8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

Date of Report: February 13, 2006

(Date of earliest event reported)

HEALTH PARTNERSHIP INC.

(Exact name of registrant as specified in the charter)

  COLORADO (State or other jurisdiction of incorporation)     000-28711 (Commission File No.)     84-1361341 (IRS Employer Identification No.)  

3111 North Seminary, Suite 1N

Chicago, Illinois 60657

(Address of Principal Executive Offices)

(312) 640-2975

Registrant’s telephone number including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

£	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On February 13, 2006, Health Partnership Inc., a Colorado corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Capital Partners For Health & Fitness, Inc., a North Carolina corporation (“Capital Partners”), Capital Partners Merger Sub, Inc., a North Carolina corporation and wholly-owned subsidiary of the Company (“Mergeco”), Capital Partners Acquisitions Sub, Inc., a North Carolina corporation and wholly-owned subsidiary of the Company (“Acquisitionco”), Randall Rohm and Thomas Flynn. On February 13, 2006, the terms and conditions of the Merger Agreement were either satisfied or waived and the transactions contemplated by the Merger Agreement were consummated. Pursuant to the Merger Agreement, a copy of which is attached hereto as Exhibit 99.1, Capital Partners became a wholly-owned subsidiary of the Company. The terms of the Merger Agreement and the effect of the merger transaction are more fully described in Item 2.01 of this Current Report on Form 8-K. Capital Partners’ predecessor was Kapital Engine Investments, Inc. (“Kapital Engine”). For purposes of this Current Report on Form 8-K, unless otherwise indicated, the meanings of the terms “Kapital Engine” and “Capital Partners” shall be synonymous.

Item 2.01 Completion of Acquisition or Disposition of Assets.

As previously stated in Item 1.01 of this Current Report on Form 8-K, the transactions contemplated by the Merger Agreement were consummated on February 13, 2006.

The Merger

Pursuant to the terms of the Merger Agreement, Mergeco merged with Capital Partners, with Capital Partners continuing to exist as the surviving corporation following this merger (the “Initial Merger”). Immediately thereafter, Capital Partners merged with Acquisitionco (collectively with the Initial Merger, the “Merger”). Acquisitionco, which remains a wholly-owned subsidiary of the Company, continued as the survivor following the Merger. Immediately following the Merger, Acquisitionco filed the necessary documents with the North Carolina Secretary of State to change its name to Capital Partners For Health & Fitness, Inc. The parties intend the Merger to be treated as a tax-free reorganization pursuant to Section 368(a)(2)(D) of the Internal Revenue Code.

Merger Consideration

All of the shares of Capital Partners’ common stock that were issued and outstanding immediately prior to the Merger and all legal or beneficial rights to participate in any fashion in the economic benefits of ownership of Capital Partners were converted into the right to receive, in the aggregate (subject to certain limitations): (a) $6,992,859 in cash (the “Cash Consideration”); (b) 3,496,430 shares of the Company’s common stock (the “Stock Consideration”); and (c) the Earnout Consideration (as defined below), if earned. Once the Merger was completed, all shares of Capital Partners’ capital stock were automatically redeemed and canceled and no longer exist. The Stock Consideration is unregistered, restricted stock and constitutes “restricted securities” as that term is defined in Rule 144 under the Securities Act of 1933. The Company has agreed that it will include the Stock Consideration in its next “Selling Stockholder” registration statement that it files with the Securities and Exchange Commission (the “SEC”).

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Notwithstanding the foregoing, the parties to the Merger agreed that no portion of the Cash Consideration would be paid at the closing of the Merger. Instead, the Company delivered to each of Capital Partners’ shareholders, Messrs. Rohm and Flynn, a promissory note in the principal amount of such shareholder’s respective portion of the Cash Consideration (the “Purchase Money Note”). These Purchase Money Notes mature on the earlier of June 30, 2006 or such time as the Company shall have raised capital sufficient to fund the entire amount of Cash Consideration. The Purchase Money Notes accrue simple interest at the annual rate of five percent (5%) for the first sixty days after the Merger was completed, and will accrue simple interest at the annual rate of ten percent (10%) thereafter. The Purchase Money Notes also provide that, if the founder of the predecessor to Capital Partners purchases up to $1.0 million of the Company’s common stock as part of the Offering (as defined below), the holders of the Purchase Money Notes will be entitled to sell back to the Company up to that number of shares of the Company’s common stock as would cumulatively total the subscription amount received by the Company from such founder.

As noted, Capital Partners’ shareholders are collectively entitled to earn an additional amount of merger consideration. This additional potential consideration is a one-time payment in cash (the “Cash Earnout Payment”) and a one-time payment in the Company’s common stock (the “Stock Earnout Payment” and, together with the Cash Earnout Payment, the “Earnout Consideration). The Earnout Consideration is equal to (1) the amount, if any, by which (a) one-half of Capital Partners’ earnings before interest, taxes, depreciation and amortization (computed in accordance with GAAP) during the first eight full calendar quarters following the Merger (the “Earnout Period”) (as certified by the Company’s independent public accountant) (the “Earnout Period EBITDA”) exceeds (b) an amount equal to the sum of (i) $3,158,933 plus (ii) one-half of the amount of any portion of $400,000 of bridge loan made by the Company to Capital Partnersthat is used by Capital Partners for working capital purposes, (2) multiplied by 4.2.

The Earnout Consideration, if any, must be paid within ten days following the receipt by the Company and Capital Partners’ shareholders of a written determination of the Earnout Period EBITDA if Capital Partners’ shareholders do not contest the Earnout Period EBITDA within five days following their receipt of such calculation. If Capital Partners’ shareholders contest the Earnout Period EBITDA, the Company and such shareholders will have ten days to settle the dispute or the dispute will be settled by arbitration. Shares of the Company’s common stock that are issued as part of the Stock Earnout Payment will be valued at the average closing price per share of the Company’s common stock on the final ten trading days of the Earnout Period. Within ten days after each Form 10-QSB or 10-KSB is filed with the SEC by the Company during the Earnout Period, the Company will cause to be delivered to Capital Partners’ former shareholders a report of Capital Partners’ financial results.

Effect of Merger

The Company was formed in 1996 as NELX Marketing, Inc., a Colorado corporation, then changed its name later that year to Mind2Market, Inc. Due to lack of funding, the Company ceased its efforts in 2002 to develop certain technology. From 2002 through the closing of the Merger, the Company had substantially no operations. In May 2005, the Company changed its name to Health Partnership Inc. and, prior to the Merger, it satisfied the SEC’s definition of a “shell company.” Pursuant to the Merger, Capital Partners became the Company’s wholly-owned subsidiary. As a result, the Company became a holding company and its shell company status terminated. Capital Partners’ business operations currently represent substantially all of the Company’s operations. The Company’s common stock is traded on the OTC Bulletin Board under the trading symbol “HHPN.OB.”

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Private Placement Offering

On January 31, 2006, the Company commenced a private placement offering of up to 8,000,000 shares of its common stock for $1.25 per share (the “Offering”). The Offering is made only to “accredited investors” as defined in Rule 501 of Regulation D under the Securities Act of 1933. The Company reserved the right, in its sole discretion, to increase the Offering to a total of 12,000,000 shares of its common stock. Upon the Company’s acceptance of subscriptions to purchase at least 2,400,000 shares of its common stock through the Offering, the Company has agreed to apply the net proceeds from such sale (after satisfaction of other appropriate Company obligations), toward reduction of the indebtedness evidenced by the Purchase Money Notes. The Company has further covenanted with the former shareholders of Capital Partners, that subsequent net proceeds from the Offering are not to be applied toward the purchase of other businesses until the Purchase Money Notes have been paid in full. As of the date of this Current Report on Form 8-K, the Company has not sold any shares of its common stock through the Offering.

Description of Capital Partners

Capital Partners is a regional chain of nine health and fitness clubs in the greater Raleigh-Durham metropolitan area. It acquired the clubs in late 2005 from Kapital Engine, an entity then controlled by Mr. Randall Rohm, the current chief operating officer of Capital Partners. Capital Partners’ clubs are the largest chain of health clubs in the greater Raleigh-Durham metropolitan area, with in excess of 55,000 members. The clubs range in size from 13,500 to 25,000 square feet and operate from leased facilities. Capital Partners endeavors to promote a good value of services at a low cost to its health club members. Based on its experience, it has found that, in the past, the larger national chains of health clubs have chosen not to enter Capital Partners’ market due at least in part to the relatively low cost at which Capital Partners offers its memberships.

Business Strategy. Capital Partners’ business plan contemplates the addition of health clubs to the current regional market, as well as the entry into other markets through both strategic acquisition and organic growth. Subject to availability of financing, Capital Partners would like to develop some new facilities on a larger scale (50,000 square feet or more), offering a wider amenity package and the possibility of consolidating membership from several of the smaller clubs into these larger clubs. Capital Partners’ value proposition for its members focuses on the provision of a high quality health club experience at a relatively modest cost to its members.

Each facility is equipped with state-of-the-art equipment in amounts generally sufficient to adequately serve members during peak hours (typically 5-7 am and 5-7 pm). The Company believes that the management at each facility is trained to provide a favorable customer experience and to do so in a cost effective manner, being mindful of the bottom line. Capital Partners employs a discretionary bonus system to incent and reward employees for exemplary individual and team effort.

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Sales and Marketing. The sale of new memberships and retention of existing members is essential to Capital Partners’ business strategy. Due to the relatively young age of its members and their greater mobility than older members, Capital Partners experiences an approximately 75% turnover of its members on an annualized basis. The Company believes that all of its employees are trained to encourage the members to renew their memberships. At the same time, all employees who regularly interface with members are encouraged to promote the clubs and to bring in new members. Membership packages are offered in a variety of formats, including pre-paid one and two year memberships, as well as month-to-month memberships. Pricing incentives are currently structured to encourage long-term participation, including promotions as low as $10 per month for two-year commitments, and a standard $39 per month fee plus a modest enrollment fee for certain shorter term commitments. These pricing incentives are subject to change in the Company’s sole discretion.

Advertising is done primarily through direct mail promotions, where Capital Partners believes the responses are measurable. In its experience, Capital Partners has found that telephone solicitation, utilization of a variety of referral sources and Internet marketing have all been successful methods of driving new membership in its health clubs. Capital Partners has employed radio and print advertising, as well as event marketing in the past, and found that these methods have been less productive than the other methods enumerated above.

