an additional 2,650,000 shares of the Company's Common Stock at a purchase price of $.22 a share (the "Option Shares"). Since Mr. Polly acquired control of the Company in 1995, the Company has pursued various acquisition and business combinations, but has been unable to conclude any transactions which management considered appropriate and in the best interest ofdate this Plan is approved by the stockholders of the Company, whichever is later.

5. Dollar Limitation. Options otherwise qualifying as Incentive Stock Options hereunder will not be treated as Incentive Stock Options to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the Shares, with respect to which Options meeting the requirements of Code Section 422(b) are exercisable for the first time by any individual during any calendar year (under all plans of the Company and any Subsidiary), exceeds $100,000.

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6. Conditions for Grant of Options.

(a) Each Option shall be evidenced by a written agreement that may contain any term deemed necessary or desirable by the Committee, provided such terms are not inconsistent with this Plan or any applicable law. Optionees shall be those persons selected by the Committee from the class of all Directors, Officers and regular employees of the Company or its Subsidiaries. Any person who files with the Committee, in a form satisfactory to the Committee, a written waiver of eligibility to receive any Option under this Plan shall not be eligible to receive any Option under this Plan for the duration of such waiver.

(b) In granting Options to Directors, Officers and employees of the Company or its Subsidiaries, the Committee shall take into consideration the contribution the person has made to the success of the Company or its Subsidiaries and such other factors as the Committee shall determine. The Committee shall also have the authority to consult with and receive recommendations from Officers and other personnel of the Company and its Subsidiaries with regard to these matters. The Committee may from time to time in granting Options to Directors, Officers and employees of the Company or its Subsidiaries under this Plan prescribe such other terms and conditions concerning such Options as it deems appropriate, including, without limitation, (i) prescribing the date or dates on which the Option becomes exercisable, (ii) providing that the Option rights accrue or become exercisable in installments over a period of years, or upon the attainment of stated goals or both, or (iii) relating an Option to the continued employment of the Optionee for a specified period of time, provided that such terms and conditions are not more favorable to an Optionee than those expressly permitted herein.

(c) The Options granted to employees under this Plan shall be in addition to regular salaries, pension, life insurance or other benefits related to their employment with the Company or its Subsidiaries. Neither this Plan nor any Option granted under this Plan shall confer upon any person any right to employment or continuance of employment by the Company or its Subsidiaries.

7. Option Price. The Committee shall establish, at the time any Option is granted, the price per Share for which the Shares covered by the Option may be purchased; provided, however, that in no event shall such Option price be less than 100% of the Fair Market Value of the Shares on the date on which the Option is granted; provided, further, that with respect to an Incentive Stock Option granted to a Participant who at the time of the grant owns (after applying the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting stock of the Company or of any parent corporation (as defined in Section 424(e) of the Code) or Subsidiary, the Option price shall not be less than 110% of the Fair Market Value of the Shares subject to the Incentive Stock Option on the date such Option is granted.

8. Exercise of Options. An Option shall be deemed exercised when (i) the Company has received written notice of such exercise in accordance with the terms of the Option, (ii) full payment of the aggregate Option price of the Shares as to which the Option is exercised has been made, and (iii) arrangements that are satisfactory to the Committee in its sole discretion have been made for the Optionee’s payment to the Company of an amount that is sufficient to satisfy all applicable federal or state tax withholding requirements relating to exercise of the Option, if any. Unless further limited by the Committee in any Option, the Option price of any Shares purchased shall be paid in cash, by certified or official bank check, by money order, with Shares or by a combination of the above; provided further, however, that the Committee in its sole discretion may accept a personal check in full or partial payment of any Shares. If the exercise price is paid in whole or in part with Shares, the value of the Shares surrendered shall be their Fair Market Value on the date the Option is exercised. No payment of the exercise price under this Section 8 shall be made if such form of payment constitutes a deferral of compensation within the meaning of Section 409A or otherwise causes the Option to be subject to the requirements of Section 409A. No Optionee shall be deemed to be a holder of any Shares subject to an Option unless and until a stock certificate or certificates for such Shares are issued to such person(s) under the terms of this Plan. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as expressly provided in Section 12 hereof.

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9. Exercisability of Options. Any Option shall become exercisable in such amounts, at such intervals and upon such terms as the Committee shall provide in such Option, except as otherwise provided in this Section 9.

(a) The expiration date of an Option shall be determined by the Committee at the time of grant, but in no event shall (i) an Option be exercisable after the expiration of ten years from the Grant Date of the Option or (ii) an Incentive Stock Option granted to a Participant, who at the time of the grant owns (after applying the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting stock of the Company or of any parent corporation (as defined in Section 424(e) of the Code) or Subsidiary, be exercisable after the expiration of five years from the Grant Date of the Incentive Stock Option.

(b) Unless otherwise provided in any Option, each outstanding Option shall become immediately fully exercisable upon any Change in Control.

(c) The Committee may in its sole discretion accelerate the date on which any Option may be exercised and may accelerate the vesting of any Shares subject to any Option or previously acquired by the exercise of any Option; provided, however, that any such acceleration of the exercisability of the Option or the vesting of any Shares is subject to the limitations of Section 409A and, unless otherwise determined by the Committee, any acceleration of the exercisability of the Option or the vesting of any Shares under this Section 9(c) shall comply with Section 409A.

(d) If the Committee provides that any Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine; provided, however, that any such waiver of installment exercise provisions of the Option is subject to the limitations of Section 409A and, unless otherwise determined by the Committee, any waiver of installment exercise provisions of the Option under this Section 9(d) shall comply with Section 409A.

(e) With respect to any extensions that were not included in the original terms of the Option but were provided by the Committee after the Grant Date, if at the time of any such extension, the exercise price per Share of the Option is less than the Fair Market Value of a Share, the extension shall, unless otherwise determined by the Committee, be limited to the earlier of (a) the maximum term of the Option as set by its original terms or (b) ten (10) years from the Grant Date. Unless otherwise determined by the Committee, any extension of the term of an Option under this Section 9(e) shall comply with Section 409A to the extent applicable.

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(f) With respect to any postponements that were not included in the original terms of the Option but were provided by the Committee after the Grant Date, if at the time of any such postponement, the exercise price per Share of the Option is less than the Fair Market Value of a Share, the postponement shall, unless otherwise determined by the Committee, be limited to the earlier of (a) the maximum term of the Option as set by its original terms or (b) ten (10) years from the Grant Date. Unless otherwise determined by the Committee, any postponement of the term of an Option under this Section 9(f) shall comply with Section 409A to the extent applicable.

(g) The Company may toll the expiration of an Option while the participant cannot exercise the Option because such an exercise would jeopardize the ability of the Company to continue as a going concern; provided that the period during which the Option may be exercised is not extended by more than thirty (30) days after the exercise of the Option (a) would no longer violate an applicable Federal, state, local, or foreign law or (b) would first no longer jeopardize the ability of the Company to continue as a going concern. Unless otherwise determined by the Committee, any tolling of the expiration of an Option under this Section 9(g) shall comply with Section 409A to the extent applicable.

10. Termination of Option Period.

(a) The unexercised portion of any Option shall automatically and without notice terminate and become null and void at the time of the earliest to occur of the following:

(i) three months after the date on which the Optionee’s employment is terminated for any reason other than by reason of (A) Cause, which, solely for purposes of this Plan, shall mean the ~~acquisition~~termination of the Optionee’s employment by reason of the Optionee’s willful misconduct or gross negligence, (B) a mental or physical disability (within the meaning of Section 22(e)(3) of the Code) as determined by a medical doctor satisfactory to the Committee, or (C) death;

(ii) immediately upon the termination of the Optionee’s employment for Cause;

(iii) one year after the date on which the Optionee’s employment is terminated by reason of a mental or physical disability (within the meaning of Section 22(e)(3) of the Code) as determined by a medical doctor satisfactory to the Committee; or

(iv) (A) one year after the date of termination of the Optionee’s employment by reason of death of the Optionee, or (B) three months after the date on which the Optionee dies if the Optionee dies during the one year period specified in Section 10(a)(iii) hereof.

(b) The Committee in its sole discretion may, by giving written notice (a “cancellation notice”), cancel, effective upon the date of the consummation of any corporate transaction described in Section 2(d)(iv) hereof, any Option that remains unexercised on such date. Such cancellation notice shall be given a reasonable period of time prior to the proposed date of such cancellation and may be given either before or after approval of such corporate transaction.

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11. Restricted Shares. The Committee may also authorize the grant or sale to Directors, Officers and employees of the Company or its subsidiaries of Restricted Shares. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions:

(a) Each such grant or sale shall constitute an immediate transfer of the ownership of Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer referred to in the Restricted Share Agreement.

(b) In granting Restricted Share awards to Directors, Officers and employees of the Company or its Subsidiaries, the Committee shall take into consideration the contribution the person has made to the success of the Company or its Subsidiaries and such other factors as the Committee shall determine. The Committee shall also have the authority to consult with and receive recommendations from Officers and other personnel of the Company and its Subsidiaries with regard to these matters. The Committee may from time to time in granting Restricted Share awards to Directors, Officers and employees of the Company or its Subsidiaries under this Plan prescribe such other terms and conditions concerning such grants as it deems appropriate.

(c) Each Restricted Share grant or sale may be made without additional consideration or in consideration of a payment by the Participant that is less than Fair Market Value per Share at the date of grant.

(d) Each such grant or sale shall be subject to a Restricted Share Agreement, which shall provide that the Restricted Shares covered by such grant or sale shall be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period of not less than one (1) year to be determined by the Committee at the date of grant, and any grant or sale may provide for the earlier termination of such period in the event of a Change in Control, retirement, or death or disability of the Participant or other similar transaction or event as approved by the Committee.

(e) Each Restricted Share Agreement shall provide that during the period for which such substantial risk of forfeiture is to continue, and any other period prescribed by law, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Committee or law, as the case may be, at the date of grant (which restrictions may include, without limitation, prohibitions on transfer, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee).

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(f) Any grant or sale of Restricted Shares may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional Restricted Shares, which may be subject to the same restrictions as the underlying award. Any Restricted Shares issued as dividends with respect to unvested Restricted Shares shall vest on the same date(s) as the portion of the Restricted Shares to which they relate.

12. Adjustment of Shares.

(a) If at any time while this Plan is in effect or unexercised Options are outstanding, there shall be any increase or decrease in the number of issued and outstanding Shares through the declaration of a stock dividend or through any recapitalization resulting in a stock split-up, combination or exchange of Shares, then and in such event:

(i) appropriate adjustment shall be made in the maximum number of Shares available for grant to Participants under this Plan, so that the same percentage of the Company’s issued and outstanding Shares shall continue to be subject to being so granted; and

(ii) subject to any requirements or limitations under Section 409A, appropriate adjustment shall be made in the number of Shares and the exercise price per Share thereof then subject to any outstanding Option, so that the same percentage of the Company’s issued and outstanding Shares shall remain subject to purchase at the same aggregate exercise price; provided that, after any such adjustment, the aggregate exercise price of the Option shall not be less than the aggregate exercise price before such adjustment.

(b) Subject to the specific terms of any Option, the Committee may change the terms of Options outstanding under this Plan, with respect to the Option price or the number of Shares subject to the Options, or both, when, in the Committee’s sole discretion, such adjustments become appropriate by reason of any corporate transaction described in Section 2(d)(iv) hereof.

(c) Except as otherwise expressly provided herein, the issuance by the Company of shares of its ~~50% interest~~capital stock of any class, or securities convertible into shares of capital stock of any class, either in ~~Metro Franchising Commissary LLC. Arrowhead Holdings Corporation ("Arrowhead"),~~connection with which Mr. Polly has no relationship, is a diversified holding company, whose principal holding is Vesper Corporation. Vesper Corporation is itself a diversified manufacturing and distributing corporation owning business entities which produce aircraft and aerospace ducting systems, gears, lubricating systems, steel lockers, storage systems and high performance strainers. In addition, Arrowhead also owns subsidiaries involved in commercial leasing and real estate and a varietydirect sale or upon the exercise of ~~other investments. In order~~rights or warrants to ~~further the interests~~subscribe therefor, or upon conversion of ~~the stockholders~~shares or obligations of the Company ~~on July 31, 1999, Mr. Polly~~convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to the ~~Foundation entered into an agreement with Arrowhead~~number of or exercise price of Shares then subject to ~~sell~~outstanding Options granted under this Plan.

(d) Without limiting the ~~Polly Shares and the Option Shares (collectively, the "Shares") to Arrowhead. Upon exercise~~generality of the foregoing, the existence of outstanding Options granted under this Plan shall not affect in any manner the right to the Option Shares, Mr. Polly will sell 5,370,563 shares for $1,540,276 and the Foundation will sell 500,000 shares for $142,724. Upon closing of the transaction, Arrowhead will own a total of 5,870,563 shares or ~~39% of the total of the then outstanding shares of Common Stock~~power of the Company ~~and will be~~to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in ~~a position to exercise substantial influence over~~ the ~~Company. Arrowhead's obligation to conclude~~Company’s capital structure or its ~~arrangements to acquire~~business; (ii) any merger or consolidation of the Company; (iii) any issue by the Company of debt securities, or preferred or preference stock that would rank above the Shares subject to outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any sale, lease, exchange, transfer, assignment or other disposition of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise.

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(e) Notwithstanding the foregoing, no adjustment shall be made under 12(a) and no amendment, modification or change in the terms of any Option shall be made under Section 12(b) which will result in an Award becoming subject to the terms and conditions of Section 409A or otherwise constitute an impermissible acceleration, unless agreed upon by the Committee and the Participant.

13. Transferability of Options and Restricted Shares.

(a) No Incentive Stock Option shall be transferable by the Optionee other than by will or the laws of descent and distribution, and each Incentive Stock Option shall be exercisable during the Optionee’s lifetime only by the Optionee.

(b) A person that receives Non-Statutory Stock Options under this Plan or such person’s beneficiary shall have the power or right to sell, exchange, pledge, transfer, assign or otherwise encumber or dispose of such person’s or beneficiary’s Non-Statutory Stock Options received under this Plan only as follows: (i) to the spouse or any children or grandchildren of such person that receives Non-Statutory Stock Options under this Plan; (ii) as a charitable contribution or gift to or for the use of any person or entity described in Section 170(c) of the Code; (iii) to any Controlled Entity; or (iv) by will or the laws of intestate succession.

14. Issuance of Shares. As a condition of any sale or issuance of Shares upon exercise of any Option or Restricted Share award grant, the Committee may require such agreements or undertakings (in an Option Agreement or Restricted Share Agreement), if any, as the Committee may deem necessary or advisable to assure compliance with any such federal or state securities or other law or regulation including, but not limited to, the following:

(a) a representation and warranty by the Participant to the Company, at the time any Option is ~~conditioned~~exercised or Restricted Share granted, that he is acquiring the Shares to be issued to him for investment and not with a view to, or for sale in connection with, the distribution of any such Shares; and

(b) a representation, warranty and/or agreement by the Participant to the Company to be bound by any legends that are, in the opinion of the Committee or counsel to the Company, necessary or appropriate to comply with the provisions of any securities law deemed by the Committee or counsel to the Company to be applicable to the issuance of the Shares and are endorsed upon ~~among~~the Share certificates.

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15. Administration of the Plan.

(a) This Plan shall be administered by the Committee, which shall consist of not less than two Directors. The Committee shall have all of the powers of the Board with respect to this Plan; provided that if any member of the Committee is not a Non-Employee Director, then the Board shall approve any Option or Restricted Share that the Committee proposes to grant hereunder. The Board may change the membership of the Committee at any time and fill any vacancy occurring in the membership of the Committee by appointment.

(b) The Committee, from time to time, may adopt rules and regulations for carrying out the purposes of this Plan. The Committee’s determinations and its interpretation and construction of any provision of this Plan shall be final and conclusive.

(c) Any and all decisions or determinations of the Committee shall be made either (i) by a majority vote of the members of the Committee at a meeting or (ii) without a meeting by the unanimous written consent of the members of the Committee.

16. Interpretation.

(a) The Plan shall be administered and interpreted so that all Incentive Stock Options granted under this Plan will qualify as Incentive Stock Options under Section 422 of the Code and related treasury regulations. If any provision of this Plan should be held invalid for the granting of Incentive Stock Options or illegal for any reason, such determination shall not affect the remaining provisions hereof, but instead this Plan shall be construed and enforced as if such provision had never been included in this Plan.

(b) This Plan shall be governed by the laws of the State of Delaware.

(d) Any reference to the masculine, feminine, or neuter gender shall be a reference to such other ~~things,~~gender as is appropriate.

17. Amendment and Discontinuation of the Plan.

(a) Either the Board or the Committee may from time to time amend this Plan or any Award; provided, however, that, except to the extent provided in Section 12, no such amendment may, without approval by the stockholders of the Company, (i) materially increase the benefits accruing to ~~amend~~Participants under this Plan, (ii) materially increase the ~~certificate~~number of ~~incorporation of~~securities which may be issued under this Plan, or (iii) materially modify the ~~Company presented~~requirements as to eligibility for participation in this Plan; and provided further, that except to the ~~Meeting, approval~~extent provided in Section 10, no amendment or suspension of this Plan or any Option issued hereunder shall substantially impair any Option previously granted to any Optionee without the consent of such Optionee. Notwithstanding the foregoing, no amendment or modification of this Plan or any Award shall be made under this Section 17 which will result in the any Award becoming subject to the terms and conditions of Section 409A or otherwise constitute an impermissible acceleration, unless agreed upon by the Committee and the Participant.

A-11

(b) Notwithstanding anything herein to the contrary, the provisions of this Plan which govern the exercise price per Share under each such Option, when and under what circumstances such Option will be granted and the period within which each such Option may be exercised, shall not be amended more than once every six months (even with stockholder approval) other than to conform to changes to (i) the Code or the rules promulgated thereunder, (ii) the Employee Retirement Income Security Act of 1974, as amended, or the rules promulgated thereunder, or (iii) rules promulgated by the Securities and Exchange Commission.

18. Effective Date and Termination Date. The Plan shall be effective on ______________, 2010 when it is approved by the stockholders of the Company (the “Effective Date”). No award shall be granted pursuant to the Plan after ____________, 2020 but any Award theretofore granted may extend beyond that date.