Amenities. Each of Capital Partners’ health clubs has extensive equipment, which is typically purchased through full payout lease financing, which is described below. Each club’s equipment is divided substantially equally among cardiovascular (such as treadmill, elliptical trainers, stationary bikes and stairclimbers), resistance training and selectorized equipment, and free weight/cable equipment. Each facility averages approximately 120 pieces of equipment. Capital Partners believes that its facilities contain ample studio area for classes, including aerobics, yoga, step, kickboxing and abdominal workouts. Décor of the clubs is typically modern, with the layout intended to provide for a pleasant workout experience. Full locker room and shower facilities are available for members. A limited number of the clubs maintain basketball facilities and/or juice bars.

In October 2004, Capital Partners entered into a five-year agreement with Beyond Fitness Companies (“Beyond Fitness”) to provide personal trainers to its health club facilities at no cost to either party. Beyond Fitness generally is paid for its personal training services by the health club members that contract for such services. Capital Partners believes that Beyond Fitness is the second largest independent personal training operation in the United States.

To the extent that food or clothing concessions are available at the clubs, management subcontracts these services to independent contractors who pay a base rent for the operation of small facilities. The Company believes that for clubs of its size, profitability is enhanced by avoiding food or apparel service due to the extensive time and personnel requirements associated with each, as well as the need to continually monitor inventory.

The Company is considering moving toward the development of some new and larger clubs which would have a broader scope of amenities, such as swimming pools, racquet courts, spa services and full-scale food facilities. The Company believes that these newer facilities would likely carry a somewhat higher membership fee and may serve as replacement facilities for some of the older, less modern facilities currently operated by the Company, and their development is contingent upon the availability of financing to Capital Partners.

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Financing. As described above, Capital Partners currently finances the equipment for its health clubs through two leasing sources, Sun Trust (formerly, Central Carolina Bank and Trust Company) and Life Fitness, a division of Brunswick Corporation, which typically sells its lease paper to CIT. Through these sources, the purchase price and a market value interest factor for the equipment is financed through full payout amortization payments over a three- to five-year term, with either a $1.00 purchase option or a residual value purchase option at the end of lease term. Certain of the equipment in the facilities is fully paid for and much of the remaining equipment is substantially paid for, with new leases typically written as additional or replacement equipment is acquired.

In November 2004, Capital Partners financed certain of its billing equipment and software from Duvera Billing Services, a billing company, based upon $350,000 of cumulative borrowings (plus interest), being paid out through level amortization over an approximately sixteen-month period for the first $250,000 and a two-year period for the remaining $100,000. Approximately $25,000 remains on this obligation. In addition, Duvera entered into a factoring arrangement with Capital Partners where over time approximately $448,000 of funds were provided in exchange for sale of two-year membership contracts at an approximately 32% discount to the aggregate funds to be paid out over their terms. The agreement contemplates that should a contract be terminated or fall into default, Capital Partners is responsible for replacing the contract with a substitute performing contract for like payments, or is liable for the deficiency with respect to the future payout from the terminated or defaulted contracts. At January 30, 2006, approximately $389,000 in principal amount of this purchase obligation remained. Duvera instituted suit to collect all indebtedness owed to it in February 2006, and subsequent to such filing Capital Partners forwarded replacement contracts to put the arrangement back in balance; the suit has not yet been withdrawn, but the Company believes, but cannot guarantee, that the suit may be withdrawn once the original $25,000 loan obligation is either timely satisfied or other appropriate arrangements for payment can be made. See “Legal Proceedings,” below.

Employees. Capital Partners currently employs approximately 230 employees, about sixty of whom are full-time. Operation of the clubs is divided into three districts, with each district having a manager who runs one club and oversees the other clubs in the manager’s district. In addition, each district has a club manager for each of the other clubs in the district and an assistant manager overseeing the day-to-day operations of each club, together with the club manager. Each club typically employs 1-4 fitness consultants, 3-6 babysitting employees, 3-6 group fitness instructors, 2-3 salespeople and 2-3 cleaning people. The fitness instructors and personal trainers work at each club, as necessitated by demand. These individuals are typically independent contractors, which the Company believes increases profitability because it does not compensate them during non-peak times.

Corporate Information. The Company’s executive offices are located at 3111 North Seminary, Suite 1N, Chicago, Illinois 60657. The Company’s telephone number is (312) 640-2975, and its fax number is (312) 640-2976. Capital Partners’ executive offices are located in its Waverly Place (Cary, NC) club at 101-A New Waverly Place, Cary, North Carolina 27511. Its telephone number is (919) 816-9853, and its fax number is (919) 854-2016. Each of Capital Partners’ clubs provides a centralized computer system with data to allow collection to be processed from this centralized office.

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Facilities. Each of Capital Partners’ facilities is leased by a separate corporation or limited liability company that is wholly owned by Capital Partners. A summary of the clubs’ leases is set forth below:

1. Durham, NC. This is a 20,000 square foot facility. It had originally been operated as a Gold’s Gym by the prior owner before the acquisition by the company in 2003. Base rent plus pass through charges total approximately $19,000 per month. An additional 20,000 square feet of adjacent space is available for expansion at no additional cost. The lease expires June 30, 2006.

2. Creedmore Road, Raleigh, NC. This is a 25,000 square foot facility opened in late 2000. Base rent plus pass through charges total approximately $20,000 per month. An additional 22,000 square feet of expansion space is available. The lease expires April 30, 2011, subject to two 5-year renewal options, with Consumer Price Index (“CPI”) escalators. The lease requires the landlord’s consent to change in beneficial ownership, but not where the beneficial owner is a publicly traded corporation. The landlord has provided an estoppel certificate to Capital Partners.

3. Spring Forest Road, Raleigh, NC. This is an 18,000 square foot facility acquired approximately ten years ago, and had been operated as a health club facility for at least ten years prior to that time. It is Capital Partners’ oldest facility and presently operated on a month-to-month basis. The Company anticipates moving this facility’s membership to a new club within the next year unless the landlord makes significant improvements to the facility.

4. Glenwood & Duraleigh, Raleigh, NC. This is a 25,000 square foot facility that was opened in 1998 and recently underwent an expansion which included the addition of two basketball courts. Base rent and pass through charges total approximately $20,000 per month. The lease expires December 31, 2013, with a five-year renewal clause order subject to certain CPI escalators. It requires the landlord’s consent to change in beneficial ownership, which has been obtained.

5. Maynard Road, Cary, NC. This is an 18,000 square foot facility opened in 1996. Base rent plus pass through charges total approximately $16,000 per month. Approximately 3,000 square feet of expansion space are available at no additional cost. The lease expires October 31, 2006 and the Company is contemplating whether to renew the lease or migrate the members to a proposed new construction facility. It has three five-year renewal options, subject to certain CPI escalators.

6. Buck Jones Road, Cary, NC. This is the original facility opened by Capital Partners in 1995, comprised of 13,500 square feet and requiring base rent plus pass through expenses of approximately $8,000 per month. The lease expires December 1, 2007, subject to two five-year renewal options. The Company would consider renewing the lease if certain upgrades are provided by the landlord. The tenant has a right of first refusal to purchase the facility in the event of a sale.

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7. Waverly Place, Cary, NC. This is a 22,500 square foot facility opened in 2001, and houses Capital Partners’ corporate offices. It is presently on a month-to-month lease. The Company anticipates that it will eventually close this facility and move the club’s members to either the Buck Jones Road facility or a new facility considered for development.

8. Garner, NC. This facility was opened in 2000 and contains 20,500 square feet, leased at approximately $10,000 per month including pass through expenses. Its lease expires in July 14, 2012, subject to one five-year extension. This is the most remote of the locations for Capital Partners’ clubs, approximately twenty-five miles from the next nearest club.

9. Fuquay Varina, NC. This is a 20,000 square foot facility opened in late 2003, with base rent plus pass through expenses totaling approximately $20,000 per month. The lease expires in 2013, with three five-year renewal options. This lease requires the landlord’s consent to change in beneficial ownership, which consent has not been obtained after the date of this Current Report on Form 8-K. See “Risk Factors.”

Risk Factors

An investment in shares of the Company’s common stock involves a high degree of risk. Prospective investors should consider carefully the following risk factors, together with all of the other information included or referred to in this Current Report on Form 8-K, before purchasing shares of the Company’s common stock. There are numerous and varied risks, known and unknown, that may prevent the Company from achieving its goals. The risks described below are not the only risks the Company will encounter. If any of these risks actually occur, the Company’s business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of the Company’s common stock could decline and investors in the Company’s common stock could lose all or part of their investment.

This Current Report on Form 8-K contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Those statements appear in a number of places herein and include statements regarding the intent, belief or current expectations of the Company with respect to, among others things: (i) the development of the Company’s business; (ii) the targeting of industries that will require the use of the business; (iii) trends affecting the Company’s financial condition or results of operation; and (iv) the Company’s business and growth strategies. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected, expressed or implied, in the forward-looking statements as a result of various factors. The accompanying information contained herein identifies important factors that could cause such differences. Such forward-looking statements speak only as of the date of this Current Report on Form 8-K and the Company cautions potential investors not to place undue reliance on such statements.

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Information with respect to Capital Partners is based on information provided to the Company by Capital Partners prior to the Merger and, although the Company has performed due diligence inquiry as to Capital Partners, there can be no assurances that such information is accurate in all respects. Information regarding market and industry statistics contained herein is included based on information available to the Company that it believes is accurate. It is generally based on industry and other trade publications that are not produced for purposes of securities offerings or economic analysis. The Company has not reviewed or included data from all sources, and the Company cannot assure potential investors of the accuracy or completeness of the data included herein. Forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. The Company has no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements.

Business Risks

Competition. Capital Partners will experience significant competition, and there are virtually no barriers to entry into its business. In the health club industry, there are numerous large chains with substantially greater resources, which include Bally Total Fitness Holding Corporation, Life Time Fitness, Inc. (both publicly traded), 24 Hour Fitness Worldwide, Inc., Town Sports International, Inc., LA Fitness, The Sports Club Company, Inc. and The WellBridge Company, doing business under various names like Northwest Athletic Club. These larger chains have the ability to enter into select markets and subsidize the cost of operations in order to gain market share through a variety of strategies which include price wars, massive advertising campaigns, and the ability to offer superior amenities. They tend to have access to greater amounts of capital, enabling them to erect state of the art facilities and to attract top talent, which may include Capital Partners’ employees. In addition, by being able to promote national brands, they can in certain instances stretch their advertising dollars further, due to the ability to amortize expenditures over a larger number of clubs, as well as to enter into strategic alliances with other national brands for co-marketing of the brands on a national basis. These larger competitors tend to offer a wider scope of products and services to their customers, including amenities at larger clubs, such as swimming pools, spa’s, rock climbing walls, racquet sports and other sports, not currently offered by Capital Partners, as well as other services such as full menu food offerings, wellness programs and salons, as well as branded apparel and food products.