19. Section 409a. The Plan is intended to comply with the requirements of Section 409A, without triggering the imposition of any tax penalty thereunder. To the extent necessary or advisable, the Board may amend the Plan or any Award to delete any conflicting provisions and ~~restate~~to add any such other provisions as are required to fully comply with the ~~By-Laws~~applicable provisions of Section 409A applicable to the Plan. The Committee shall comply with Section 409A in establishing the rules and procedures applicable to the Plan. Notwithstanding any provision of this Plan or any Award to the contrary, if all or any portion of the ~~Company, approval~~payments and/or benefits under this Plan or any Award are determined to be “nonqualified deferred compensation” subject to Section 409A and the Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)), as determined by the stockholders of the Company (other than Mr. Polly, Mrs. Polly and the Foundation) of the actual sale of the Company's 50% interest in Metro to Mr. Polly, receipt of an agreement whereby Mr. Polly will agree, in consideration of the purchase of the Polly Shares, to remain as an executive officer of the Company for up to five years, confirmation that the Board of the Company shall consist of four individuals, two of whom shall be approved by Arrowhead, completion by Arrowhead of its due diligence to its satisfaction and receipt of customary certificates and opinions. 8 APPROVAL OF THE SALE OF THE COMPANY'S 50% INTEREST IN METRO FRANCHISING COMMISSARY LLC General The Board of Directors of the Company unanimously recommends that the stockholders approve the proposal to sell the Company's 50% interest (the "Franchise Interest") in Metro Franchising Commissary LLC ("Metro") to Mr. Polly. Mr. Polly has agreed to purchase the Company's 50% interest in Metro for a purchase price of $1,000,000 payable in cash at closing of the sale. The closing of the sale would take place contemporaneously with the purchase of the Shares by Arrowhead and only if the sale of the Shares to Arrowhead occurs. As a result of Mr. Polly being an officer and director of the Company, other than a standard representation that the Company has valid title to the Franchise Interest, the Company will make no representation or warranty to Mr. Polly whatsoever in connection with the sale of the Franchise Interest. A copy of the proposed Agreement of Sale for the Franchise Interest is attached as Exhibit A. All of the consideration payable by Mr. Polly for the Franchise Interest will be payable to the Company and there will be no distribution of the proceeds of the sale of the Franchise Interest to the stockholders of the Company. Background for the Sale of the Franchise Interest As at December 31, 1999, the Company's investment in Metro represented 68% of the Company's assets. The Company acquired its interest for $1,005,000 in cash in May 1998. The remaining 50% interest is held by Metro Franchising Bakery Inc. and Subex LLC, with which Mr. Polly has no relationship. Metro is engaged in the business of owning and operating Dunkin Donuts Quick Service Restaurant locations in Exxon service stations in the New York, New Jersey and Connecticut areas. It has leased property in Long Island City where Dunkin Donuts Products are baked for delivery to various locations. The retail locations are selected by Metro with Dunkin Donuts and Exxon's approval. Each retail location is renovated and equipped by Metro and operated by the station operator. All baked products are purchased from Metro and the station operator pays Metro a royalty fee based on sales, a portion of which is remitted to Dunkin Donuts. Metro's baking facility was fully operational on December 31, 1998. The first retail location commenced operations in December 1998 and at the present time, there are only seven retail locations of a group of sixteen locations originally anticipated. The Metro unaudited statement of operations for the twelve months ended December 31, 1999 show a profit of $7,257 and members' capital at the end of such six-month period of $912,541. The bulk of Metro's assets are represented by property and equipment and franchise and license fees. Metro management and the Company have concluded that operations of Metro will continue to be only marginally profitable until six additional profitable retail locations are established and that substantial additional capital of up to $400,000 will be required to complete the desired number of retail locations. 9 Having previously determined that the Company could not contribute the capital required, the Company had investigated selling of the Franchise Interest. The Company approached three unrelated entities with a view to such sale and received only one indication of interest for $800,000. At approximately the same time, Mr. Polly received an offer to purchase the Shares from Arrowhead as described above. Arrowhead made the purchase of the Shares conditioned upon, among other things, the divestiture of the Franchise Interest as the Franchise Interest has no relevance to Arrowhead's business and its future plans for the Company. Arrowhead's current business is largely in diversified manufacturing and distributing activities including products such as aircraft and aerospace ducting systems, gears, lubricating systems, steel lockers, storage systems and high performance strainers. Arrowhead has advised the Company that, if it acquires the Shares, its present plans for the Company would be to use the Company as a vehicle for potential acquisitions that compliment Arrowhead's current holdings (i.e., specifically, acquisitions in the manufacturing area which either share customer base, technology or other business attributes with one or more of Arrowhead's current business enterprises) in addition to continuing to evaluate any real estate opportunities that many arise. If the Franchise Interest is sold, the Company will have only one mortgage loan in its portfolio, which will mature on September 1, 2000. The Sale Price Believing that the sale of Shares was in the best interest of the stockholders of the Company, as more fully described below, Mr. Polly agreed to purchase the Franchise Interest from the Company and agreed upon the purchase price with Arrowhead and the Board of Directors of the Company. The Fairness Opinion Value Management, Inc. ("VMI") is an appraisal company located in Newtown, Pennsylvania. VMI was recommended to the Company by the attorneys for Arrowhead. VMI has over 10 years experience in providing valuation services to businesses. It specializes in valuation of business enterprises for a variety of purposes including mergers and acquisitions, recapitalizations, employee stock ownership plans and litigation support. There is no relationship between VMI and any of its affiliates on the one hand, and the Company, Arrowhead or Metro, or their respective affiliates, on the other hand. The Company presented the consideration proposed to be paid by Mr. Polly for the Franchise Interest to VMI and asked for its opinion as to the fairness of that consideration. In formulating an opinion on the matter, VMI (1) reviewed and considered the current operations of Metro; (2) reviewed and considered certain financial statements of Metro; and (3) held discussions with the management of Metro and the Company concerning the past and present operations and financial condition and prospects of Metro. 10 VMI utilized two valuation methods in its analysis: the capitalization of cash flow approach and the net asset value approach. Another common method of valuation, the comparative method, which seeks to compare the company under valuation with similarly situated enterprises, was not used because VMI found no enterprises which were reasonably comparable to Metro for this purpose. The capitalization of cash flow approach examines the cash flow capacity of the Franchise Interest and what rate of return an investor would demand based on the degree of risk associated with the asset generating the cash flow. In this case, based on Metro's financial statements for the nine-months ended September 30, 1999, VMI calculated Metro's cash flow capacity to be approximately $55,000 by taking its pretax loss for such period and adding back depreciation and amortization. It then applied, for the reasons discussed in the opinion, a 5% annual growth rate and a 23% rate of return. This method brought a valuation of approximately $252,000 for a 100% interest in Metro. The net asset value method examines the value of the assets less liabilities. The fair market value of the underlying tangible assets is estimated and liabilities are deducted to arrive at an adjusted net worth. The method resulted in a net asset value of $663,000. In an opinion letter dated November 30, 1999, VMI concluded that the consideration to be paid by Mr. Polly in respect to the sale of the Company's interest in Metro is fair, from a financial point of view, to the stockholders of the Company. A copy of such fairness opinion setting forth the assumptions made, the matters considered, the scope and limitations of the review undertaken and the procedures followed by VMI in rendering its opinion is attached to the proxy statement as Exhibit B. Recommendation of the Board of Directors The Board of Directors believes that the sale of the Franchise Interest to Mr. Polly is in the best interest of the stockholders for several reasons. First, the purchase price payable by Mr. Polly is $200,000.00 in excess of the only other indication of interest the Company received for the Franchise Interest as described above and exceeds the book value of $914,504 as reflected on the Company's financial statements, which the Company believes accurately reflects the value of the Franchise Interest. Second, since Mr. Polly is familiar with the operation of Metro, the Company will not have to make any representations or warranties relating to the Franchise Interest as would normally be the case in such a transaction. Normally, an arms-length purchaser would require various representations and warranties as to the Franchise Interest which, if proved to be untrue, could result in liability for the Company. Additionally, to confirm the fairness of the purchase price, the Company retained Value Management, Inc., an independent appraiser, who advised the Company that the consideration to be received from Mr. Polly was fair. Furthermore, as discussed above, Metro showed 11 a profit of only $7,257.00 and will not likely reach increased profitably unless there is a capital infusion by the Company of up to $400,000. More importantly, sale of the Franchise Interest is a condition to Arrowhead's obligation to purchase the Shares. If Arrowhead purchases the Shares, Arrowhead will be in a position to exercise considerable influence over the operations of the Company. Arrowhead is a diversified holding company and, as described above, has significant holdings aerospace, aircraft and other industries. Arrowhead has advised the Company that, if it acquires the Shares, its present plans for the Company would be to use the Company as a vehicle for potential acquisitions that compliment Arrowhead's current holdings (i.e., specifically, acquisitions in the manufacturing area which either share customer base, technology or other business attributes with one or more of Arrowhead's current business enterprises) in addition to continuing to evaluate any real estate opportunities that many arise. While there can be no guaranty that any such acquisition will take place, or whether they will be successful, such acquisitions, if successful, could increase the value of the Company. The risk to the stockholders if the sale of the Franchise Interest and the subsequent sale to Arrowhead does not occur is that the Company continues on its current course which has been to be relatively inactive, without the resources necessary to fund any expansion of its business. The risk to the stockholders if the sale of the Franchise Interest and the subsequent sale to Arrowhead does occur is that the Company would have basically no revenue producing assets other than its sole mortgage loan (which generates approximately $36,000 in interest per year) and any income it could earn from the proceeds of the sale of the Franchise Interest. There is no guarantee that Arrowhead will make any acquisitions using the Company or, if made, whether they will be successful. Based on the foregoing, the Board of Directors has concluded that the terms of the Sale of the Franchise Interest to Mr. Polly are fair and that the Sale of the Franchise Interest is in the best interest of the Company. Vote Required and Other Matters In accordance with the Delaware Corporation Law and the Bylaws of the Company, the Sale of Franchise Interest is required to be submitted to a stockholder vote and the affirmative vote of a majority of the shares outstanding is required to approve the Sale. Arrowhead has further stipulated in its agreement to purchase the Shares that for purposes of such approval, the Shares shall not be counted, which requirement can be waived at Arrowhead's sole discretion. If the stockholders do not approve the divestiture proposal, the agreement with Arrowhead may be terminated at Arrowhead's discretion and if so terminated would be of no further force and effect. The Company is not aware of any regulatory or governmental approvals required to consummate the sale of the Franchise Interest for the Company or for Mr. Polly. The sale of the Franchise Interest will be accounted for as a sale of assets,Committee in accordance with generally accepted accounting principles. The Company will recognize a gain of approximately $70,000 for book purposes based upon the excess net proceeds to be received over the book value of the Franchise Interest, which gain will be offset by the Company's net operating loss carryforwards. Accordingly, the sale of the Franchise Interest will have no tax effect on the Company nor will the sale have any tax consequence for stockholders of the Company. 12 THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO SELL THE COMPANY'S 50% INTEREST IN METRO TO MR. POLLY IS IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS A VOTE FOR ITS APPROVAL. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION The certificate of incorporation of the Company currently in effect was designed and adopted to implement the Company's operation as a real estate investment trust ("REIT"). The Company discontinued its REIT status in 1995 and the current certificate of incorporation contains provisions which have no application in light of the Company's present operations. Arrowhead and the Company believe that it is in the best interests of the stockholders of the Company to amend the certificate of incorporation of the Company to remove provisions relating to the Company's REIT status which are no longer necessary and to add a provision to protect the Company's net operating loss carry forwards as described below, all as set forth in Exhibit C. Other than eliminating the provisions relating to the Company's prior REIT status, the principal change reflected in the proposed amendment to the Company's certificate of incorporation is a new Article 4 which is designed to protect the Company from a possible limitation on its net operating loss carry forwards under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). As of December 31, 1999, the Company had approximately, $75,000,000 of net operating loss carried forward which expire between 2005 and 2020. The net operating loss carry forwards are valuable to the Company and to Arrowhead. The Code places certain limitations on the utilization of net operating losses if there as an "ownership change" involving any "5% shareholder" as contemplated by Section 382 of the Code. To help protect against any such limitations, Article 4 of the amended certificate of incorporation enables the Board of Directors of the Company to cause the Company to refuse to recognize an acquisition of the Common Stock of the Company by any person or entity, directly or indirectly, which would cause such person or entity (1) to be treated as a "5% shareholder" within the meaning of Section 382 of the Code; (2) to be treated as a holder of Common Stock of the Company in an amount that could otherwise result in a limitation on the use of, or loss of, the Company's net operating loss carry forwards; or (3) to be the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Securities Act of 1934, as amended or any successor or replacement rule) of more than 4.5% of the outstanding shares of the Common Stock of the Company. The proposed new Article 4 would result in the inability of stockholders to realize any increase in the value of the Common Stock of the Company as a result of any change in control premium that might be realized if there was not a prohibition of any stockholder acquiring more than 5% of the outstanding Common Stock of the Company. Currently, the Articles of Incorporation of the Company prohibit any stockholder from acquiring greater than 9.99% of the outstanding Common Stock of the Company. This provision was put in place in connection with the Company's status as a REIT and would no longer apply to the Company. 13 Arrowhead and the Company regard the Company's net operating loss carry forwards as a valuable asset of the Company and Arrowhead has made it a condition of acquiring the Shares that the Company amend its certificate of incorporation to include the revised Article 4 described above. For the reasons set forth under "APPROVAL OF THE SALE OF THE COMPANY'S 50% INTEREST IN METRO FRANCHISING COMMISSARY, LLC -- Recommendation of the Board of Directors," the Company believes it is in the best interests of the stockholders for the Shares to be sold to Arrowhead. Accordingly, despite the potential negative effects discussed above, the Company believes that it is in the best interests of the stockholders of the Company to amend the certificate of incorporation in the manner set forth in Exhibit C. THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION IS IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS A VOTE FOR ITS APPROVAL. PROPOSAL TO AMEND AND RESTATE THE COMPANY'S BY-LAWS The By-Laws of the Company currently in effect were designed and adopted to implement the Company's operations as a REIT. The Company discontinued its REIT status in 1995 and the current By-Laws contain many provisions which have no application in light of the Company's present operations. The Company believe that it is in the best interests of the shareholders of the Company to amend and restate the By-Laws of the Company as set forth in Exhibit D to eliminate references to the Company as a REIT. There are no changes made to the By-laws of the Company except for the elimination of such provisions. THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO AMEND AND RESTATE THE BY-LAWS OF THE COMPANY IS IN THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS A VOTE FOR ITS APPROVAL. OTHER MATTERS The Board is not aware of any matter not referred to in the enclosed form of proxy that will be presented for action at the meeting. If any such matter properly comes before the meeting, the proxies in the accompanying form will be voted with respect thereto in accordance with the judgment of the person or persons voting such proxies. The Company's Transfer Agent is to perform certain services in connection with the solicitation of the proxies, including tabulation of proxies and personal or telephone inquiries to stockholders or brokers, banks or other persons acting as custodians. For these services, the Transfer Agent will receive a fee at its customary rate and reimbursement of certain out-of-pocket expenses. Brokers, banks and other persons acting as custodians may be reimbursed for certain expenses incurred by them in obtaining instructions from beneficial owners of the Company's Common Stock. In addition to use of the mails, directors and officers of the Company may, without compensation other than their regular compensation, solicit proxies from stockholders by telephone or in person. All costs of solicitation will be borne by the Company. 14 STOCKHOLDER PROPOSALS A proposal by a stockholder intended for inclusion in the Company's proxy statement for the 2001 annual meeting must be received by the Company at the address noted immediately above, to the attention of _______________, Secretary, on or before March 1, 2001, in order to be eligible for such inclusion. B.H.I.T., INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION The unaudited pro forma financial information as of March 31, 2000 and for the three months ended March 31, 2000 and the year ended December 31, 1999 presented in this proxy statement gives effect to the Company's sale of the Franchise Interest as well as the sale of 2,650,000 additional shares of the Company's Common Stock. The unaudited pro forma financial statements give effect to events that are directly attributable to the proposed sale. Explanations for these adjustments are included in the notes accompanying the unaudited pro forma balance sheet and income statements. The Company's unaudited pro forma financial information should be read in conjunction with the historical financial statements of the Company and the information contained in the Company's "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's annual report on Form 10-K/A for the year ended December 31, 1999 and quarterly report on Form 10-Q/A for the three month period ended March 31, 2000, which are included with the materials mailed with this proxy statement. The unaudited pro forma financial data should not be construed to be indicative of our financial condition, results of operations or covenant compliance had the proposed sale and events described above been completed on the dates assumed and are not intended to project our financial condition on any future date or our results of operations for any future period. 15 B.H.I.T., Inc. Notes To Unaudited Pro Forma Consolidated Financial Statements December 31, 1999 and March 31, 2000 In July of 1999 Harvey Polly, President and Chairman of B.H.I.T., Inc. (the "Company"), and Sheltering Palms Foundation, Inc. (the "Foundation"), a not for profit charitable organization controlled by Mr. Polly and his wife, agreed to sell their stock holdings in the Company to Vesper Corporation, or its assignee. Mr. Polly owns 2,720,563 shares, and has an option to purchase 2,650,000 additional shares from the Company at $0.22 per share. The agreement calls for Mr. Polly to sell 5,370,563 shares, and the Foundation to sell its 500,000 shares. In addition, the agreement requires that Mr. Polly purchase from the Company its 50% interest in Metro Franchising Commissary, LLC ("Metro") for $1,000,000. All December 31, 1999 adjustments have been prepared assuming that the agreement discussed above was closed on January 1, 1999. All March 31, 2000 Pro Forma Balance Sheet adjustments have been prepared assuming that the agreement discussed above was closed on March 31, 2000, and that the March 31, 2000 Pro Forma Operating Statement adjustments assume the above agreement was closed on January 1, 1999. The Pro Forma Operating Statements do not show any provision for Income Earned on the Company's funds received from the sale of its interest in Metro and on the sale of 2,650,000 additional shares of the Company's Common Stock. The Company's Profit on its sale of its Interest in Metro, amount to $94,717 at December 31, 1999 and $84,496 at March 31, 2000, have not been included in the Pro Forma Operating Statements. These Profits have been credited directly to accumulated Deficit. 16 B.H.I.T., Inc. Adjustments for Pro Forma Statements December 31, 1999 ----------------- (1) Equity in Net Income of Joint Venture $10,221 Accumulated Deficit $10,221 To eliminate the Company's share of operating profit from Joint Venture March 31, 2000 -------------- (1) Cash & Cash Equivalents 1,583,000 Investment in Joint Venture 930,507 Profit on Sale of Joint Venture Interest 69,493 Capital Stock (2,650,000 Shares) 583,000 To record sale of 50% interest in Joint Venture, and credit profit realized thereon to accumulated deficit; and sale of 2,650,000 shares of Common Stock (2) Equity in Net Income of Joint Venture 15,003 Accumulated Deficit 15,003 To eliminate the Company's share of operating profit from Joint Venture 17 B.H.I.T., Inc. Unaudited Pro Forma Consolidated Statement Of Operations For The Year Ended December 31, 1999 Unaudited Historical Adjustments Pro Forma ---------- ----------- --------- Income: Interest Income on Cash and Equivalents $ 7,211 $ 7,211 Interest Income on Mortgages 37,770 37,770 --------- --------- --------- Total Income 44,981 44,981 ========= ========= ========= Equity in Net Income of Unconsolidated Joint Venture 10,221 (1) 10,221 - --------- --------- --------- Expenses: Stockholder Expenses 7,160 7,160 Professional Fees 59,788 59,788 General & Admin. 167,293 167,293 --------- --------- --------- Total Expenses 234,241 234,241 --------- --------- --------- Net Income or (Loss) $(179,039) $(189,260) ========= ========= ========= Net Income or (Loss) Per Share of Common Stock Outstanding - 12,338,061 Historical 14,988,051 Pro Forma $ (0.01) $ (0.01) ========= ========= See Accompanying Notes 18 B.H.I.T., Inc. Unaudited Pro Forma Consolidated Balance Sheet As of March 31, 2000 Unaudited Unaudited Historical Adjustments Pro Forma ---------- ----------- --------- Assets: Cash and Cash Equivalents $ 52,261 (1)$1,583,000 $1,635,261 Interest Receivable 3,205 3,205 Mortgage Loan Receivable 300,000 300,000 Investment in Joint Venture 930,507 (1) (930,507) - Prepaid Insurance 8,282 8,282 Other Assets 3,198 3,198 --------- ------------ --------- Total Assets 1,297,453 1,949,946 ========= ============ ========= Liabilities & Stockholders' Equity: Accounts Payable & Accrued Expenses 6,244 6,244 --------- ------------ --------- Stockholders' Equity: Shares of Common Stock $0.01 Par Value-20,000,000 Authorized 12,338,051 Shares Outstanding - Historical 14,988,051 Shares Outstanding Pro Forma 87,477,847 (1) (583,000) 88,060,847 Accumulated Deficit (86,178,449) (1) 69,493 (86,108,956) Treasury Stock At Cost 32,757 Shares (8,189) (8,189) --------- ------------ ---------- Total Shareholders' Equity 1,291,209 $1,943,702 --------- ------------ ---------- Total Liabilities and Shareholders' Equity $1,297,453 $1,949,946 ========== ============ ========== See Accompanying Notes 19 B.H.I.T., Inc. Unaudited Pro Forma Consolidated Statement Of Operations For The Three Months Ended March 31, 2000 Unaudited Unaudited Historical Adjustments Pro Forma ---------- ----------- --------- Income: Interest Income on Cash and Equivalents $ 902 $ 902 Interest Income on Mortgages 9,000 9,000 --------- ----------- --------- Total Income 9,902 9,902 --------- ----------- --------- Equity in Net Income of Unconsolidated Joint Venture 15,003 (2) 15,003 - --------- ----------- --------- Expenses: Stockholder Expenses 2,333 2,333 Professional Fees 3,271 3,271 General & Admin. 42,331 42,331 --------- ----------- --------- Total Expenses 47,935 47,935 --------- ----------- --------- Net Income or (Loss) $ (23,030) $ (38,033) ========= =========== ========= Net Income or (Loss) Per Share of Common Stock Outstanding - 12,338,061 Historical 14,988,051 Pro Forma $ (0.00) $ (0.00) ========= ========= See Accompanying Notes 20 ANNUAL REPORT The Company's 1999 Annual Report to Stockholders, which includes a copy of the Company's Annual Report on Form 10-K/A for 1999 (including the financial statements and schedules thereto), as filed with the Securities and Exchange Commission ("1999 Annual Report") is being delivered concurrently with this Proxy Statement. Stockholders are urged to review carefully the financial information contained in the 1999 Annual Report. Please sign the proxy and return it promptly in the enclosed envelope to which no postage need be affixed if mailed within the United States. New York, New York June __, 2000. 21 EXHIBIT A SALE OF FRANCHISE INTEREST AGREEMENT THIS SALE OF FRANCHISE INTEREST AGREEMENT (the "Agreement") made and entered into as of this 31st day of July, 1999, between B.H.I.T., Inc., a Delaware corporation ("Seller") and Harvey Polly ("Purchaser"). W I T N E S S E T H: A. Seller owns a fifty percent interest (the "Franchise Interest") in Metro Franchising Commissary, L.L.C. ("Metro"). B. Purchaser is President and significant stockholder of Seller. Purchaser has agreed to sell his shares of stock in Purchaser to Vesper Corporation pursuant to a Securities Purchase Agreement between Vesper Corporation, Purchaser and Sheltering Palms Foundation dated as of July 31, 1999 (the "Securities Purchase Agreement"). Vesper has subsequently assigned its interest in Securities Purchase Agreement to Arrowhead Holdings Corporation ("Arrowhead"). C. Arrowhead has made it a condition to its purchase of the shares under the Securities Purchase Agreement that the Franchise Interest be sold on or before the closing under the Securities Purchase Agreement. D. Purchaser has agreed to purchase the Franchise Interest from Seller pursuant to the terms hereof. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: ARTICLE I - TRANSACTIONS AND RELATED AGREEMENTS 1.1 Sale and Purchase of the Franchise Interest. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing (defined herein), Seller shall sell, transfer, assign and convey to Purchaser, and Purchaser shall purchase from Seller, all of Seller's right, title and interest in and to the Franchise Interest. ARTICLE II - CONSIDERATION 2.1 Consideration. The purchase price for the Franchise Interest (the "Purchase Price") shall be $1,000,000 payable by Purchaser in cash at Closing. A-1 ARTICLE III - CLOSING 3.1 Time and Place. The closing of the transactions contemplated hereby (the "Closing") shall take place simultaneously with the closing under the Securities Purchase Agreement (the "Closing Date"). 3.2 Deliveries of Seller. At Closing, Seller shall deliver or cause to be delivered the following to Purchaser: (a) An Assignment of the Franchise Interest; and (b) such other documents as may be reasonably requested by Purchaser to effect the transactions described herein. 3.3 Deliveries of Purchaser. At the Closing, Purchaser shall deliver the following to Seller: (a) the Purchase Price; and (b) such other documents as may be reasonably requested by Seller to effect the transactions described herein. ARTICLE IV - REPRESENTATIONS AND WARRANTIES 4.1 By Seller. Seller hereby represents and warrants each of the following to Purchaser: (a) Organization Good Standing and Authority of Seller . Seller is a corporation duly organized and validly existing under the laws of the State of Delaware with the requisite power and authority to execute and satisfy all of its obligations under this Agreement. The execution, delivery and performance by Seller of this Agreement, the other documents contemplated herein and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. This Agreement and other documents contemplated herein have been or will be at Closing duly executed and delivered by Seller and constitute or will constitute at Closing the valid and legally binding obligations of Seller, enforceable against Seller in accordance with their respective terms, subject to the qualifications that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally. (b) Ownership of, and Title to, the Purchased Assets. To the best of Seller's knowledge, Seller owns, and has good and marketable title to all of the Franchise Interest. Other than the foregoing, Seller makes no representation or warranty whatsoever with respect to the Franchise Interest and such Franchise Interest is being transferred on an "AS-IS," "WHERE-IS" basis. A-2 4.2 By Purchaser. Purchaser represents and warrants the following to Seller: (a) Authority of Purchaser. Purchaser has the requisite authority to enter into, and to satisfy all of its obligations under, this Agreement and all other agreements and instruments executed in connection herewith. This Agreement and other documents contemplated herein have been or will be at Closing duly executed and delivered by Purchaser and constitute or will constitute at Closing the valid and legally binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms, subject to the qualifications that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally. (b) Purchaser acknowledges that as President of Seller he is completely familiar with the operations of Metro and all aspects of the Franchise Interest and acknowledges that the Purchase Price and the other terms of this Agreement are fair. Accordingly, Purchaser has not asked that Seller make any representation or warranty whatsoever regarding the Franchise Interest. Purchaser hereby represents and warrants that the assignment of the Franchise Interest to him is authorized under the Operating Agreement of Metro dated May 28, 1998 (the "Operating Agreement") and no consent or approval of Metro or any of its members is required for such transfer. ARTICLE V - INDEMNIFICATION OF SELLER: 5.1 Indemnification of Seller. Purchaser shall indemnify, defend and hold harmless Seller, and its affiliates, and the present and future shareholders, officers, directors, employees, agents and representatives of the foregoing and their respective successors, heirs and assigns (the "Seller Group") from and against any and all claims, causes of action, suits, complaints, demands, liabilities, damages, losses, debts, costs and expenses (including but not limited to attorneys' fees and costs incurred in defending any such actions or to recover such losses) that are made against or sustained by any member of the Seller Group and that arise, directly or indirectly, from: (a) any breach, default, or violation by Purchaser of a covenant, representation, agreement or warranty set forth in this Agreement; (b) the operations of Metro after the Closing Date; or (c) any liability for taxes, charges or other assessments or accruals under the Operating Agreement or otherwise relating to the ownership of the Franchise Interest prior to or after the Closing Date. 5.2 Survival. The obligations of indemnification set forth in Subsections 5.1 hereof shall survive the execution of this Agreement. ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER Seller's obligations under this Agreement are contingent upon the fulfillment of the following conditions or waiver of the same by Seller: A-3 6.1 Performance of Obligations of Purchaser. Purchaser shall have performed in all respects its obligations hereunder to be performed on or before the Closing Date. 6.2 Closing Under The Securities Purchase Agreement. The closing under the Securities Purchase Agreement shall have occurred. 6.3 Deliveries Made. Seller shall have received all of the deliveries required by Section 3.3. 6.4 Stockholder Approval. The Stockholders of Seller shall have approved the sale of the Franchise Interest to Purchaser. ARTICLE VII - CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER Purchaser's obligations hereunder are contingent upon the fulfillment of the following conditions or waiver of same by Purchaser: 7.1 Performance of Obligations of Seller. Seller shall have performed in all respects its obligations hereunder to be performed on or before the Closing Date. 7.2 Closing Under The Securities Purchase Agreement. The closing under the Securities Purchase Agreement shall have occurred. 7.3 Deliveries Made. Purchaser shall have received all of the deliveries required by Section 3.2 above. 7.4 Stockholder Approval. The Stockholders of Seller shall have approved the sale of the Franchise Interest to Purchaser. ARTICLE VIII - GENERAL PROVISIONS 8.1 Further Assurances. After the date of this Agreement, each party, without further consideration, shall promptly take such actions and shall promptly execute and deliver such documents as may be reasonably requested by another party hereto (or by his or its employees, agents, insurers, or representatives) to effectuate, evidence, authorize, or approve the transactions contemplated in this Agreement. 8.2 Fees and Expenses. Each party hereto shall pay its own fees and expenses for brokers, agents, investment bankers, attorneys, accountants, finders or other persons, as may be retained or employed, directly or indirectly, in connection with the negotiation, preparation and/or closing under this Agreement and the consummation of the transactions contemplated herein. A-4 8.3 Notices. All notices given to a party hereto in connection with this Agreement shall be in writing and shall be deemed to have been properly delivered if delivered into the hand of a recognized overnight courier (such as Federal Express) with delivery charges prepaid, or deposited in the United States mail, postage prepaid, registered or certified, return receipt requested to the addresses set forth in the Securities Purchase Agreement or to such other address as the above persons may notify the other parties of from time to time, in writing and pursuant to the other provisions of this Subsection 8.3. 8.4 Remedies and Waivers. All rights and remedies available at law, in equity or under the terms of this Agreement or any other agreement or instrument executed in connection herewith shall be cumulative, and no waiver thereof shall be (a) implied from the prior acts or omissions, or based solely upon the oral representations, of a party hereto; or (b) effective or binding unless, and then only to the extent that, such waiver is set forth in this Agreement, or a party hereto signs an express written waiver of rights or remedies and causes such written waiver to be delivered to the party for whose benefit it was made. In no event shall actual or constructive knowledge of a breach or misrepresentation by one party learned prior to Closing be deemed a waiver or acceptance of such breach or representation by the party with such knowledge of such breach or misrepresentation. 8.5 Applicable Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York. 8.6 Prior Agreements. All prior agreements, whether written or oral, among the parties hereto with respect to the subject matter of this Agreement have been merged and integrated into this Agreement and, to the extent of any conflict or inconsistency with this Agreement, are superseded by the provisions of this Agreement. 8.7 Terms of Convenience. Captions and headings are used in this Agreement for convenience only and shall not be construed to affect the meaning of this Agreement. Terms such as "hereof," "herein," "hereto," "hereby," "hereunder" and similar references to this Agreement shall be deemed to refer to this Agreement as a whole and not to any particular section or provision of this Agreement. 8.8 Modification. This Agreement shall not be modified unless, and then only to the extent that, a written modification is executed by all of the parties hereto or their respective successors or assigns. 8.9 Assignment-Binding Effect. This Agreement and the obligations hereunder may not be assigned either party without the express written consent of the other party, which may be withheld in its discretion. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted assigns and successors in title or interest. 8.10 Severability All provisions in this Agreement are severable, and each valid and enforceable provision shall remain in effect and shall be binding upon the parties hereto, regardless of any finding by a judicial, administrative, or legislative body that other provisions of this Agreement are invalid or unenforceable. A-5 8.11 Counterparts. This Agreement may be executed in counterparts, and any executed counterparts shall bind the parties hereto and inure to their benefit as though all parties were signatory to the same counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Agreement409A, as of the date first written above. SELLER: B.H.I.T., INC. By: ____________________________________________ Its:____________________________________________ PURCHASER: ________________________________________________ HARVEY POLLY A-6 EXHIBIT B Value Management Inc. The Business Valuation Specialist ================================================================================ November 30, 1999 B.H.I.T., Inc. c/o: William L. Weiss 110 East 59th St. New York, NY 10022 Re: Fairness of Sale of B.H.I.T.'s Interest in Metro Franchising Commissary, LLC ---------------------------------------------------------------------------- Dear Mr. Weiss: As you requested, we have prepared an opinion on the proposed sale of B.H.I.T., Inc.'s (referred to herein as "BHIT") fifty percent (50%) interest in Metro Franchising Commissary, LLC (referred to herein as "Metro or the "Company") to Mr. Harvey Polly. The purpose of this opinion is to establish the fairness to BHIT's stockholders, from a financial point of view, of the proposed sale to Mr. Polly. Mr. Polly has agreed to acquire BHIT's fifty percent (50%) interest in Metro for one million dollars ($1,000,000). This letter will present the factors considered and approaches utilized in making this determination. The findings of this valuation are subject to certain limiting conditions (Exhibit 1). DEFINITION OF FAIR MARKET VALUE - ------------------------------- In rendering this opinion, we considered the fair market value of Metro. The definition of "fair market value" employed in this appraisal is the price at which an interest in Metro would change hands between a willing buyer and willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts. OPINION - ------- In the course of preparing this opinion, we spoke with Stuart Cohen, one of the managers of Metro, about the history and evolution of Metro, its operations, financial performance, competition, markets and marketing efforts, and its outlook for the future. We visited one of the Company's retail franchises (located at 1550 Bedford Ave., Brooklyn, NY) and contacted each of the other locations. We have been supplied with copies of: B-1 o Compiled financial statements for Metro Franchising Commissary, LLC for the six months ended June 30, 1999 and for the nine months ended September 30, 1999, as prepared by the certified public accounting firm of Nemiroff, Cosmas & Company, LLP; o A copy of an Operating Agreement for Metro Franchising Commissary, LLC dated May 28, 1998 by and among Metro Franchising Bakery, LLC, Subex, LLC and B.H.I.T., Inc. o A listing by address of Metro's current seven retail locations, its baking center and the addresses of three potential sites for new retail locations. o Copies of several written correspondences involving Harvey Polly, President of BHIT, including: a letter dated 2/22/99 to Don Kleila of FKB Donuts asking if Mr. Kleila was interested in purchasing BHIT's stock in Metro; a letter dated 2/22/99 to Paul Waltzer and Stuart Cohen asking if they were interested in purchasing BHIT's stock in Metro; a letter dated 5/25/99 to Paul Waltzer and Stuart Cohen asking them to provide an explanation for the shortfall in capital and for the longer-than-planned development period of Metro; a letter dated 6/2/99Participant’s separation from Paul Waltzer and Stuart Cohen to Mr. Polly in response to his letter to them dated 5/25/99; a letter dated 6/8/99 from Mr. Polly to William Colianni of Holding Capital Corp. asking if he would have an interest in buying the Metro stock from Mr. Polly if Mr. Polly sold his BHIT stock; and, a letter to Mr. Polly from James W. Donaghy, President of Subex, LLC, stating