There is also significant competition from comparably sized chains and smaller unit operators, in addition to health club facilities operated by the YMCA and similar not-for-profit organizations, local governmental and hospital health care and recreational facilities, country clubs, tennis and other athletic clubs, schools, recreational facilities in office and other buildings, condominium and townhome association amenities and home-use equipment.

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While the Company believes that Capital Partners and other businesses that it may acquire in the health club industry will be competitive and able to maintain and grow their businesses, it is expected that competition will intensify over time. In addition, the Company in most instances expects to structure acquisitions on an earn-out basis where some portion of the purchase price will be contingent on future performance, which is intended to incent the sellers to continue the operations of the facilities aggressively following purchase. There can be no assurances that the sellers will have the same level of enthusiasm for the operation of the businesses following sale, or that if they cease performing services for the businesses, the Company will be able to install replacement management with the same skill sets and determination as the sellers. The Company will typically negotiate for a noncompete agreement from the key seller(s) of a business; however, following the termination of the noncompete period, there is always a risk that the seller will attempt to reenter the market and possibly seek to recruit some of the former employees of the business, who may continue to be key employees of the business that the Company acquires.

Prior Dealings with Jeremy Jaynes.   In 2002, the founder  (Edward "Ted" Sampson) of Kapital Engine Investments, Inc. ("KEI"), the predecessor entity to  Capital Partners, sold a 47.5% interest in KEI to Mr. Jeremy Jaynes for $4,125,000, comprised of $2,000,000 of  cash and the balance by note.  In 2003, the founder sold the remaining 52.5% of KEI to Mr. Randall Rohm and a second purchaser (no longer a stockholder) for $3,900,000 comprised of $1,000,000 of cash and a note for the balance, with Mr. Rohm retaining voting control over all of such shares and effective control of the operations of KEI.  In 2005, the shares of the subsidiary entities which operate all of the Capital Partners health clubs were assigned by KEI to Capital Partners.  Subsequently in 2005, Mr. Rohm entered into an agreement with Mr. Jaynes where he acquired 100% of Mr. Jaynes' stock and economic interest in KEI for $628,425.

In 2004, Mr. Jaynes was convicted of violation of the Virginia anti-spamming statute and sentenced as a felon to nine years in prison.  This related to Mr. Jaynes' unsolicited sending of unwanted emails to persons in excess of legally permitted levels, as well as using deceptive routing to hide the source of the emails. This conviction is under appeal.

Mr. Jaynes has also been implicated in connection with his alleged involvement in a so-called “pump and dump” penny stock scheme involving a public shell company named Absolute Health & Fitness, Inc. (“AHFI”). The Securities & Exchange Commission (“SEC”) has filed a civil suit in Florida naming certain individuals who allegedly participated in the scheme.  The complaint states that Mr. Rohm was the majority owner of two holding companies that operated several fitness centers which Mr. Jaynes had proposed to be merged with AHFI, and that Mr. Rohm subsequently broke off negotiations for the sale of the businesses to AHFI.  However, the complaint states that the stock promoters acted as if the merger had occurred and that the signature appearing under Mr. Rohm’s name was not Mr. Rohm's signature.    The complaint further states that Mr. Rohm never executed an agreement to merge his companies with AHFI. Although Mr. Jaynes was not named as a defendant, it is possible that he will be named as a defendant in the lawsuit or in subsequent criminal proceedings regarding the SEC allegations.

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The Company has performed what it considers to be a commercially reasonable level of due diligence with respect to the above matters and believes Mr. Rohm and Mr. Sampson to be innocent of the alleged wrongdoings surrounding Mr. Jaynes or the other parties in the SEC complaint based upon the information of which the Company is presently aware.  In addition, Mr. Rohm has delivered to the Company a letter dated December 15, 2004, from the office of the US Attorney for the Eastern District of North Carolina stating that as of that date neither Mr. Rohm nor Mr. Sampson was the target of any investigation being conducted by that office.  Nevertheless, it is expected that there will be significant publicity in the future regarding the AHFI stock scheme and possible  attempts by the press to link Mr. Rohm and/or Mr. Sampson to the activities of Mr. Jaynes and other persons accused of wrongdoing.  This could have a material adverse impact on the Company and the market price of the Company’s common stock irrespective of the merits of such allegations.  In addition, notwithstanding the due diligence conducted to date by the Company, there is always a risk that there are matters which differ from its present understanding, which could implicate these individuals in such wrongdoing.  Current and prospective investors in the Company should consider these factors and their possible impact on the Company.

Troubleshooter Investigation.  In early February 2006, several articles appeared in the Raleigh press, as well as several local television stories, addressing complaints regarding Capital Partners’ health clubs.  One such article states that there were more than 200 complaints over the past thirty-six months with the Better Business Bureau ranging from matters such as broken exercise equipment in select locations to complaints regarding sanitation and improper billing and collection practices. The article states that the North Carolina Attorney General's Office is investigating over 350 complaints over the past three years.  Management of Capital Partners has advised that with nine clubs and over 55,000 members, it is inevitable that complaints will be lodged by members, and that this average annual volume of complaints constitutes less than one half of one percent of the annual membership at the clubs.  Nevertheless, any adverse publicity could have a material adverse impact on membership at the clubs and on the market price of the Company’s common stock, and could result in fines, requirement for remedial action, or possibly more severe sanctions from the applicable regulatory authorities.  The Company's business plan includes addressing necessary repairs, maintenance and sanitation actions to operate and maintain the clubs to a level of high member satisfaction.  There can be no assurances that the Company will be able to operate the clubs in this manner.

Brands and Reputation. The “Health Partners” and “Capital Partners” brands are not well known, and developing adequate brand awareness may not be possible or may be too costly to achieve. Many of the Company’s competitors have much more widespread brand awareness and much more financial ability to promote their brands. In addition, the brands and reputations of Health Partnership and Capital Partners are closely associated with the business and personal reputations of Messrs. Lee Wiskowski, Douglas Stukel, Gerard Jacobs and Randall Rohm. Any damage to the business or personal reputation of one or more of these individuals could have a material adverse effect on the Company’s business, results of operations, financial condition and the trading price of the Company’s common stock.

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Governmental Regulation. All areas of the operations of health clubs are subject to regulation on the federal, state and local levels. A significant aspect of the success of a health club is its ability to advertise and bring in new members to grow revenues as well as to replace terminating members. Health club advertisements and membership plans have drawn significant scrutiny from the Federal Trade Commission as well as its counterparts on the state and local levels, especially associated with the truthfulness of the advertising programs and terms of their membership contracts. State statutes have been enacted and/or proposed to regulate the health club industry, including related to:

·Giving the member the right to a period of typically three to ten days following the signing of a contract, during which period of time the individual can cancel a membership contract;

·Establishment of limits on the time period and dollar amounts of contracts issued to members;

·Requiring the posting of bonds and/or escrowing of monies collected in connection with pre-opening membership drives, as well as limiting the time period in which such drives may be effected; and

·Regulation of so-called deceptive trade practices, where the terms of the membership are deemed to be misleading, or where the offering of negotiated or differing membership terms to individuals may be deemed to be discriminatory.

The existing and future legislation governing the industry will require continued awareness by the Company and could impact the way business is done in the future. These costs may result in reduced margins, as there may be no way of passing on the benefit of this compliance to the consumer.

To date, Capital Partners has not been subject to any significant adverse governmental enforcement proceedings; however, as noted in “Troubleshooters” above, there have been a certain number of complaints and there may be a current investigation by The North Carolina Attorney General’s Office as to the operation and business practice of Capital Partners.

Dependence on Key Employees. The Company’s success depends to a significant degree upon the continuing contributions of its key management, Lee Wiskowski, Douglas Stukel and Gerard Jacobs, who will oversee the acquisition and finance strategies of the Company as well as of the key employees from Capital Partners, which initially shall include Randall Rohm. The Company does not maintain key man insurance with respect to any of these individuals. The loss of any of these individuals could have a material adverse effect upon the Company and its operations. The Company, through Capital Partners, has entered into an employment agreement with Mr. Rohm and anticipates that it will enter into additional employment contracts with certain of the key operations employees of the Company, but no other contracts currently exist. Messrs. Wiskowski, Stukel and Jacobs have substantial other business interests and will not be devoting their full time to the Company’s business. The Company does not have employment agreements with Messrs. Wiskowski, Stukel or Jacobs, and could be required to spend significant time, attention and money in finding replacements should any of them no longer be associated with the Company. There is no assurance the Company would be able to find similarly qualified replacements which could have a material adverse effect on the Company’s business, results of operations, financial condition and the trading price of the Company’s common stock.

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Need for Accounting Personnel and Systems. The Company is conducting a search for a chief financial officer. The Company also intends to locate a financial controller for Capital Partners. There is no assurance that the Company will be able to promptly locate and hire such a qualified chief financial officer, nor that Capital Partners will be able to promptly locate and hire a competent financial controller, nor at compensation levels acceptable to the Company. Failure to locate such individuals on terms satisfactory to the Company and Capital Partners could have a material adverse effect on the Company’s business, results of operations, financial condition and the trading price of the Company’s common stock. In addition, the Company and its independent accountants believe that Capital Partners must migrate its internal financial accounting onto a robust general accounting system, and a failure to do so could have a material adverse effect on the Company’s business, results of operations, financial condition and the trading price of the Company’s common stock, and could potentially lead to deficiencies in regard to the Company’s internal financial controls and reporting.

Insider Control. Certain individuals and entities controlled by them own a substantial majority of the Company’s common stock. Accordingly, they have substantial influence over the Company’s policies and management. The Company may take actions supported by them that may not be viewed by some stockholders to be in the Company’s best interest.