that Subex would have an interest in purchasing BHIT's stock in Metro at book value. We have relied upon the accuracy and the completeness of the material furnished to us and have not independently verified the information contained in such material. In establishing the opinion determined herein, we have taken into consideration IRS Revenue Ruling 59-60, which establishes guidelines for appraising stock of a closely-held company. This revenue ruling states that no general formula is applicable to the many different valuation situations. Various factors, both endogenous and exogenous to the Company, must be considered. Such factors, and how we applied them in this case are as follows: o An understanding of the business and its evolution over time. Knowledge of the Company's development may shed insight as to its future performance. We interviewed management to learn of its history and development. Original plans for store openings were compared to the number of stores actually opened at the time of the valuation. o Degree and level of competition. Generally speaking, there is a high degree of competition for baked retail goods. This factor was considered in determining potential growth and the rate of return an investor would require. B-2 o Book value. Book value was utilized in calculating net asset value. Net asset value directly impacted our fairness opinion. We considered the following: The net asset value for Metro Franchising Commissary in its entirety was $663,000 (rounded) or $331,500 (rounded) for BHIT's 50% interest. o The financial condition of the business. Metro's ability to achieve its initial goal of opening sixteen locations was negatively impacted by its lack of funds. The potential for growth was limited by this lack of capital. o The earnings and cash flow capacity of the Company. Metro's financial statements were reviewed. Absent any management projections, it was assumed optimistically that cash flow was equal to net income plus depreciation and amortization. o Transactions in the stock of the Company. No transactions were identified, therefore this had no impact. o The condition and outlook of the economy in the Company's market area and the industry to which the Company belongs. General information was sought for the retail baking industry, as well as for retail franchises to determine if any major impediments to Metro's business existed. None were found. Given that Metro had only nine months of performance, any comparison to established retail bakeries would be meaningless. o The attitude of investors toward companies which are comparative to the subject Company. We searched for transactions of privately held companies falling under Standard Industrial Classification code 5461 - Retail Bakeries. Several were identified, however, they were not in the same business as Metro and/or little information was provided on the terms of the transactions. In general, the attitude of investors toward companies which are similar, in size and risk assessment, was utilized in determining an investor's required rate of return for the capitalization of cash flow. The valuation methods considered in rendering our opinion include: the net asset value of Metro, the present value of the Company's expected cash flows and an examination of the private transactions market for sales of similar companies. The comparative or guideline method is based on the premise that prices paid for one company provided an indication of what a buyer would be willing to pay for stock in another company sharing similar characteristics. The method entails B-3 examination of the relationship between stock prices in kindred companies and various quantifiable factors. The relationships are adjusted to reflect the differences between the guideline group and the subject company. At that point, derived ratios are applied to the subject company in order to establish a value. No comparable publicly-traded companies were identified. We also attempted to identify transactions involving the transfer of a majority interest in similar companies. None were found. Hence, no value was produced by this approach. The capitalization of cash flow approach examines the cash flow capacity of the subject company and the risk associated with it. Cash flow is generally the most important valuation factor for a profitable ongoing operation. For the first nine months of 1999, Metro Franchising Commissary ("Metro") had a pre-tax loss of $52,312. We examined a best case scenario - adding back all depreciation and amortization (which combined for $93,700 for the nine months ended September 30), and assuming no capital expenditures. This produced an annualized cash flow of $55,184. In capitalizing this cash flow, we assumed a constant 5% growth rate. In calculating the rate of return, we considered two basic components, a risk-free portion and a risk premium. The risk-free portion is best approximated by the interest rate on Treasury Bills, which was 5.2 percent on or about the valuation date, and on Treasury Bonds, which approximated 6.6 percent. Metro represents an investment in a much smaller operation that has its revenue dependent on a limited geographical market area. Additionally, it is a start-up company that has, to date, opened only 7 of the 16 locations on which it originally planned. Considering all factors, we believe a target rate of return of 23 percent is currently appropriate for Metro. Based on a capitalization of cash flow, the value determined for a 100 percent interest approximated $322,000. Net asset value examines the value of the assets less liabilities that the Company has built to date. Under this approach, the fair market value of the underlying tangible assets is estimated and totaled, and its liabilities are deducted to arrive at an adjusted net worth. In arriving at a net asset value for Metro, we used its September 30, 1999 balance sheet as the starting point. For our analysis, we assumed that all tangible assets are stated at or near realizable value. The Company had total assets of $863,402 as of September 30, 1999. Approximately $190,000 was for intangible assets (franchise and license fees). Reducing total assets by the value of intangible and subtracting liabilities of $10,430 resulted in a net asset value of $663,000 (rounded). Based on all factors, it is our opinion that $1,000,000 for BHIT's fifty percent interest in Metro is not less than current fair market value. Stated otherwise, we believe that a purchase price of $1,000,000 for BHIT's fifty percent interest in Metro Franchising Commissary, LLC is fair to BHIT stockholders. We are aware of no factors, specific or otherwise, that do not support our opinion. B-4 We consent to the use of our fairness opinion for the solicitation of proxies of the shareholders of B.H.I.T. Inc. in connection with the special meeting of the stockholders to approve the sale of B.H.I.T. Inc.'s interest in Metro Franchising Commissary, LLC. Respectfully submitted, Value Management Inc. /s/ Andrew Wilusz /s/ Edward A. Wilusz - ----------------------------- ------------------------------- Andrew Wilusz Edward A. Wilusz, ASIA, CFA Financial Analyst President B-5 EXHIBIT 1 ASSUMPTIONS AND LIMITING CONDITIONS 1. We have relied upon the accuracy and completeness of information supplied by the client company without further verification thereof. We have assumed that all financial statements were prepared in conformity with generally accepted accounting principles unless informed otherwise. 2. Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it. 3. This fairness opinion is valid only for the date or dates specified herein and only for the fairness opinion purpose specified herein. The various estimates of value presented in this report apply to this fairness opinion only and may not be used out of the context presented herein. It is also stipulated that this report is not to be used for any purpose other than that stated in this report, nor may it be used by anyone but the client (and its shareholders) without our previous written consent. B-6 EXHIBIT C AMENDMENTS TO THE CERTIFICATE OF INCORPORATION OF B.H.I.T., INC. The following sets forth the amendments to the Certificate of Incorporation of B.H.I.T., Inc. 1. ARTICLE THIRD is revised to read in its entirety as follows: The Corporation shall issue shares of Common Stock ("Shares"), each with a par value of $0.01, and each Share shall be identical in all respects with every other Share. Each Share shall entitle the holder thereof to one vote on all matters upon which Shareholders are entitled to vote. The total number of Shares which the Corporation shall have authority to issue shall be 20,000,000. The Shares may be issued for such consideration as the Directors shall determine, including upon the conversion of convertible debt, or by way of Share distribution or Share split in the discretion of the Directors. Subject to Article Fourth, outstanding Shares shall be assignable and transferable. Shares reacquired by the Corporation shall no longer be deemed outstanding and shall have no voting or other rights unless and until reissued. Shares reacquired by the Corporation may be cancelled by action of the Directors. All Shares shall be fully paid and nonassessable by or on behalf of the Corporation upon receipt of full consideration if issued by way of Share distribution, Share split, or upon the conversion of convertible debt. The Shares shall not entitle the holder to preference, preemptive, conversion, or exchange rights of any kind, except as the Directors may specifically determine with respect to any Shares at the time of issuance of such Shares and except as specifically required by law. 2. ARTICLE FOURTH is amended in its entirety to read as follows: a) Each holder of Shares of any class of stock of the Corporation shall upon demand disclose to the Board of Directors in writing such information with respect to direct and indirect ownership of such Shares as the Board of Directors deems necessary to enforce the provisions of this Article Fourth. b) Whenever it is deemed by the Board of Directors to be reasonably necessary to protect the Corporation from a possible limitation on its net operating loss carry forwards or built in losses (collectively, "NOLS") under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), any C-1 regulation thereunder or any replacement or similar provision of any federal or state tax law or regulation, the Board of Directors may require a statement or affidavit from each proposed transferee of Shares of any class of stock of the Corporation setting forth the number of Shares of all classes of stock of the Corporation already owned, or treated as owned under Section 382 of the Code, by such proposed transferee in a form specified by the Board of Directors, and, in connection therewith, if the proposed transfer may result in a limitation on the use of, or a loss of, any NOLs, the Board of Directors shall have the right, but not the duty, to cause the Corporation to refuse to transfer such Shares to the proposed transferee. All contracts for the sale or other transfer of Shares shall be subject to the provisions of Article Fourth. For purposes of this Article Fourth, the term "Shares" includes any option, contingent purchase right, warrant, convertible debt instrument, put, contract or similar interest or instrument with respect to Shares. c) Notwithstanding any other provision of this Certificate of Incorporation to the contrary, and subject to the provisions of subsection 4(d), there shall be a limit on the number of Shares of capital stock of the Corporation owned by any stockholder of the Corporation as set forth in the following sentence, such limitation herein referred to as the "Limit." No person or entity shall at any time directly or indirectly acquire any Shares of any class of stock of the Corporation which could cause such person or entity (1) to be treated as a "5-percent shareholder" withinservice (within the meaning of Treasury Regulation Section 382 of the Code, (2) to be treated as a holder of capital stock of the Corporation in an amount that could otherwise result in a limitation on the use of, or loss of, the Corporation's NOLs, or (3) to be the beneficial owner (as such term is defined in Rule l3d-3 promulgated under the Securities Exchange Act of 1934, as amended or any successor or replacement rule) of more than 4.5% of the outstanding Shares of capital stock of the Corporation. Shares of any class of stock of the Corporation which are proposed to be acquired by a person in excess of the Limit at any time shall be deemed "Excess Shares." (i) Any contract for the sale or other transfer of Shares of any class of stock of the Corporation which would, if consummated, result in a transferee owning Excess Shares, and any transfer of Shares of any class of stock of the Corporation which would result in a transferee owning Excess Shares shall, as to the Excess Shares, be null and void and be deemed an acquisition by such transferee of such Excess Shares for the account of the Corporation. All Excess Shares held by such transferee for the account of the Corporation shall cease to be outstanding and shall cease to be entitled to dividends, voting rights and other benefits with respect to such Excess Shares, excepting only the holder's right to payment from the Corporation of the price determined and payable as set forth below. (ii) Upon receipt of notice of the existence of Excess Shares, the Corporation, at the direction of the Board of Directors, by notice to the holder thereof, may demand that the holder deliver the Excess Shares to the Corporation. Upon issuance of such demand, the Excess Shares shall be deemed cancelled1.409A-1(h)), and the holder shall be entitled to receive from the Corporation a price determined and payable as hereinafter set forth. Subject to the limitation on payment set forth below, the price of each Excess Share called for delivery shall be the average daily per share closing sales price if the class of stock of the Corporation comprising the Excess Share is listed on a national securities exchange, or on the National Association of Securities Dealers Inc. C-2 Automated Quotation system or any similar or successor system and if such class of stock is not so listed, shall be the mean between the average published per share closing bid and asked prices, in each case during the thirty day calendar period ending on the business day prior to receipt by the holder of the notice for delivery, or if there have been no sales on a national securities exchange or such system and no published bid and asked quotations with respect to such class of stock of the Corporation during such thirty-day calendar period, the price shall be the price determined by the Board of Directors in good faith. (iii) Unless the Board of Directors shall determine that it is in the interest of the Corporation to make earlier payment of all of the amount determined as the price per share in accordance with subsection 4(c)(ii), the price shall be payable only upon the liquidation of the Corporation and shall not exceed an amount which is the sum of the per share distributions designated as liquidation distributions and return of capital distributions declared with respect to other Shares of the Corporation of the same class or series, and no interest shall accrue with respect to the period subsequent to the issuance by the Corporation of the demand to the date of such payment. (d) The Board of Directors in their discretion may exempt from the Limit (i) ownership of certain designated Shares while owned by a person or entity who has provided the Board of Directors with evidence and assurance acceptable to the Board of Directors that no NOLs of the Corporation would be lost or limited thereby, or (ii) any other ownership if the Board of Directors determine that such exception is in the best interests of the Corporation. (e) Nothing contained in the Certificate of Incorporation, or in this Article Fourth shall limit the authority of the Board of Directors to take such other action as they deem necessary or advisable to protect the value of the NOLs to the Corporation. (f) if any provision of this Article Fourth or any application of any such provision is determined to be invalid by an federal or state court having jurisdiction over the issue, the validity of the remaining provisions shall not be affected and other applications of such provisions shall be affected only to the extent necessary to comply with the determination of such court. To the extent this Article Fourth may be inconsistent with any other provision, this Article Fourth shall be controlling. 3. ARTICLE SIXTH is amended as follows: (a) Article Sixth (b)(12) is amended to read as follows: "(12) [reserved]". (b) Article Sixth (b)(13) is amended by deleting the comma and placing a period after the word "persons" in the seventeenth line and deleting the rest of the sentence. (c) Article Sixth (b)(23) is amended by placing a period after the word "determined" in the tenth line thereof and deleting the rest of the sentence. C-3 (c) Article Sixth (b) (27) is amended to read as follows: "(27) [reserved]." 4. ARTICLE ELEVENTH is amended by deleting ":(i)" in the fifteenth and sixteenth line thereof and deleting the semicolon and replacing it with a period in the eighteenth line thereof and deleting the rest of the sentence. 5. ARTICLE TWELFTH is amended by placing a period after the word "inconsistencies" in the sixteenth line thereof and deleting the rest of the sentence. C-4 EXHIBIT D --------- AMENDED AND RESTATED BYLAWS --------------------------- OF -- B.H.I.T., INC. -------------- ARTICLE 1. THE CORPORATION, DEFINITIONS 1.1. Name. The corporation governed by these By-Laws is herein referred to as the "Corporation" and shall be known by the name "B.H.I.T., INC." Under circumstances in which the Directors determine that the use of the name "B.H.I.T., INC." is not practicable, legal and convenient, they may as appropriate, subject to the approval of the holders of a majority of the Corporation's outstanding Common Stock, cause the Corporation's Certificate of Incorporation (the "Certificate") to be amended to change the name of the Corporation so that the Corporation may use and adopt another name under which the Corporation may hold property or operate in any jurisdiction. 1.2. Place of Business. The Corporation shall maintain an office, and shall designate a resident agent for the service of process (whose name and address shall be reported from time to time to the Secretary of State of Delaware), in Delaware. The Corporation may have such other offices or places of business within or without the State of Delaware as the Directors may from time to time determine. 1.3. Purpose of the Corporation. The purpose of the Corporation is to engage in any lawful activity for which corporations may be engaged under the Delaware General Corporation Law. ARTICLE 2. DIRECTORS 2.1. Number, Term of Office, Qualification of Directors. There shall be no fewer than three nor more than nine Directors. The range in the authorized number of Directors may be changed by vote of the holders of a majority of the Shares, and the exact number within such range shall be specified, by the Directors from time to time. Each Director shall hold office for a term of one year or until the election and qualification' of his successor. At each Annual Meeting of Shareholders, the Shareholders shall elect successors to the Directors, unless the number of Directors is then being reduced. There shall be no cumulative voting in the election of Directors. Directors may be re-elected without limit as to the number of times. A Director shall be an individual at least 21 years of age who is not under legal disability. Unless otherwise D-1 required by law or by action of the Directors, no Director shall be required to give bond, surety or security in any jurisdiction for the performance of any duties or obligations hereunder. The Directors in their capacity as Directors shall not be required to devote their entire time or any specified portion of their time to the business and affairs of the Corporation. 2.2. Compensation and Other Remuneration. Directors shall not be entitled to receive, directly or indirectly, any remuneration for services rendered to the Corporation in any capacity, including, without limitation, services as an officer of or consultant to the Corporation, legal, accounting or other professional services, or otherwise. 2.3. Resignation. Removal and Death of Directors. A Director may resign at any time by giving written notice to the remaining Directors. Such resignation shall take effect on the date such notice is given or at any later time specified in the notice. A Director may be removed at any time with or without cause by vote or by written consent of the holders of a majority of the Shares outstanding or, unless otherwise prohibited by Delaware corporate law, with cause by a majority of the remaining Directors. For purposes of the immediately preceding sentence "cause" shall include, without limitation, any physical and/or mental inability, due to a condition or illness which is expected to be of permanent or indefinite duration, to perform the duties of a Director. Upon the resignation or removal of any Director, or his otherwise ceasing to be a Director, he shall account to the remaining Director or Directors as they require for all property which he holds as Director and shall thereupon be discharged as Director. Upon the incapacity or death of any Director, his legal representative shall perform the acts, if any, set in the preceding sentence and the discharge mentioned therein shall run to such legal representative and to the incapacitated Director, or the estate of the deceased Director, as the case may be. 2.4. Vacancies. If any or all of the Directors cease to be Directors hereunder, whether by reason of resignation, removal, incapacity, death or otherwise, such event shall not terminate the Corporation or affect its continuity. Until vacancies are filled, the remaining Director or Directors may exercise the power of the Directors hereunder. Vacancies among the Directors (including vacancies created by increases in the number of Directors) shall be filled for the unexpired term by persons ratified by the remaining Directors. If at any time there shall be no Directors in office, successor Directors shall be elected by the Shareholders as provided in Section 6.6. 