Geographic Expansion. Capital Partners currently operates in the Raleigh-Durham market and has been the dominant health club company in that market due to its rapid expansion and the relatively low cost of its club memberships, which may make the market less attractive to new entrants. To the extent that expansion into new geographic markets is effected by internal growth as opposed to acquisition, the Company may experience greater difficulty than in its current market due to the entrenchment of existing competition, which may compete vigorously to avoid the loss of customers. In addition, profitability of operations is often tied in large part to the ability to operate multiple facilities in a market, which enable the operator to amortize advertising expenditures over a larger base, benefit from name recognition in the community, ability to retain a customer who moves from one sector of the area to another and the ability to attract and retain high quality employees who can oversee multiple location facilities.

The success of Capital Partners in the Raleigh-Durham market may be due in large part to the familiarity of its management with both the customs of the local market and the geographic nuances of the market. As it seeks to expand into other markets, there will be less familiarity with the drivers to success in those markets. In addition, site selection will be critical, and there can be no assurances that access to geographical and demand generation information will be sufficient to ensure success in those markets.

Membership Retention and Need for New Members. The Company’s success will be tied in large part to its ability to continue to attract and retain new members. There can be no assurances that the Company will be successful in this regard or that the market will continue to generate new prospective members in sufficient numbers. See “Competition’” above. The Company believes that the health club industry experiences significant turn over in memberships due to a variety of reasons, including members switching to clubs with other amenities, the decision to simply not renew the membership, moving to new locales and financial inability to continue as members. Consequently, the Company believes it must attract and retain a large number of paying members on an ongoing basis. To do so, the Company must continue to invest significant resources in order to enhance its existing facilities, equipment and services, and to introduce new high-quality facilities, equipment and services. Further, if the Company is unable to predict member preferences or industry changes, or if the Company is unable to modify its facilities, equipment and services on a timely basis, the Company may lose existing members and may fail to attract new members. There is no assurance that the Company will have the personnel, financial or other resources required to enhance existing and introduce new facilities, equipment and services. Failure to enhance or develop facilities, equipment and services or to respond to the needs of members in an effective or timely manner could have a material adverse effect on the Company’s business, results of operations, financial condition and the trading price of the Company’s common stock. The Company cannot provide any assurances that it will be able to add more members than it loses each month. Failure to increase the Company’s membership on a cost-effective basis could have a material adverse effect on the Company’s business, results of operations, financial condition and the trading price of the Company’s common stock.

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Trademark Protection. Capital Partners has been operating under the “Beyond Fitness” service mark since its inception. To date, no Federal Registration application has been submitted for the service mark and Capital Partners has been relying upon its common law rights with respect to the mark. The Company expects to submit a federal registration application in the near future. There can be no assurances that the US Patent and Trademark Office will grant a federal registration for the service mark or that if granted, it will be enforceable at all, or with respect to all current or future anticipated uses by the Company. In a preliminary search of registered marks, the mark “Beyond Fitness” was granted to one registrant in 2003 for the provision of wellness services (showing first use in 1997), which although not directly related to health club and personal training services, is in the general health care field. While the Company believes that Capital Partners has enforceable rights in the Beyond Fitness mark, there can be no assurances that the mark will be registered or given sufficiently broad protection. Even if the Beyond Fitness mark is fully registered, the Company will be required to enforce the mark against potential infringers, and would have to bear costs in connection with any such proceedings. There is always a risk that in connection with an enforcement proceeding, the court could declare the prior grant of the mark to be invalid or unenforceable.

Leases. Certain of the leases for the Capital Partners facilities typically have change in control provisions, which were triggered upon the Merger or which were triggered in connection with a prior change of control in 2003. Not all of the required landlord consents were obtained upon the closing of the Merger. The requisite landlord consents were obtained for all of Capital Partners’ leases except the two month-to-month leases where management anticipates moving to a new location and/or consolidating the members in one of its other nearby clubs, and the health club located in Fuquay Varina, North Carolina. Capital Partners has engaged in preliminary discussions with the landlord of the Fuquay Varina facility and, based on these negotiations, it believes that the landlord is willing to provide its consent upon receipt of additional security deposit funding. Management intends to continue to negotiate for a less costly concession. However, there can be no assurances that such landlord will grant the consent and will not choose to terminate the lease. In addition, there can be no assurances that moving Capital Partners’ members who currently support clubs on month-to-month leases into new or existing clubs can be effected on a timely and cost effective basis or that the members will accept any such new facility. To the extent a consent is not obtained, Capital Partners may be required to vacate the premises and open a new club in a new location and may have potential exposure with respect to the lease. Prior to the Merger, management of Capital Partners advised the Company that the opening of a new facility is often quite easy and can be done quickly, however there can be no assurances that this will be the case or that there will not be significant member loss in connection with a new club location. In addition, there would be a need to invest in additional leasehold improvements in the event of such a move, and there can be no assurances that the Company would have the capital necessary to effect the same.

Ability to Access Sufficient Capital for Future Acquisitions and Developments. Continued growth of the Company through its strategy to acquire additional health club facilities will be contingent upon the Company having access to sufficient capital from a variety of sources, including equity raises, debt financing, internally generated earnings and the ability to use its stock as currency—which in turn is contingent in large part upon the Company’s ability to maintain a liquid market for its shares at acceptable price levels. There can be no assurances that the Company will be able to borrow sufficient capital to meet its needs, or if so, that such loan and/or new equity will be provided on terms satisfactory to the Company or to investors.

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In the event that the Company is able to borrow monies to fund acquisitions and/or operations, it will be subject to leverage. Typically, leverage results in less dilution than in connection with equity financings. However, it also increases the risk profile of the Company in that cash is required to service the debt, ongoing covenants are typically employed which can restrict the way in which the Company is operated and, if the financing comes due either upon maturity or an event of default, the Company may lack the resources at that time to either pay off or refinance the debt, or if it is able to refinance, it may be on terms that are less favorable than those originally in place, and may require additional equity or quasi equity accommodations. This is particularly true with respect to the Purchase Money Notes, which come due on June 30, 2006; should the Company be unable to raise sufficient new capital and/or refinance the balance due on the Purchase Money Notes as of their maturity dates, the Company could be adversely affected.

Development of new club facilities requires significant additional capital. This includes monies necessary to fund leasehold improvements and purchase of equipment (to the extent equipment financing is not available). In addition, if the Company begins to develop larger facilities, it may be more beneficial to own the facilities due to the significant capital expenditures that would not be recouped in the event of lease termination. There can be no assurances that the Company will have sufficient capital available to fund the cash down payment and/or the necessary credit to fund mortgage financing for owned facilities.

Accounting Projections. Any accounting projections used by the Company as to future events are based upon assumptions made by the Company regarding the future. There is no assurance that actual events will correspond with these assumptions. Actual results for any period may or may not approximate such statements. In the event that the Company experiences delays in raising capital, the Company’s business plan may be adversely affected.

Significant Fluctuations in Quarterly Operating Results. The Company may experience significant fluctuations in future quarterly operating results from a number of factors, including: (i) the timing and nature of expansion efforts in both new and existing markets; (ii) the introduction of new products or services and the market response to those introductions; (iii) the timing and nature of sales transactions and accounting treatment with respect to customer contracts; (iv) seasonal trends; (v) changes in pricing policies or service offerings; (vi) changes in the level of marketing and other operating expenses to support future growth; (vii) competitive factors; and (viii) general economic conditions. Consequently, quarterly revenue and operating results may fluctuate significantly, and the Company believes that period-to-period comparisons of results will not necessarily be meaningful and should not be relied upon as an indication of future performance. Furthermore, due to the foregoing factors, among others, it is likely that the Company's future quarterly operating results from time to time may not meet the expectations of research analysts or investors, which may have an adverse effect on the price of the Company’s common stock.

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Management of Growth. The Company's anticipated growth through acquisitions and organic expansion is expected to place a significant strain on the Company's managerial, operational, technical and financial resources. The Company expects operating expenses and staffing levels to increase substantially in the future as the Company expands. To manage its growth, the Company must expand its operational and technical capabilities, increase, train and manage its employee base and manage multiple relationships with customers, suppliers and other third parties. There can be no assurance that the Company will be able to manage its expanding operations effectively. Any failure of the Company to implement effective management and operating systems, add resources on a cost-effective basis or effectively manage the Company's expansion could have a material adverse effect on the Company's business, results of operations, financial condition and the trading price of the Company’s common stock.

Need for Additional Capital. The Company will need to procure additional financing over time, the amount and timing of which will depend on a number of factors including the pace of expansion of the Company's markets and customer base, services offered and development efforts and the cash flow generated by its operations. The Company cannot predict the extent to which it will require additional financing. There can be no assurance regarding the availability or terms of additional financing the Company may be able to procure over time. Any future debt financing or issuance of preferred equity by the Company could be senior to the rights of shareholders, and any future issuance of equity could result in the dilution of the then existing owners' proportionate equity interests in the Company.

Actions Not Requiring Your Approval. The terms and conditions of any acquisition could require the Company to take actions that would not require shareholder approval. In order to acquire certain companies or assets, the Company may issue additional shares of common or preferred stock, borrow money or issue debt instruments including debt convertible into capital stock. Not all of these actions would require your approval even if these actions dilute your economic or voting interest as a shareholder.

Acquisitions. The Company may not be able to identify, negotiate, finance or close acquisitions. A significant component of the Company’s growth strategy focuses on acquiring additional companies or assets. The Company may not, however, be able to identify or acquire companies or assets on acceptable terms if at all. Additionally, the Company may need to finance all or a portion of the purchase price for an acquisition by incurring indebtedness. There can be no assurance that the Company will able to obtain financing on terms that are favorable, if at all, which will limit the Company’s ability to acquire additional companies or assets in the future. Failure to acquire additional companies or assets on acceptable terms, if at all, would have a material adverse effect on the Company’s ability to increase assets, revenues and net income and on the trading price of the Company’s common stock.

Integration of Acquired Businesses. The Company may be unable to successfully integrate acquired businesses. Even if the Company is able to acquire additional companies or assets, the Company may not be able to successfully integrate these companies or assets. For example, the Company may need to integrate widely dispersed operations with different corporate cultures, operating margins, competitive environments, computer systems, compensation schemes, business plans and growth potential requiring significant management time and attention. Failure to successfully integrate acquired businesses could have a material adverse effect on the Company’s business, results of operations and financial condition and the trading price of the Company’s common stock.

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Earnouts. The Company has agreed to pay earnouts in regard to its acquisition of Capital Partners. The Company will likely also agree to contingent payout arrangements in connection with future acquisitions. There is no assurance that the Company will have cash available to pay these earnouts if they are earned. Thus, the Company may have to borrow additional monies or sell additional equity to raise the needed funds, which may have a material adverse effect on the Company’s results of operations, financial condition, business prospects and the trading price of the Company’s common stock.

Investment Risks

National Securities Listing. Listing on a national exchange such as the American Stock Exchange (“AMEX”), or NASDAQ Capital Market or NASDAQ National Market may be sought, but is not assured. There is no guarantee that if such listing is pursued the Company, it will meet the listing requirements or that such efforts to list the Company’s common stock on any national or regional exchange or the NASDAQ SmallCap market will be successful, or if successful, will be maintained, including but not limited to requirements associated with maintenance of a minimum net worth, minimum stock price and ability to establish a sufficient number of market makers.

The Company Does Not Expect to Pay Dividends. For the foreseeable future, it is anticipated that earnings, if any, which may be generated from the Company’s operations will be used to finance the growth of the Company and that dividends may not be paid to holders of shares of the Company’s common stock.

The Company’s Articles of Incorporation, Bylaws and State Law May Contain Provisions that Preserve Current Management. Provisions of state law, the Company’s articles of incorporation and by-laws may discourage, delay or prevent a change in the Company’s management team that stockholders may consider favorable. These provisions will be likely to include:

·   authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;

·   permitting stockholder action by written consent; and

·   establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

These provisions, if included in the Company’s articles of incorporation or by-laws, could allow the Company’s board of directors to affect the investor’s rights as a stockholder since the board of directors can make it more difficult for preferred stockholders or common stockholders to replace members of the board. Because the board of directors is responsible for appointing the members of the management team, these provisions could, in turn, affect any attempt to replace the current or future management team.

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There are Additional Costs of Being a Public Company and those Costs may be Significant. The Company is subject to the information and reporting requirements of the U.S. securities laws. The U.S. securities laws require, among other things, review, audit and public reporting of the Company’s financial results, business activities and other matters. The public company costs of preparing and filing registration statements, as well as annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause expenses to be higher than if it were privately-held. These increased costs may be material and may include the hiring of additional employees and/or the retention of additional consultants and professionals. Failure by the Company to comply with the federal or state securities laws could result in private or governmental legal action against the Company and/or its officers and directors, which could have a detrimental effect on the business and finances of the Company, the value of the Company’s stock and the ability of stockholders to resell their stock.

The Common Stock of the Company may be Considered “Penny Stock” and may be Difficult to Trade. The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market or exercise price of less than $5.00 per share, subject to specific exemptions. The market price of the Company’s common stock may be less than $5.00 per share and, therefore, may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell the Company’s common stock and may affect the ability of investors to sell their shares.

Certain of the Company’s Shares are Eligible for Sale, and their Sale Could Depress the Market Price of its Stock. Much of the Company’s common stock is subject to resale under Rule 144, subject to certain volume limitations. Shares which are not registered may be offered from time to time in the open market pursuant to Rule 144, and these sales may have a depressive effect on the market for the Company’s common stock. In general, a person who has held restricted shares for a period of one year may, upon filing with the SEC a notification on Form 144, sell into the market shares of the Company’s common stock in an amount equal to the greater of 1% of the outstanding shares or the average weekly number of shares sold in the last four weeks prior to such sale. Such sales may be repeated once each three months, and any amount of the restricted shares may be sold by a non-affiliate after they have been held two years.

Indemnification of Officers and Directors. The Company intends to indemnify its officers and directors to the fullest extent permissible under the law. Under most circumstances, the Company's officers and directors may not be held liable to the Company or its equity owners for errors in judgment or other acts or omissions in the conduct of the Company's business unless such errors in judgment, acts or omissions constitute fraud, gross negligence or malfeasance.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of the historical results of operations, liquidity and capital resources of Kapital Engine Investments, Inc. and its subsidiaries (collectively, “Kapital Engine”), which is the predecessor to Capital Partners, should be read in conjunction with the consolidated financial statements and related notes that appear elsewhere in this Current Report on Form 8-K. For purposes of this discussion, the terms “Kapital Engine” and “Capital Partners” shall be synonymous. This discussion contains forward-looking statements that involve risks and uncertainties. Capital Partners’ actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in “Risk Factors” beginning on page 8 of this Current Report on Form 8-K.

Overview

Capital Partners is primarily engaged in design, management and operation of fitness centers, principally in the Raleigh, North Carolina area. As of September 30, 2005, Capital Partners owned and operated nine fitness clubs.

The fitness clubs generally offer weight training, cardiovascular equipment, aerobics classes, yoga, tanning, babysitting and basketball courts. Operations focus on prospecting for new members, membership sales, and renewals.  Memberships may be prepaid or paid monthly. The majority of the memberships sold are for two-year periods.

This discussion compares the results of Capital Partners’ centers based on how long the centers have been open at the most recent measurement period. Capital Partners includes a center for comparable center revenue purposes beginning on the first day of the thirteenth full calendar month of the center’s operation, prior to which time the center is referred to as a new center. As Capital Partners grows its presence in existing markets by opening new centers, it expects to attract some memberships away from its other existing centers already in those markets, thereby reducing revenue and initially lowering the memberships of those existing centers. In addition, as a result of new center openings in existing markets, and because older centers will represent an increasing proportion of Capital Partners’ center base over time, Capital Partners’ comparable center revenue increases may be lower in future periods than in the past. Future plans include expansion into markets closely surrounding the Raleigh Durham market area (the “triangle”). These areas are rapidly expanding due to decreased land costs and the willingness of the workforce to commute to the triangle. These areas are further from Capital Partners’ existing clubs than its previous expansions have been. Therefore Capital Partners’ does not anticipate a significant impact on existing club revenue.

Capital Partners’ measures performance using such key operating statistics as average revenue per membership, including membership dues and enrollment fees, average in-center revenue per membership and center operating expenses, with an emphasis on payroll and occupancy costs, as a percentage of sales and comparable center revenue growth. Capital Partners’ uses center revenue and EBITDA margins to evaluate overall performance and profitability on an individual center basis. In addition, Capital Partners’ focuses on several membership statistics on a center-level and system-wide basis. These metrics include growth of center membership levels and growth of system-wide memberships, percentage center membership to target capacity, center membership usage, center membership mix among individual, couple and family memberships and center attrition rates.

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Capital Partners’ primarily receives revenue from two sources. First, its largest source of revenue is membership dues and enrollment fees paid by its members. Capital Partners receives a one-time enrollment fee at the time a member joins and monthly membership dues for usage from its members. The enrollment fees generally are nonrefundable after three to ten days. Enrollment fees and related direct expenses (primarily commissions) are deferred and recognized on a straight-line basis over an estimated membership period of twelve to thirty-six months, which is based on the life of the contract. In addition, monthly membership dues paid in advance of a center’s opening are deferred until the center opens. Capital Partners offers members month-to-month memberships and recognizes as revenue the monthly membership dues in the month to which they pertain.

Second, Capital Partners generates revenue at its centers from rental revenue from several third party vendors who operate refreshment areas within each fitness center. Rental revenue from this activity is recognized monthly.

The fitness center operations expenses consist primarily of salary, commissions, payroll taxes, benefits, real estate taxes and other occupancy costs, utilities, repairs and maintenance, supplies, administrative support and communications to operate our centers. Advertising and marketing expenses consist of its marketing department costs and media and advertising costs to support center membership growth. General and administrative expenses include costs relating to Capital Partners’ centralized support functions, such as accounting, information systems, procurement and member relations and other members of senior management. Capital Partners’ other operating expenses include other corporate expenses, as well as gains or losses on its dispositions of assets. Capital Partners’ total operating expenses may vary from period to period depending on the number of new centers opened during that period and the number of centers engaged in pre-sale activities.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the U.S., or GAAP, requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In recording transactions and balances resulting from business operations, Capital Partners uses estimates based on the best information available. Capital Partners uses estimates for such items as depreciable lives, tax provisions and provisions for uncollectible receivables. Capital Partners also uses estimates for calculating the amortization period for deferred enrollment fee revenue and associated direct costs, which are based on the weighted average expected life of center memberships. Capital Partners revises the recorded estimates when better information is available, facts change or it can determine actual amounts. These revisions can affect operating results. Capital Partners has identified below the following accounting policies that it considers to be critical.

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Revenue Recognition — Capital Partners receives a one-time enrollment fee at the time a member joins and monthly membership dues for usage from its members. The enrollment fees generally are nonrefundable after three to ten days. Enrollment fees and related direct expenses (primarily commissions) are deferred and recognized on a straight-line basis over an estimated membership period of twelve to thirty-six months, which is based on the life of the contract. In addition, monthly membership dues paid in advance of a center’s opening are deferred until the center opens. Capital Partners offers members month-to-month memberships and recognizes as revenue the monthly membership dues in the month to which they pertain.

Capital Partners also receives rental revenue from several third party vendors who operate refreshment areas within each fitness center. Rental revenue from this activity is recognized monthly.

Fair Value of Financial Instruments - Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, and accrued expenses. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of Capital Partners’ notes payable is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to Capital Partners for debt of the same remaining maturities and approximates the carrying amounts of the notes.

Accounts Receivable - Accounts receivable principally consists of amounts due from Capital Partners’ membership base. Capital Partners maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its members to make required payments. Capital Partners considers facts such as: historical collection experience, the age of the receivable balance, and general economic conditions that may affect its member’s ability to pay.

Impairment of Long-lived Assets - The carrying value of long-lived assets is reviewed annually and whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Capital Partners considers a history of consistent and significant operating losses to be its primary indicator of potential impairment. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows, which is generally at an individual location. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to that center, compared to the carrying value of these assets. If an impairment has occurred, the amount of impairment recognized is determined by estimating the fair value of these assets and recording a loss if the carrying value is greater than the fair value. For the years ended December 31, 2004 and 2003 there was no impairment charge recorded.

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Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Total revenue. Total revenue increased $2,654,500, or 37.9%, to $9,661,200 for the year ended December 31, 2004 from $7,006,700 for the year ended December 31, 2003. This was primarily due to the opening of a new fitness center and the purchase of an existing facility. The addition of new members by the new facilities resulted in a growth in total membership base of 20%. The memberships sold by the new facilities were primarily pre-paid and account for approximately 25% of the revenue increase. The remaining revenue increase is due to an overall company focus on pre-paid membership sales.