2.5. Actions by Directors. The Directors may act with or without a meeting. A quorum for all meetings of the Directors shall be a majority of the Directors. Unless specifically provided otherwise in the Certificate or these By-Laws, any action of the Directors may be taken at a meeting by vote of a majority of the Directors if a quorum is present, or without a meeting by written consent of all of the Directors filed with the minutes of proceedings of the Board of Directors. Directors may conduct meetings by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. An annual meeting of the Directors shall be held at substantially the same time as the Annual Meeting of Shareholders. Regular meetings shall be held at least four times per year at such times as shall be fixed by the Directors. No notice shall be required of an annual or a regular meeting of Directors. D-2 Special meetings of the Directors shall be called by the Chairman upon the request of any two Directors and may be called by the Chairman on his own motion, on not less than two days' notice to each Director if the meeting is to be held in person, and/or not less than eight hours' notice if the meeting is to be held by conference telephone or similar equipment. Such notice, which shall state the purpose of the meeting, shall be by oral, telegraphic, telephonic or written communication stating the time and place therefor. Notice of any special meeting need not be given to any Director entitled thereto who submits a written and signed waiver of notice, either before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. Regular or special meetings of the Directors may be held within or without the State of Delaware, at such places as shall be designated by the Directors. The Directors may adopt such rules and regulations for their conduct and the management of the affairs of the Corporation as they may deem proper and as are not inconsistent with the Certificate or these By-Laws. 2.6. Committees. The Directors may appoint from among their number an executive committee and such other standing committees, including without limitation, audit and nominating committees, or special committees as the Directors determine. Each standing committee shall consist of three or more members. Each committee shall have such powers, duties and obligations as may be required by any governmental agency or other regulatory body or as the Directors may deem necessary and appropriate. ARTICLE 3. DIRECTORS' POWERS 3.1. Power and Authority of Directors. The Directors, subject only to the specific limitations contained in the Certificate and these By-Laws, shall have, without further or other authorization, free from any power of control on the part of the Shareholders, full, absolute and exclusive power, control and authority over the Corporation's assets and over the business and affairs of the Corporation to the same extent as if the Directors were the sole owners thereof in their own right, and to do all such acts and things as in their sole judgment and discretion are necessary or incidental to, or desirable for, the carrying out of any of the purposes of the Corporation or conducting the business of the Corporation. Any determination made in good faith by the Directors of the purposes of the Corporation or the existence of any power or authority hereunder shall be conclusive and each such determination and the basis therefor shall be set forth in the minutes of meetings of the Directors. In construing the provisions of the Certificate or these By-Laws, the presumption shall be in favor of the grant of powers and authority to the Directors. The enumeration of any specific power or authority herein shall not be construed as limiting the general powers or authority or any other specified power or authority conferred herein by statute or rule of law upon the Directors. D-3 3.2. Specific Powers and Authorities. Subject only to the express limitations contained in the Certificate and these By-Laws and in addition to any powers and authorities conferred by the Certificate and these By-Laws or which the Directors may have by virtue of any present or future statute or rule of law, the Directors without any action or consent by the Shareholders shall have and may exercise, at any time and from time to time, the following powers and authorities which may or may not be exercised by them in their sole judgment and discretion, and in such manner, and upon such terms and conditions as they may, from time to time, deem proper: 3.2.1. To retain, invest and reinvest the capital or other funds of the Corporation and, for such consideration as they deem proper, to purchase or otherwise acquire for cash or other property or through the issuance of Shares or other securities of the Corporation and hold for investment real or personal property of any kind, tangible or intangible, in entirety or in participation and to possess-and exercise all the rights, powers and privileges appertaining to the ownership of the Corporation's assets with respect thereto; 3.2.2. To sell, rent, lease, hire, exchange, release, partition, assign, mortgage, pledge, hypothecate, grant security interest in, encumber, negotiate, convey, transfer or otherwise dispose of or grant interests in the Corporation's assets by deeds, financing statements, security agreements and other instruments, trust deeds, assignments, bills of sale, transfers, leases or mortgages, for any of such purposes. Provided that any Board resolution authorizing the sale, lease, or exchange of all or substantially all of the Corporation's assets must be approved by the holders of a majority of the outstanding Shares entitled to vote thereon; 3.2.3. To enter into leases, contracts, obligations, and other agreements for a term extending beyond the term of office of the Directors and beyond the possible termination of the Corporation or for a lesser term; 3.2.4. To borrow money and give negotiable or non-negotiable instruments therefor; to guarantee, indemnify or act as surety with respect todelayed payment or performance of obligations of third parties; to enter into other obligations on behalf of the Corporation; and to assign, convey, transfer, mortgage, subordinate, pledge, grant security interests in, encumber or hypothecate the Corporation's assets to secure any of the foregoing; 3.2.5. To lend money, whether secured or unsecured, to any person, including any person affiliated with the Corporation; 3.2.6. To create reserve funds for any purpose; 3.2.7. To incur and pay out of the Corporation's assets any charges or expenses, and disburse any funds of the Corporation, which charges, expenses or disbursements are, in the opinion of the Directors, necessary or incidental to or desirable for the carrying out of any of the purposes of the Corporation or conducting the business of the Corporation, including, without limitation, taxes and other governmental levies, charges and assessments, of whatever kind or nature, imposed upon or against the Directors in connection with the Corporation or the Corporation's assets or upon or against the Corporation's assets or any part thereof, and for any of the purposes herein; D-4 3.2.8. To deposit funds of the Corporation in or with banks, trust companies, savings and loan associations, money market organizations and other depositories or issuers of depository-type accounts, whether or not such deposits will draw interest or be insured, the same to be subject to withdrawal or redemption on such terms and in such manner and by such person or persons (including any one or more Directors, officers, agents or representatives) as the Directors may determine; 3.2.9. To possess and exercise all the rights, powers and privileges appertaining to the ownershipdistribution of all or any ~~mortgages~~ portion of such amounts to which the Participant is entitled under this Plan and/or ~~securities issued or created by, or interests~~any Award is required in ~~any person, forming part~~order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the ~~Corporation's assets,~~Code, then such portion deferred under this Section 19 shall be paid or distributed to the ~~same extent~~Participant in a lump sum on the earlier of (a) the date that ~~an individual might and, without limiting the generality~~is six (6) months following termination of the foregoing, to vote or give consent, request or notice, or waive any notice, either in person or by proxy or power of attorney, with or without power of substitution, to one or more persons which proxies and powers of attorney may be for meetings or action generally or for any particular meeting or action, and may include the exercise of discretionary powers; 3.2.10. To enter into joint ventures, general or limited partnerships and any other lawful combinations or associations; 3.2.11. To elect or appoint officers of the Corporation (none of whom needs beParticipant’s employment, (b) a Director), who may be removed or discharged at the discretion of the Directors, such officers to have such powers and duties, and to serve such terms, as may be prescribed by the Directors or by these By-Laws of the Corporation, if adopted, or as may pertain to such offices; 3.2.12. Subject to the provisions of Sections 7.5 and 7.6, to engage or employ any persons as agents, representatives, employees, or independent contractors (including without limitation, real estate advisors, investment advisors, transfer agents, registrars, underwriters, accountants, attorneys at law, real estate agents, managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, in connection with the management of the Corporation's affairs or otherwise, and to pay compensation from the Corporation for services in as many capacities as such person may be so engaged or employed and notwithstandingdate that ~~any such person~~ is or is an Affiliated person of, an officer or Director of the Corporation, and, except as prohibited by law, to delegate any of the powers and duties of the Directors to any one or more Directors, agents, representatives, officers, employees, independent contractors or other persons. 3.2.13. To determine whether moneys, securities or other assets received by the Corporation shall be charged or credited to income or capital or allocated between income and capital, including the power to amortize or fail to amortize any part or all of any premium or discount, to treat all or any part of the profit resulting from the maturity or sale of any asset, whether purchased at a premium or at a discount, as income or capital, or apportion the same between income and capital, to apportion the sales price of any asset between income and capital, and to determine in what manner any expenses or disbursements are to borne as between income and capital, whether or not in the D-5 absence of the power and authority conferred by this subsection such moneys, securities or other assets would be regarded as income or as capital or such expense or disbursement would be charged to income or capital; to treat any dividend or other distribution on any investment as income or capital or to apportion the same between income and capital; to provide or fail to provide reserves for depreciation, amortization, doubtful collection, or obsolescence in respect of all or any part of the Corporation's assets subject to depreciation, amortization, collection, or obsolescence in such amounts and by such methods as they shall determine; and to determine the method or form in which the accounts and records of the Corporation shall be kept and to change from time to time such method or form; 3.2.14. To determine from time to time the value of all or any part of the Corporation's Assets and of any services, securities, property or other consideration to be furnished to or acquired by the Corporation, and from time to time to revalue all or any part of the Corporation's assets in accordance with such valuations or other information, which valuations or other information may be provided by other persons retained for the purpose, as the Directors, in their sole judgment, may deem necessary; 3.2.15. To collect, sue for, and receive all sums of money coming due to the Corporation, and to engage in, intervene in, prosecute, join, defend, compound, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, controversies, demands or other litigation relating to the Corporation, the Corporation's assets or the Corporation's affairs, to enter into agreement therefor, whether or not any suit is commenced or claim accrued or asserted and, in advance of any controversy, to enter into agreements regarding arbitration, adjudication or settlement thereof; 3.2.16. To renew, modify, release, compromise, extend, consolidate, or cancel, in whole or in part, any obligation to or of the Corporation; 3.2.17. To purchase and pay for out of the Corporation's assets insurance contracts and policies insuring the Corporation's assets against any and all risks and insuring the Corporation, the Directors, the Shareholders, the officers of the Corporation, or any or all of them, against any and all claims and liabilities of every nature asserted by any person arising by reason of any action alleged to have been taken or omitted by the Corporation, or by the Directors, Shareholders or officers; 3.2.18. To cause legal title to any of the Corporation's assets to be held by or in the name of the Corporation or one or more of the Directors or any other person as the Directors may determine, on such terms and in such manner and with such powers as are consistent with Section 144 of the Delaware General Corporation Law, as amended, and with disclosure that the Corporation or Directors are interested therein; D-6 3.2.19. To adopt an accounting method for the Corporation, and from time to time change such accounting method, and to engage a firm of independent certified public accountants to audit the financial records of the Corporation; 3.2.20. To adopt and use a seal (but the use of a seal shall not be required for the execution of instruments or obligations of the Corporation); 3.2.21. With respect to any securities issued by the Corporation, to provide that the same may be signed by the manual signature of one or more Directors or officers, or persons who have theretofore been Directors or officers or by the facsimile signature of any such person (with or without countersignature by a transfer agent, registrar, authenticating agent or other similar person), and to provide that ownership of such securities may be conclusively evidenced by the books and records of the Corporation or any appropriate agent of the Corporation without the necessity of any certificate, all as determined by the Directors from time to time to be consistent with normal commercial practices; 3.2.22. To declare and pay cash distributions to Shareholders as provided in Section 6.4; 3.2.23. To adopt a distribution reinvestment or similar such plan for the Corporation, and to provide for the cost of the administration thereof to be borne by the Corporation; 3.2.24. To file any and all documents and take any and all such other action as the Directors in their sole judgment may deem necessary in order that the Corporation may lawfully conduct its business in any jurisdiction; 3.2.25. To participate in any reorganization, readjustment, consolidation, merger, dissolution, sale or purchase of assets, lease or similar proceedings of any corporation, partnership or other organization in which the Corporation shall have an interest and in connection therewith to delegate discretionary powers to any reorganization, protective or similar committee and to pay assessments and other expenses in connection therewith; 3.2.26. To do all other such acts and things as are incident to the foregoing, and to exercise all powers which are necessary or useful to carry on the business of the Corporation, to promote any of the purposes for which the Corporation is formed, and to carry out the provisions of the Certificate and these By-Laws. 3.3. Regulations. The Directors may, but are not required to, make, adopt, amend or repeal regulations containing provisions relating to the business of the Corporation, the conduct of its affairs, its rights or powers and the rights or powers of its Shareholders, Directors or officers not inconsistent with law or with these By-Laws. Such regulations may provide for the appointment of assistant officers or agents of the Corporation, subject, however, to the right of the Directors to remove or discharge such officers or agents. D-7 ARTICLE 4. ADVISOR AND OTHER AGENTS: ANNUAL TOTAL OPERATING EXPENSES 4.1. Employment of Employees, Agents. etc. The Directors are responsible for the general policies of the Corporation and for such general supervision of the business of the Corporation conducted by all officers, agents, employees, advisors, managers or independent contractors of the Corporation as may be necessary to insure that such business conforms to the provisions of the Certificate and these By-Laws. However, the Directors shall have the power to retain and/or to appoint, employ or contract with any person (including any corporation, partnership, or trust in which one or more of the Directors may be directors, officers, stockholders, partners or trustees) as the Directors may deem necessary or proper for the transaction of the business of the Corporation, and for such purpose may grant or delegate such authority to any such person as the Directors may in their sole discretion deem necessary or desirable without regard to whether such authority is normally granted or delegated by directors. The Directors shall have the power to determine the terms and compensation of any person whom they may employ or with whom they may contract. ARTICLE 5. PROHIBITED ACTIVITIES 5.1. Obligors Default. Notwithstanding any provision in the Certificate or in any Article of these By-Laws, when an obligor to the Corporation is in default under the terms of any obligation to the Corporation, the Directors shall have the power to pursue any remedies permitted by law which in their sole judgment are in the interest of the Corporation and the Directors shall have the power to enter into any necessary investment, commitment or obligation of the Corporation resulting from the pursuit of such remedies that are necessary or desirable to dispose of property acquired in the pursuit of such remedies. 5.2. Percentage Determinations. Whenever standards contained in this Article V are expressed in terms of a percentage, whether of value, total assets, cost or otherwise, such percentage shall be determined at the time of the issuance of a commitment by the Corporation for a transaction covered by such standard hereunder. ARTICLE 6. SHARES AND SHAREHOLDERS 6.1. Shares. The Corporation shall issue shares of Common Stock ("Shares"), each with a par value of $0.01, and each Share shall be identical in all respects with every other Share. Each Share shall entitle the holder thereof to one vote on all matters upon which Shareholders are entitled to vote. The total number of Shares which the Corporation shall have authority to issue shall be 20,000,000. The Shares may be issued for such consideration as the Directors shall determine, including upon the conversion of convertible debt, or by way of D-8 ~~Share distribution or Share split in the discretion of the Directors. Subject to the Certificate, outstanding Shares shall be assignable and transferable. Shares reacquired by the Corporation shall~~ no longer be deemed outstanding and shall have no voting or other rights unless and until reissued. Shares reacquired by the Corporation may be cancelled by action of the Directors. All Shares shall be fully paid and nonassessable by or on behalf of the Corporation upon receipt of full consideration if issued by way of Share distribution, Share split, or upon the conversion of convertible debt. The Shares shall not entitle the holder to preference, preemptive, conversion, or exchange rights of any kind, except as the Directors may specifically determine with respect to any Shares at the time of issuance of such Shares and except as specifically required by law. 6.2. Shares Deemed Personal Property. The Shares shall be personal property and shall confer upon the holders thereof the interest and rights specifically set forth in these By-Laws. The death, insolvency or incapacity of a Shareholder shall not dissolve or terminate the Corporation or affect its continuity nor give his legal representative any rights whatsoever, whether against or in respect of other Shareholders, the Directors or the Corporation's assets or otherwise except the sole right to demand and, subject to the provisions of these By-Laws, regulations, if adopted, and any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such Shareholder. 