General and administrative expenses. General and administrative expenses were $7,998,600 or 85.3%, of total revenue, for the year ended December 31, 2004 compared to $7,344,100, or 108.7% of total revenue, for the year ended December 31, 2003. This decrease primarily consisted of decreases of approximately $200,000 in advertising cost, $150,000 in contracted services, $200,000 in payroll, and $100,000 in professional fees. As a percentage of total revenue, these expenses decreased due to the eliminated expenses not being performance related (i.e. sales bonus).

Other operating income. Other operating income was $126,000 for the year ended December 31, 2004 compared to $150,900 for the year ended December 31, 2003. This $24,900 decrease was primarily due to a decrease in subleasing of unused space in the facilities.

Interest expense. Interest expense was $141,700 for the year ended December 31, 2004 compared to $124,400 for the year ended December 31, 2003. This $17,300 increase was primarily the result of new debt and capital leases.

Net income(loss). As a result of the factors described above, net income (loss) was $1,351,500, or14.4% of total revenue, for the year ended December 31, 2004 compared to $(609,800), or (9.02)% of total revenue, for the year ended December 31, 2003.

Nine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30, 2004

Total revenue. Total revenue decreased $854,400 or 11.4%, to $6,618,600 for the nine months ended September 30, 2005 from $7,473,000 for the nine months ended September 30, 2004. This decrease does not reflect a decrease in memberships. Rather, the decrease is a result of an increase in monthly membership sales and a decrease in paid-in-full sales. The decrease is also due to an increase in competition.

General and administrative expenses. General and administrative expenses were $4,873,100 or 73.6%, of total revenue, for the nine months ended September 30, 2005 compared to $5,837,000, or 78.1% of total revenue, for the nine months ended September 30, 2004. This decrease primarily consisted of decreases of approximately $250,000 in advertising cost, $150,000 in contracted services, $400,000 in payroll, and $150,000 in professional fees.

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Other operating income. Other operating income was $277,400 for the nine months ended September 30, 2005 compared to $78,800 for the nine months ended September 30, 2004. This $198,600 increase was primarily due to advertising revenues generated in the facilities and an increase in subleases.

Interest expense. Interest expense was $87,900 for the nine months ended September 30, 2005 compared to $120,200 for the nine months ended September 30, 2004. This $32,300 decrease was primarily the result of loan balances being paid-in-full.

Net income. As a result of the factors described above, net income was $1,935,000, or 29.2% of total revenue, for the nine months ended September 30, 2005 compared to $1,594,600, or 21.3% of total revenue, for the nine months ended September 30, 2004.

Non-GAAP Financial Measures

Capital Partners uses the term “EBITDA,” which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization. This term, as Capital Partners defines it, may not be comparable to a similarly titled measure used by other companies and is not a measure of performance presented in accordance with GAAP.

Capital Partners uses EBITDA as a measure of operating performance. EBITDA should not be considered as a substitute for net income, cash flows provided by operating activities, or other income or cash flow data prepared in accordance with GAAP. The funds depicted by EBITDA are not necessarily available for discretionary use if they are reserved for particular capital purposes, to maintain compliance with debt covenants, to service debt or to pay taxes.

Capital Partners believes EBITDA is useful to an investor in evaluating its operating performance and liquidity because:

•   it is a widely accepted financial indicator of a company’s ability to service its debt;

•   it is widely used to measure a company’s operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of our capital structure and the method by which assets were acquired; and

•   it helps investors to more meaningfully evaluate and compare the results of its operations from period to period by removing from its operating results the impact of its capital structure, primarily interest expense from its outstanding debt, and asset base, primarily depreciation and amortization of its properties.

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Capital Partners uses EBITDA:

	•	as a measurement of operating performance because it assists it in comparing its performance on a consistent basis, as EBITDA removes from Capital Partners’ operating results the impact of its capital structure, which includes interest expense from Capital Partners’ outstanding debt, and its asset base, which includes depreciation and amortization of its properties;
	•	in presentations to the members of its board of directors to enable the board to have the same consistent measurement basis of operating performance used by management; and
	•	as the basis for incentive bonuses paid to selected members of senior and center-level management.
The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA:

	For the Nine Months Ended September 30,				For the Year Ended December 31
		2005		2004		2004		2003
Net income (loss)	$	1,935,000	$	1,594,600	$	1,351,500	$	(609,800	)
Interest expense		87,900		120,200		141,700		124,400
Provision for income taxes		-		-		-		-
Depreciation and amortization		463,300		463,900		589,500		514,200
EBITDA	$	2,486,200	$	2,178,700	$	2,082,700	$	28,800

Seasonality of Business

Seasonal trends have a limited effect on Capital Partners’ overall business. Generally, it has experienced greater membership growth at the beginning of the year and has not experienced an increased rate of membership attrition during any particular season of the year.

Liquidity and Capital Resources

Liquidity

Historically, Capital Partners has satisfied its liquidity needs through various debt arrangements capital contributions and cash from operations. Capital Partners believes that its cash from operations will be sufficient to satisfy its cash requirements during the next twelve months. Principal liquidity needs have included the development of new fitness centers, debt service requirements and expenditures necessary to maintain and update its existing centers and their related fitness equipment. Capital Partners believes that it can satisfy its current and longer-term debt service obligations and capital expenditure requirements with cash flow from operations and by the extension of the terms of or refinancing its existing debt, although there can be no assurance that such actions can or will be completed. Capital Partners’ business model operates with negative working capital because it carries minimal accounts receivable due to Capital Partners ability to have monthly membership dues paid by electronic draft and that it defers enrollment fee revenue.

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Operating Activities

As of September 30, 2005, Capital Partners had total cash of $20,400. Net cash provided by operating activities was $1,061,300 for the nine months ended September 30, 2005 as compared to $968,600 for same period in 2004. The increase of $92,700 was primarily due to a $240,400 increase in net income adjusted for non-cash charges and in cash provided by net operating assets and liabilities in 2005 compared to 2004. The cash used by net operating assets and liabilities was a result of an increased number of memberships.

Net cash provided by operating activities was $1,080,100 for 2004 compared to $1,268,500 for 2003. The decrease of $188,400 was primarily due to an increase in memberships and deferred revenue during 2004.

Investing Activities

Investing activities consist primarily of purchasing and sales of fitness equipment. In addition, Capital Partners makes capital expenditures to maintain and update its existing centers. Capital Partners finances the purchase of its fitness equipment by cash payments or by financing through notes payable or capital lease obligations.

Net cash used by investing activities was $9,200 for the nine months ended September 30, 2005, as compared to $223,700 for same period in 2004. The decrease of $214,500 was primarily due to the decreased purchases of property and equipment during the 2005 period as compared to 2004.

Net cash used by investing activities was $221,300 for 2004 compared to $191,100 for 2003. The increase of $30,200 was primarily due to an increase in the purchase of property and equipment.

Opening new facilities will require financing for new equipment. A 25,000 square foot facility typically requires approximately $250,000 in new equipment.

Financing Activities

Equipment is financed by Sun Trust (formerly known as Central Carolina Bank and Trust Company) and Life Fitness, a division of Brunswick Corporation, which typically sells its leases to CIT following the closing of the financing. They are typically three-year leases with a $1 purchase option upon maturity. Upfit of an existing building is typically financed by Sun Trust. Depending on the work required, this cost is between $200,000 and $700,000.

Recent Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. In addition, it carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle in most circumstances. The provisions of SFAS No. 154 are effective in fiscal years beginning after December 15, 2005. Capital Partners plans to prospectively adopt SFAS No. 154 at the beginning of the 2006 fiscal year.  

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In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 05-06, Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (“EITF 05-06”). EITF 05-06 concludes that the amortization period for leasehold improvements acquired in a business combination and leasehold improvements that are in service significantly after and not contemplated at the beginning of the lease term should be amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date of inception. As of September 30, 2005, this pronouncement had no impact on the financial statements.  

Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on Capital Partners present or future financial statements.

Impact of Inflation

Capital Partners believes that inflation has not had a material impact on its results of operations for any of the periods presented. It cannot assure you that future inflation will not have an adverse impact on its operating results and financial condition.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information, as of the date of this Current Report on Form 8-K, regarding the beneficial ownership of the Company’s common stock on a fully-diluted basis by: (1) each of the Company’s executive officers and directors; (2) all of the Company’s executive officers and directors as a group; and (3) each person known by the Company to be the beneficial owners of more than 5.0% of the outstanding shares of the Company’s common stock.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, the Company believes that each stockholder identified in the table possesses sole voting and investment power over all shares of the Company’s common stock shown as beneficially owned by the stockholder. Percentage of beneficial ownership is based on 19,481,735 shares of the Company’s common stock outstanding as of the date of this Current Report on Form 8-K. The amount of the Company’s outstanding shares of common stock reflects the Stock Consideration issued in the Merger, but does not include shares that may be issued in the Offering. Unless indicated otherwise in the footnotes, the address of each individual listed in the table is c/o Health Partnership Inc., 3111 North Seminary, Suite 1N, Chicago, Illinois 60657.

Name	Shares of Common Stock Beneficially Owned	Percentage of Common Stock Beneficially Owned
Douglas Stukel	2,831,250(1), (4)	14.53%
Lee Wiskowski	2,831,250(2), (4)	14.53%
Gerard Jacobs	9,437,500(3)	48.44%
All Officers & Directors	15,100,000	77.50%
5% Stockholders
Randall Rohm	3,279,952(2)(4)	16.84%

^{1 Legal title to these shares is held by DJS Investments, LLC (“DJS”), a limited liability company controlled by Mr. Stukel. DJS has granted certain individuals the option to purchase a portion of the shares held by DJS.}

^{2 Legal title to these shares is held by Grander, LLC, a limited liability company controlled by Mr. Wiskowski. Grander has granted certain individuals the option to purchase a portion of the shares held by Grander.}

^{3 Legal title to these shares is held by the Roberti Jacobs Family Trust (the “Trust”), which is an irrevocable trust whose beneficiaries include Mr. Jacobs’ children. Mr. Jacobs’ mother-in-law is the current trustee of the Trust. Mr. Jacobs has disclaimed any beneficial ownership of any securities, including the Company’s common stock, owned by the Trust. The Trust has granted certain individuals the option to purchase a portion of the shares held by the Trust.}

^{4 Messrs Rohm and Flynn (a former stockholder of Capital Partners) have provided Mr. Jacobs, or his designees, with an irrevocable proxy to vote their shares until disposed of to and nonaffiliated, and effective upon the initial closing of the Offering, it is expected that DJS and Grander will grant to Mr. Jacobs or his designee an irrevocable proxy to vote their shares until disposed of to a nonaffiliated.}

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Management

Set forth below is information concerning the Company’s executive officers and directors, as well as the current executive officers of Capital Partners.

Name	Age	Position
Gerard Jacobs	50	Chairman of the Board; Chief Executive Officer of the Company
Douglas Stukel	35	Director, Vice Chairman, President of the Company
Lee Wiskowski	39	Director, Secretary and Treasurer of the Company
Ashley Shepard	35	President of Capital Partners
Randall Rohm	31	Chief Operating Officer of Capital Partners

Gerard Jacobs. Mr. Jacobs was appointed as the chairman of the Company’s board of directors and as its chief executive officer upon the closing of the Merger. Since December 2001, Mr. Jacobs has served as the chief executive officer, secretary and treasurer of CGI Holding Corporation d/b/a Think Partnership Inc., an AMEX listed provider of internet services including internet advertising, online dating and online educational services. Mr. Jacobs also served as president of CGI Holding Corporation from December 2001 to December 2005. From March 1999 until December 2001, Mr. Jacobs was an officer and director of several privately held companies. From 1995 until March 1999, Mr. Jacobs served as the chief executive officer of Metal Management, Inc., Chicago, Illinois, a NASDAQ listed metal processor and dealer. Mr. Jacobs is a graduate of Harvard University, where he was elected to Phi Beta Kappa, and of The University of Chicago Law School, which he attended as a Weymouth Kirkland Law Scholar. Mr. Jacobs was elected twice to the Board of Education of District 200, Oak Park and River Forest High School, Oak Park, Illinois.

Douglas Stukel. Mr. Stukel was appointed as the Company’s vice chairman upon the closing of the Merger. Mr. Stukel also has served as the Company’s president and as a member of its board of directors since May 2005. In addition, Mr. Stukel serves as a director of Capital Growth Systems, Inc. (“CGS”) and as the co-chief executive officer of CGS. Mr. Stukel, together with Mr. Wiskowski, led the investor group which purchased the majority stake in CGS, and subsequently raised substantial capital to fund working capital requirements in connection with CGS’ acquisitions of Nexvu Technologies, LLC and Frontrunner Network Systems, Inc. Nexvu has developed an advanced set of software tools in the application performance management services industry. Frontrunner is a complementary telephone systems integrator, with expertise in installation, sales and management of systems through its network operating center. In addition, Mr. Stukel is a co-founder of Premier Holdings of Illinois, LLC, a distributor of medical supplies based in Joliet, Illinois. Mr. Stukel served as the president of Cendant Home Funding, a residential mortgage company based in Joliet, Illinois, from 1997 until 2001. Mr. Stukel is also a co-founder of Momentum Capital, LLC, a privately held firm providing financial advisory services in connection with mergers and acquisitions and analysis as to strategic alternatives. As a co-founder of Momentum Capital, LLC, Mr. Stukel's responsibilities are related to the location of potential clients, the negotiation of agreements with those clients and the provision of advisory services related to the clients.

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Lee Wiskowski. Mr. Wiskowski also has served as the Company’s secretary and treasurer and as a member of its board of directors since May 2005. Mr. Wiskowski also serves as a director of Capital Growth Systems, Inc. (“CGS”) and as a co-chief executive officer of CGS. In 1994, Mr. Wiskowski was the co-founder of Madison Securities and early in 1999 was a co-founder of Advanced Equities, Inc., both NASD licensed broker-dealers focusing on emerging growth companies. During his tenure with these two companies, Mr. Wiskowski had significant responsibility in the companies' raising of capital for private and public placements, primarily of high technology companies. Mr. Wiskowski sold his interest to the other principals of Advanced Equities approximately five years ago. Since December 2002, Mr. Wiskowski has been engaged in the business of providing financial and advisory services to emerging growth companies through Grander, LLC and Momentum Capital, LLC, both privately held advisory and consulting firms. As the sole owner of Grander, LLC and co-founder of Momentum Capital, LLC, Mr. Wiskowski's responsibilities are related to the location of potential clients, the negotiation of agreements with those clients and the provision of advisory services related to the clients.

Randall Rohm. Upon the closing of the Merger, Mr. Rohm became the chief operating officer of Capital Partners. Prior to that, Mr. Rohm served as the chief executive officer of Capital Partners since his purchase of majority control of the chain in 2003. Since that time, he has opened two new clubs, with a third under development. He is a former high school and college athlete and has pursued physical fitness and entrepeneurialism his entire adult life. Mr. Rohm was certified as a physical fitness trainer in 1997 and left school to pursue a career in health club management. In addition, he started and successfully operated a limousine business from 1998-2004.

Ashley Shepard.Mr. Shepard has served as the president of Capital Partners since 2005. He is a graduate of Clemson University and former player for the St. Louis Rams and Minnesota Vikings in the National Football League. From 1998 to the present he has been active in the telecommunications industry, having held sales and marketing positions of increasing responsibility with Southeastern Telecom, Williams Communications, ITC Delacom, Colo Solutions and Universal Solutions.

Board of Directors

The Company’s by-laws provide that the size of its board of directors may be fixed from time to time by resolution of the board. The Company’s board of directors adopted a resolution fixing the number of directors at three members. The Company anticipates that its board of directors will adopt another resolution to add an additional six directors, for a total of nine directors, by the end of the second quarter of 2006. All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors or their earlier removal or retirement. Executive officers are elected annually by the board of directors and serve at the discretion of the board.

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Compensation of the Board of Directors

The Company will reimburse each of its directors for reasonable travel and other expenses incurred with attending all board meetings. In addition, the Company anticipates that it will pay each director that is not an officer or director of the Company an undetermined fee for each board meeting that such director attends.

Audit Committee

The Company has not yet formed an audit committee of its board of director and is not yet required to do so because it is not a “listed issuer” as such term is defined by the rules adopted under the Securities Exchange Act of 1934. However, the Company intends to form an audit committee once it adds additional members to its board of directors as previously noted. The Company anticipates that its audit committee will consist of one or more independent members of its board of directors, at least one of whom will qualify as an audit committee financial expert under the SEC’s rules and regulations. In the meantime, the Company’s board of directors intends to satisfy the duties of the audit committee. The audit committee’s duties would be to recommend to the Company’s board of directors the engagement of independent auditors to audit the Company’s financial statements and to review its accounting and auditing principles. The audit committee would review the scope, timing, and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls.

Executive Compensation

The following summary compensation table sets forth information concerning the cash and non-cash compensation earned by, awarded or paid to Capital Partners’ then acting chief executive officer for services rendered during the fiscal years ended December 31, 2003, 2004 and 2005. The Company’s current officers and directors are not receiving any compensation from the Company.

Summary Compensation Table
										Long- Term Compensation
			Annual Compensation						Awards			Payouts
Name and Principal Position	Year		Salary ($)		Bonus ($)		Other Annual Compensation ($)		Securities Underlying Options		LTIP Payouts ($)		All Other Compen-sation ($)
Randall Rohm, CEO		2005		90,000		0		12,583(1)	0		0			0
		2004		180,000		0		39,000(1)	0		0			0
		2003		180,000		0		28,750(1)	0		0			0

___________________

(1) The Company made automobile lease payments on behalf of Mr. Rohm during 2003, 2004 and a portion of 2005. Mr. Rohm assumed the automobile lease during 2005.

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Employment Agreement

Concurrent with the closing of the Merger, Capital Partners entered into an employment agreement with Randall Rohm, the former chief executive officer of Capital Partners. Pursuant to the employment agreement, Mr. Rohm agreed to act as the chief operating officer of Capital Partners for a three-year term. Mr. Rohm will earn an annual base salary of $200,000 and will be eligible to receive raises, bonuses, options and warrants in the sole discretion of the board of directors of Capital Partners. Mr Rohm will be eligible for a mandatory bonus of $50,000 during each year of the term if Capital Partners' EBITDA reaches certain levels. In addition to serving as the chief operating officer, Mr. Rohm agreed to perform such duties as may be assigned to him by Capital Partners’ board of directors or chief executive officer. Mr. Rohm’s initial assignment is to provide full-time management of the health club facilities owned by Capital Partners.

Incentive Plan

The Company anticipates establishing a qualified stock incentive plan to incent the employees, officers and directors of the Company and its subsidiaries, as well as other persons providing assets or services of value to the Company, calling for the issuance of restricted stock, stock options and/or other equity based compensation. At present, no such plan is in place.

Certain Relationships and Related Party Transactions

Convertible Debentures

In October 2005, the Company issued a series of notes (the “Convertible Debentures”) totaling $500,000 in principal amount, bearing simple interest at 7% per annum and maturing one year from issuance. The principal plus interest accrued under the Convertible Debentures automatically convert into shares of the Company’s common stock effective upon the Company closing on an equity raise of $3,000,000 (inclusive of the amount of equity issued on conversion of the Convertible Debentures) or more, at a 25% discount to the price paid per share to investors in the equity raise. The Company may seek to raise up to $1,000,000 of additional Convertible Debentures to enable it to provide bridge loan financing to Capital Partners and/or other acquisition candidates for working capital purposes. The holders of the Convertible Debentures include persons who currently serve as directors and/or officers of the Company or who may do so in the future.

$400,000 Bridge Loan

In December 2005, Douglas Stukel and two other individuals loaned an aggregate of $300,000 to the Company, which in turn was loaned by the Company to Capital Partners at 8% per annum to enable it to effect the funding of the buyout of a former minority shareholder of its predecessor entity. In January 2006, another individual loaned the Company an additional $100,000, which in turn was loaned by the Company to Capital Partners at 8% per annum to enable it to fund certain of its working capital requirements. All of these loans to the Company bear simple interest at 12% per annum and are due upon the initial closing of the Offering. See “Certain Relationships and Related Party Transactions - Convertible Debentures,” above.

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Advisory Fees

The Company expects to pay advisory fees to its current and future officers and directors, as well as possibly other persons assisting the Company in the acquisitions of Capital Partners and/or additional acquisition candidates, which could total up to $1,500,000 plus warrants to purchase up to 1,200,000 shares of the Company’s common stock at $1.25 per share. These fees are expected to be awarded by the board of directors and paid for identification and negotiation of the acquisition of the target companies, as well as services associated with the consummation of the acquisitions. This compensation will be adjusted downward to the extent that fewer than three targets are acquired by the Company in 2006, and is in addition to other compensation that the board of directors may award from time to time to these persons for other services.