6.3. Share Record; Issuance and Transferability of Shares. Records shall be kept by or on behalf of and under the direction of the Directors, which shall contain the names and addresses of the Shareholders, the number of Shares held by them respectively, and the number of certificates, if any, representing the Shares, and in which there shall be recorded all transfers of Shares. The persons in whose names Shares are so recorded shall be deemed the absolute owners of such Shares for all purposes of this Corporation; but nothing herein shall be deemed to preclude the Directors or officers, or their agents or representatives from inquiring as to the actual ownership of Shares. Until a transfer is duly registered on the records of the Corporation, the Directors shall not be affected by any notice of such transfer, either actual or constructive. The payment thereof to the person in whose name any Shares are registered on the records of the Corporation or to the duly authorized agent of such person (or if such Shares are so registered in the names of more than one person, to any one of such persons or to the duly authorized agent of such person) shall be sufficient discharge for all distributions payable or deliverable in respect of such Shares. In case of the loss, mutilation or destruction of any certificate for Shares, the Directors may issue or cause to be issued a replacement certificate on such terms and subject to such rules and regulations as the Directors may from time to time prescribe. Nothing in these By-Laws shall impose upon the Directors or a transfer agent a duty, or limit their rights, to inquire into adverse claims. Transfer and issuance of Shares is at all times subject to the provisions of the Certificate. 6.4. Distributions to Shareholders. The Directors, in their discretion, shall declare and pay to Shareholders quarterly distributions in cash or other property, out of current or accumulated income, capital, capital gains, principal, surplus, proceeds from the increase or refinancing of Corporation obligations, from the repayment of loans made by the Corporation, from the sale D-9 of portions of the Corporation's assets, or from any other source as the Directors in their discretion shall determine. Provided, no such distribution shall impair the capital of the Corporation or otherwise violate the provisions of the Delaware General Corporation Law. Shareholders shall have no right to any distribution unless and until declared by the Directors. The date for determining the Shareholders who are entitled to participate in such distributions shall be established by the Directors within 45 days after the last day of the fiscal quarter with respect to which such distribution shall be made. The Directors shall furnish the Shareholders at the time of each such distribution with a statement in writing advising as to the source of funds so distributed or, if the source thereof has not then been determined, a written statement disclosing the source shall be sent to each Shareholder who received the distribution not later than (a) 60 days after the close of the fiscal year in which the distribution was made, or (b) promptly after the independent auditors of the Corporation have completed, or undertaken sufficient actions toward completion of, the annual audit of the Corporation, so that the Directors can determine the source of such distribution, whichever event shall occur later. 6.5. Transfer Agent, Distribution Disbursing Agent and Registrar. The Directors shall have power to employ one or more transfer agents, distribution disbursing agents, distribution reinvestment plan agents, and registrars and to authorize them on behalf of the Corporation to keep records, to hold and disburse any distributions and to have and perform powers and duties customarily had and performed by transfer agents, distribution disbursing agents, distribution reinvestment plan agents, and registrars as may be conferred upon them by the Directors. 6.6. Shareholders' Meetings and Consents. The Directors shall cause to be called and held an Annual Meeting of Shareholders at such time and such place as they may determine, at which Directors shall be elected and any other proper business may be conducted. The Annual Meeting of Shareholders shall be held within six months after the end of each fiscal year, after not fewer than 10 days nor more than 60 days' written notice of such meeting has been sent to Shareholders by the Directors and after delivery to the Shareholders of the Annual Report for the fiscal year then ended. Special meetings of Shareholders may be called by a majority of the Directors and shall be called by the Chairman upon the written request of Shareholders holding not less than 10% of the outstanding Shares of the Corporation. Within ten business days after a written request either in person or by registered mail stating the purpose of the meeting requested by Shareholders, the Corporation shall provide all Shareholders written notice (either in person or by mail) of a meeting and the purpose of such meeting to be held on a date not fewer than 10 days nor more than 60thirty (30) days after the date of ~~such notice, at a time and place convenient to Shareholders. The call and notice of any special meeting shall state~~ the ~~purpose of~~Participant’s death or (c) the meeting and no other business shall be considered at such meeting. If there shall be no Directors, a special meeting of the Shareholders shall be held promptly for the election of successor Directors. A majority of the outstanding Shares entitled to vote at any meeting represented in person or by proxy shall constitute a quorum at such meeting. Whenever Shareholders, are required or permitted to take any action, such action may be taken, exceptearliest date as ~~otherwise provided by the Certificate or these By-Laws or required by law, by a majority of the votes cast at a meeting of Shareholders at which a quorum~~ is ~~present by holders of Shares entitled to vote thereon, or D-10~~ without a meeting by written consent setting forth the action so taken signed by the holders of a majority of the outstanding Shares entitled to vote thereon or such larger proportion thereof as would be required for a vote of Shareholders at a meeting. Any written consent may be revoked by a writing received by the Corporation prior to, but not after, the time that written consents of the number of Shares required to authorize the proposed action have been filed with the Corporation. Notwithstanding this or any other provision of the Certificate or these By-Laws, no vote or consent of Shareholders shall be required to approve the sale, exchange or other disposition pledging, hypothecating, granting security interests in, mortgaging, encumbering or leasing of by the Directors of less than half of the assets of the Corporation, which is presumed to constitute less than all or substantially all of the assets of the Corporation. 6.7. Proxies. Whenever the vote or consent of Shareholders is required or permitted under ~~these By-Laws, such vote or consent may be given either directly by~~Section 409A. For purposes of clarity, the Shareholder or by a proxy. The Directors may solicit such proxies from the Shareholders or any of them in any matter requiring or permitting the Shareholders' vote. or consent. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. 6.8. Reports to Shareholders. The Directors shall cause to be prepared and mailed to the Shareholders not later than 120 days after the close of each fiscal year of the Corporation, and in any event not less than 15 days prior to the Corporation's annual meeting of Shareholders, a report of the business and operation of the Corporation during such fiscal year, which report shall constitute the accounting of the Directors for such fiscal year. The report shall be in such form and have such content as the Directors deem proper, but shall in any event include (a) a balance sheet, an income statement and a surplus statement, each prepared in accordance with generally accepted accounting principles, shall be audited by an independent certified public accountant and shall be accompanied by the report of such accountant thereon, and (b) a description of the material terms and circumstances of any transactions between the Corporation and any Director, Officer or any Affiliate thereof, including without limitation purchases from, loans to or from, or joint ventures with the Corporation, and a statement that a majority of the Directors determined that such transactions were fair and reasonable to the Corporation and on terms not less favorable than those available from unaffiliated third parties. 6.9. Fixing Record Date. For the purpose of determining the Shareholders who are entitled to notice of or to vote or act at any meeting or any adjournment thereof or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution, or for the purpose of any other action, the Directors shall fix a date not more than 60 nor less than 10 days prior to the date of any meeting of Shareholders nor more than 60 days prior to any other action as a record date for the determination of Shareholders entitled to vote at such meeting or any adjournment thereof or to take any other action. Any Shareholder who was a Shareholder at the time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to take such other action, even though he has since that date disposed of his Shares, and no Shareholder becoming such after that date shall be so entitled to vote at such meeting or any adjournment thereof or to take such other action. D-11 6.10. Notice to Shareholders. Any notice of meeting or other notice, communication or report to any Shareholder shall be deemed duly delivered to such Shareholder when such notice, communication or report is deposited, with postage thereon prepaid, in the United States mail, addressed to such Shareholder at his address as it appears on the records of the Corporation or is delivered in person to such Shareholder. 6.11. Inspection by Shareholders. Inspection of the books and records of the Corporation shall be permitted to the same extent as permitted under the laws of Delaware. ARTICLE 7. LIABILITY OF DIRECTORS, SHAREHOLDERS AND OFFICERS AND OTHER MATTERS 7.1. Elimination of Certain Liability of Directors. A Director of the Corporationsix (6) month delay shall not be personally liable to the Corporation or its Shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the Director's duty of loyalty to the Corporation or its Shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the Director derived an improper personal benefit. 7.2. Indemnification and Insurance. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but,apply in the case of ~~any such amendment, only~~severance pay contemplated by Treasury Regulation Section 1.409A-1(b)(9)(iii) to the extent ~~that such amendment permits~~of the ~~Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability~~limits set forth therein. Any remaining payments due under this Plan and ~~loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to~~any Award shall be paid ~~in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue~~ as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) D-12 initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which makes it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its Shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its Shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate, these By-Laws, agreement, vote of Shareholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or. agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. D-13 7.3. Right of Directors and Officers to Own Shares or Other Property and to Engage in Other Business. Any Director or officer may acquire, own, hold and dispose of Shares in the Corporation, for his individual account, and may exercise all rights of a Shareholder to the same extent and in the same manner as if he were not a Director or officer. Any Director or officer may have personal business interests and may engage in personal business activities, which interests and activities may include businesses similar to or competitive with the business of the Corporation. Subject to the provisions of Article V, any Director or officer may be interested as trustee, officer, director, stockholder, partner, member, advisor or employee, or otherwise have a direct or indirect interest in any person who may be engaged to render advice or services to the Corporation, and may receive compensation from such person as well as compensation as Director, officer or otherwise hereunder and no such activities shall be deemed to conflict with his duties and powers as Director or officer. 7.4. Transactions with Affiliates. The Corporation shall not engage in transactions with any Director or officer, or any Affiliated person of such person, except to the extent that each such transaction has, after disclosure of such affiliation, been approved or ratified by the affirmative vote of a majority of the Directors who are not interested parties in the transactions after a determination by them that: 7.4.1. The transaction is fair and reasonable to the Corporation and its Shareholders; 7.4.2. The terms of such transaction are at least as favorable as the terms of any comparable transactions made on an arm's length basis; 7.4.3. Payments to any Director or officer for services rendered in a capacity other than as Director, or officer may only be made upon determination that: (a) the compensation is not in excess of their compensation paid for any comparable services; and (b) the compensation is not greater than the charges for comparable services available from others who are competent and not affiliated with any of the parties involved. 7.5. Persons Dealing With Directors or Officers. Any act of the Directors or officers purporting to be done in their capacity as such shall, as to any persons dealing with such Directors or officers, be conclusively deemed to be within the purposes of this Corporation and within the powers of the Directors and officers. No person dealing with the Directors or any of them, or with the authorized officers, agents or representatives of the Corporation shall be bound to see to the application of any funds or property passing into their hands or control. The receipt of the Directors or any of them, or of authorized officers, agents, or representatives of the Corporation, for moneys or other consideration, shall be binding upon the Corporation. D-14 7.6. Reliance. The Directors and officers may consult with counsel (which may be a firm in which one or more of the Directors or officers is or are members) and the advice or opinion of such counsel shall be full and complete personal protection to all of the Directors and officers in respect of any action taken or suffered by them in good faith and in reliance on or in accordance with such advice or opinion. In discharging their duties, Directors and officers shall be fully protected in relying in good faith upon financial statements of the Corporation represented to them to be correct by the Chairman or the officer of the Corporation having charge of its books of account, or stated in written reports by an independent certified public accountant fairly to present the financial position of the Corporation. The Directors may rely upon any instrument or other document believed by them to be genuine. ARTICLE 8. DURATION, TERMINATION, AMENDMENT AND REORGANIZATION OF CORPORATION 8.1. Duration and Termination of Corporation. The duration of he Corporation shall be perpetual unless terminated in accordance with the Certificate or these By-Laws or by operation of law. The Directors shall at all times be empowered to cause the termination of the Corporation by vote of a majority of the Directors and the approval of the holders of a majority of the outstanding Shares. Any determination by the Directors of the date upon which termination shall occur shall be reflected in a vote of or written instrument signed by a majority of all of the Directors then in office, and ratified by the holders of a majority of the outstanding Shares; provided, however, that any plan for the termination of the Corporation which contemplates the distribution to the Shareholders of securities or other property in kind (other than the right promptly to receive cash) shall require the vote or consent of the holders of two-thirds of the outstanding Shares. 8.1.1. Upon the termination of the Corporation and unless otherwise provided in a plan for termination approved by the holders of two-thirds of the Shares outstanding and a majority of the Directors: (a) the Corporation shall carry on no business except for the purpose of winding up its affairs; (b) the Directors shall proceed to wind up the affairs of the Corporation and all of the powers of the Directors under these By-Laws shall continue until the affairs of the Corporation shall have been wound up, including the power to fulfill or discharge the contracts of the Corporation, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Corporation's assets to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business (and provided that the Directors may, if permitted by applicable law, and if they deem it to be in the best interest of the Shareholders, appoint a liquidating trust, or agent, or other entity to perform one or more of the foregoing functions); and D-15 (c) after paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Directors or any liquidating trust, agent or other entity appointed by them, shall distribute the remaining Corporation's assets among the Shareholders, pro rata, according to the number of Shares held by each. If any plan for the termination of the Corporation approved by the holders of two-thirds of the outstanding Shares and agreeable to a majority of the Directors provides for actions of the Directors other than aforesaid, the Directors shall have full authority to take all action as in their opinion is necessary or appropriate to implement such plan. 8.1.2. After termination of the Corporation and distribution to the Shareholders as provided herein or in any said plan so approved by the Shareholders, the Directors shall execute and lodge among the records of the Corporation an instrument in writing setting forth the fact of such termination, and the Directors shall thereupon be discharged from all further liabilities and duties hereunder and the rights and interests of all Shareholders hereunder shall thereupon cease. 8.2. Merger. etc . Upon the vote or written consent of a majority of the Directors and with the approval of the holders of two-thirds of the Shares then outstanding, at a meeting the notice for which included a statement of the proposed action, the Directors may (a) merge the Corporation into, or sell, convey and transfer the Corporation's assets to, any corporation, association, trust or other organization, which may or may not be a subsidiary of the Corporation, in exchange for shares or securities thereof, or beneficial interests therein, or other consideration, and the assumption by such transferee of the liabilities of the Corporation and (b) thereupon terminate the Corporation and, subject to Section 8.1, distribute such shares, securities, beneficial interests, or other consideration, ratably among Shareholders in redemption of their Shares, provided, however, that the Shareholders would, thereafter, be the sole equity owners of such entity. 8.3. Amendment Procedure. The Certificate or these By-Laws (other than Section 2.1 hereof) may be amended by the vote or written consent of a majority of the Directors and of the holders of a majority of the outstanding Shares; provided, however, that no amendment which would reduce the priority of payment or amount payable to holders of Shares of the Corporation upon liquidation of the Corporation or that would diminish or eliminate any voting rights pertaining to holders of Shares shall be made unless approved by the vote or consent of the holders of two-thirds of the outstanding Shares present, in person or by proxy, and eligible to vote; provided further, however, that a majority of the Directors without the vote or consent of Shareholders may at any time amend the Certificate or these By-Laws to the extent deemed by the Directors in good faith to be necessary to clarify any ambiguities or correct any inconsistencies. D-16 ARTICLE 9. MISCELLANEOUS 9.1. Filing of Copies: References: Headings. The original or a copy of these By-Laws and of each amendment hereto shall be kept at the office of the Corporation where it may be inspected by any Shareholder. Anyone dealing with the Corporation may rely on a certificate by an officer of the Corporation as to whether or not any such amendments have been made, as to the identities of the Directors and officers, and as to any matters in connection with the Corporation hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an. officer of the Corporation to be a copy of this instrument or of any such amendments. In this instrument, and in such amendment, references to this instrument, and all expressions like "hereof," and "hereunder" shall be deemed to refer to this instrument as a whole as the same may be amended or affected by any such amendments. The masculine gender shall include the feminine gender and the neuter. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original. 9.2. Provisions of the Corporation in Conflict With Law or Regulations. If any provision of these By-Laws shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other provision of these By-Laws, and these By-Laws shall be carried out as if any such invalid or unenforceable provisions were not contained herein. 9.3. Binding Effect; Successors in Interest. Each person who becomes a Shareholder shall, as a result thereof, be deemed to have agreed to and to be bound by the provisions of these By-Laws. These By-Laws shall be binding upon and inure to the benefit of the Directors and the Shareholders and each of their respective successors, assigns, heirs, distributees and legal representatives. D-17 therein.

A-12

PROXY	BANYAN RAIL SERVICES INC.	PROXY
	ANNUAL MEETING OF STOCKHOLDERS July 1, 2010 2255 Glades Road, Suite 342-W Boca Raton, Florida 33431 11:00 a.m.

THIS PROXY B.H.I.T. INC. (Formerly Banyan Hotel Investment Fund) PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS OF B.H.I.T. INC. July __, 2000IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints ~~Harvey Polly~~C. Lawrence Rutstein and ~~Morton I. Kalb and each~~Diane T. Starzee, or ~~any~~either one of them ~~(with powers~~acting singly with full power of ~~substitution),~~substitution, the proxy or proxies ~~for~~of the undersigned to attend the Annual Meeting of Stockholders of Banyan Rail Services Inc., to be held on July 1, 2010, at 2255 Glades Road, Suite 342-W, Boca Raton, Florida 33431, beginning at 11:00 a.m. local time, and any adjournments, and to vote all shares of ~~common Stock held of record on June __, 2000 of B.H.I.T. Inc. (the "Corporation") which~~stock that the undersigned would be entitled to vote if personally present atin the ~~Special Meeting in Lieu of~~manner indicated below, and on any other matters properly brought before the Annual Meeting ~~of Shareholders (the "Meeting") to be held in New York, New York on July __, 2000, and~~or any ~~adjournment~~adjournments thereof, ~~upon the matters~~all as set forth in the May 26, 2010 Proxy Statement. The undersigned hereby acknowledges receipt of the Notice of ~~and~~Annual Meeting, Proxy Statement and Annual Report, including the Form 10-K for ~~said Meeting, copies~~the year ended December 31, 2009, of which have been received by the undersigned, and in their discretion, upon all other matters which may properly come before said meeting. Without otherwise limiting the generality of the foregoing, said proxies are directed to vote as follows: Please mark your votes FOR AGAINST ABSTAIN as in this example [ ] [ ] [ ] 1. ElectionBanyan Rail Services Inc.

PLEASE MARK YOUR CHOICE LIKE THIS x IN BLUE OR BLACK INK.

The Board of Directors ~~For, except~~ recommends a vote ~~withheld from the following nominee(s): ______________________________________ Nominees: Harvey Polly, Morton I. Kalb, Leo Yarfitz, Willis G. Ryckman. 2. Adoption of amended~~ FOR AGAINST ABSTAIN Certificate [ ] [ ] [ ] of Incorporation 3. Adoption of Amended FOR AGAINST ABSTAIN and Restated By-Laws [ ] [ ] [ ] 4. Approve the sale of the FOR AGAINST ABSTAIN Corporation's 50% [ ] [ ] [ ] ownership in Metro Franchising, LLC to Harvey Polly 1 5. In their discretion to FOR AGAINST ABSTAIN act upon such other [ ] [ ] [ ] matters as may properly come before the Meeting or any adjournment thereof This proxy, when properly executed, will be voted in the manner directed herein by the shareholder. If no specification is made, this proxy will be voted for all the nominees listed for Directors and in favor of the above proposals. Your proxy is important to assure a quorum at the Meeting whether or not you plan to attend the Meeting in person. You may revoke this proxy at any time, and the giving of it will not affect your right to attend the Meeting and vote in person. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. SIGNATURE(S)______________________ DATE _________________ NOTE: Please sign.

1. Election of Directors:

Paul S. Dennis, Gary O. Marino, Bennett Marks and Donald D. Redfearn

¨ Mark here to vote FOR all nominees

¨ Mark here to WITHHOLD from all nominees

For all EXCEPT – To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) below.

To approve our 2010 Stock Option and Award Plan

¨ Mark here to vote FOR the plan

¨ Mark here to vote AGAINST the plan

To ratify the appointment of Daszkal Bolton LLP as our independent auditor for the fiscal year ending December 31, 2010

¨ Mark here to vote FOR ratification of auditors

¨ Mark here to vote AGAINST ratification of auditors

(Signature should be exactly as name ~~appears. When shares are~~or names appear on this proxy. If stock is held ~~as joint tenants, both~~jointly each holder should sign. ~~When signing as~~If signature is by attorney, executor, administrator, trustee or guardian, please give full ~~title as such. If a corporation, please sign in full corporate name by president or other authorized officer~~title.)

Dated:_________________________________, 2010

__________________________________________

Signature

Signature if held jointly

I plan to attend the meeting: Yes ¨ No ¨

This proxy will be voted FOR all nominees, FOR the 2010 Stock Option and ~~if a partnership, please sign~~Award Plan and FOR the ratification of the auditors unless otherwise indicated, and in the ~~partnership name by authorized person.~~