Description of Securities

General

The authorized capital stock of the Company consists of: (i) 50,000,000 shares of common stock, par value $.0001 per share, 19,481,734 of which shares were outstanding as of the date of this Current Report on Form 8-K; and (ii) 5,000,000 Shares of Preferred Stock, par value $0.10 per share, none of which were issued and outstanding as of the date of this Current Report on Form 8-K.

Common Stock

Each share of the Company’s common stock is entitled to one vote. There are no preemptive, subscription, conversion or redemption rights pertaining to the shares of such common stock. Stockholders are entitled to receive such dividends as declared by the board of directors out of assets legally available therefor and to share ratably in the assets of the Company available upon liquidation.

The Company’s Articles of Incorporation do not provide for cumulative voting. Therefore, stockholders do not have the right to aggregate their votes for the election of directors and, accordingly, stockholders holding more than fifty percent (50%) of the shares of the Company’s common stock outstanding can elect all of the directors.

Preferred Stock

The Company is authorized to issue 5,000,000 Shares of Preferred Stock without designation, par value $0.10 per Share. As of the date of this Current Report on Form 8-K, there were no shares of Preferred Stock outstanding.

The Company’s Articles of Incorporation grants the board of directors the right to cause the Company to issue, from time to time, all or part of the shares of Preferred Stock remaining undesignated in one or more series, and to fix the number of shares of Preferred Stock and determine or alter for each series, the voting powers, full, limited, or none, and other designations, preferences, or relative, participating, optional or other special rights and such qualifications, limitations, or restrictions thereof.

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Market for the Company’s Common Equity and Related Stockholder Information

The Company’s common stock is traded on the OTC Bulletin Board under the trading symbol “HHPN.OB.” As of the date of this Current Report on Form 8-K, the Company had approximately 232 stockholders of record prior to the Merger. The Company has not declared any dividends on its common stock during the fiscal years ended December 31, 2003 or 2004, or the nine months ended September 30, 2005. The Company does not anticipate that it will declare any dividends in the foreseeable future. The table below sets forth the high and low bid information with respect to the Company’s common stock for each quarter during the same periods.

2003	High	Low
1st Quarter	No quote available	No quote available
2nd Quarter	No quote available	No quote available
3rd Quarter	.010	.010
4th Quarter	.010	.010
2004	High	Low
1st Quarter	.028	.005
2nd Quarter	.019	.004
3rd Quarter	.005	.001
4th Quarter	.010	.001
2005	High	Low
1st Quarter	.100	.100
2nd Quarter	.100	.100
3rd Quarter	.100	.100

Legal Proceedings

In February 2006, Duvera Billing Services (“Duvera”) filed a complaint in the General Court of Justice, District Court Division of Wake County, North Carolina against, among others, Kapital Engine Investments, Inc. (“Kapital Engine”), the predecessor to Capital Partners. Duvera alleges in the complaint that Kapital Engine breached that certain Master Loan Agreement dated November 16, 2004, by failing to make the required payments thereunder. Duvera is seeking approximately $414,000 through its complaint. Although the Company has reserved a sufficient sum to satisfy the matter, the Company intends to review such complaint, the relevant facts and all appropriate defenses.

The Company is not involved in any other legal proceedings as of the date of this Current Report on Form 8-K.

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Recent Sales of Unregistered Securities

The Company has not issued any securities since October 31, 2005 (the date of its last report of sales of securities, as reported on Form 8-K) other than: (i) the issuance of 3,496,430 shares of its common stock to the two former shareholders of Capital Partners pursuant to the Merger of Capital Partners with a wholly owned subsidiary of the Company; and (ii) the issuance of $400,000 of unsecured notes to four individuals during the period December 2005 through January, 2006; such notes bear simple interest at 12% per annum and are due on the earlier of June 30, 2006 or the initial closing of the Offering. The Company believes that such transactions were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2) and Regulation D promulgated thereunder. Capital Partners, as a predecessor to the Company, issued 66 shares of its common stock to one stockholder in late 2005 (representing approximately 6% of its issued and outstanding stock) pursuant to a transaction which the Company believes was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2).

Indemnification of Directors and Officers

The Colorado Business Corporation Act contains provisions permitting and, in some situations, requiring Colorado corporations to provide indemnification to their officers and directors for losses and litigation expense incurred in connection with their service to the corporation. The Company’s articles and bylaws contain provisions requiring its indemnification of its directors and officers and other persons acting in their corporate capacities.

The Colorado Business Corporation Act (the “Colorado BCA”) permits indemnification of a director of a Colorado corporation, in the case of a third-party action, if the director:

·   conducted himself or herself in good faith,

·   reasonably believed that (a) in the case of conduct in his or her official capacity, his or her conduct was in the corporation's best interest, or (b) in all other cases, his or her conduct was not opposed to the corporation's best interest; and

·   in the case of any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

The Colorado BCA further provides for mandatory indemnification of directors and officers who are successful on the merits or otherwise in litigation. The statute limits the indemnification that a corporation may provide to its directors in a derivative action in which the director is held liable to the corporation, or in any proceeding in which the director is held liable on the basis of his improper receipt of a personal benefit.

In addition, the Company may enter into agreements with its directors providing contractually for indemnification consistent with the articles and bylaws. The Colorado BCA also authorizes the Company to purchase insurance for its directors and officers insuring them against risks as to which the Company may be unable lawfully to indemnify them.

As to the exculpation or indemnification of directors, officers, and controlling persons for liabilities arising under the Securities Act of 1933, the Company has been advised that, in the opinion of the SEC, such exculpation or indemnification is against public policy and is, therefore, unenforceable.

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Other Information

The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, and is required to file reports and other information with the SEC, 450 Fifth Street N.W., Washington, D.C., 20549. These reports and other information are available at the SEC’s website at http://www.sec.gov. In addition, you may examine copies of these documents without charge at, or obtain copies of such documents upon payment of prescribed fees from, the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the regional offices of the SEC located at Room 1400, 75 Park Place, New York, New York 10007 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.

The Company will send to its stockholders annual reports containing audited financial statements with a report thereon by its independent public accountants.

Item 3.02 Unregistered Sales of Equity Securities.

The Company has not issued any securities since October 31, 2005 (the date of its last report of sales of securities, as reported on Form 8-K), other than: (i) the issuance of 3,496,430 shares of its common stock to the two former shareholders of Capital Partners pursuant to the Merger of Capital Partners with a wholly owned subsidiary of the Company; and (ii) the issuance of $400,000 of unsecured notes to four individuals during the period of December 2005 through January, 2006; such notes bear simple interest at 12% per annum and are due on the earlier of June 30, 2006 or the initial closing of the Offering. The Company believes that such transactions were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2) and Regulation D promulgated thereunder. Capital Partners, as a predecessor to the Company, issued 66 shares of its common stock to one stockholder in late 2005 (representing approximately 6% of its issued and outstanding stock) pursuant to a transaction which the Company believes was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(2).

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

Immediately following the closing of the Merger, the Company’s board of directors appointed Gerard Jacobs as the chairman of the board of directors and the chief executive officer of the Company. Prior to that date, Douglas Stukel, the Company’s president, acted as the Company’s chief executive officer. Mr. Stukel will continue to serve the Company as its president. In addition, the Company’s board of directors also appointed Mr. Stukel as the vice chairman of the Company. Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

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Item 5.06 Change in Shell Company Status.

As a result of the consummation of the Merger described in Items 1.01 and 2.01 of this Current Report on Form 8-K, the Company believes that it is no longer a shell corporation as that term is defined in Rule 405 of the Securities Act of 1933 and Rule 12b-2 of the Securities Exchange Act of 1934.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

In accordance with Item 9.01(a), Capital Partners audited financial statements for the fiscal years ended December 31, 2003 and 2004 and Capital Partners’ unaudited financial statements for the interim period ended September 30, 2005, are filed in this Current Report on Form 8-K as Exhibit 99.1

(b) Pro Forma Financial Information.

In accordance with Item 9.01(b), the Company’s pro forma financial statements are filed in this Current Report on Form 8-K as Exhibit 99.2.

(c) Exhibits

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

Exhibit No.Description

2.1 Agreement and Plan of Merger dated February 13, 2006, by and among Health Partnership Inc., Capital Partners Merger Sub, Inc., Capital Partners Acquisition Sub, Inc., Capital Partners for Health & Fitness, Inc., Randall Rohm and Thomas Flynn (to be filed by amendment).

3.1 Articles of Incorporation of Health Partnership Inc.

3.2 Form of Bylaws of Health Partnership Inc.

3.3 Form of Articles of Merger merging Capital Partners Merger Sub, Inc., a North Carolina corporation, with Capital Partners for Health & Fitness, Inc., a North Carolina corporation.

3.4 Form of Articles of Merger merging Capital Partners for Health & Fitness, Inc., a North Carolina corporation, with Capital Partners Acquisition Sub, Inc., a North Carolina corporation.

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10.1 Form of Note Purchase Agreement used in connection with the issuance of the Company’s convertible debentures totaling $500,000.

10.2 Form of Note Purchase Agreement used in connection with the $400,000, in the aggregate, bridge loan to Capital Partners.

10.3 Form of Membership Agreement used by Capital Partners’ health club facilities.

10.4 Master Loan Agreement dated November 16, 2004, between Kapital Engine Investments, Inc. and Duvera Billing Services, LLC.

10.5 Form of Equipment Lease between Life Fitness, a division of Brunswick Corporation, and the Company.

10.6 Form of Equipment Finance Lease Agreement between Central Carolina Bank and the Company.

10.7 Form of Employment Agreement between Capital Partners and Randall Rohm.

23.1 Consent of Pender Newkirk and Company.

99.1 Audited financial statements for Kapital Engine Investments, Inc. for the fiscal years ended December 31, 2003 and 2004, and unaudited financial statements for the interim period ended September 30, 2005.

99.2 Unaudited pro forma consolidated balance sheet as of September 30, 2005 of Kapital Engine Investments, Inc. and Health Partnership Inc. Unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2005 of Kapital Engine Investments, Inc. and Health Partnership Inc. Unaudited pro forma statements of operations for the year ended December 31, 2004 of Kapital Engine Investments, Inc. and Health Partnership Inc.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:February 13, 2006

HEALTH PARTNERSHIP INC.

By:/s/ Douglas Stukel_________

Douglas Stukel, President

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EX-3.1

EX-3.2

   v035422_ex3-2 -- Converted by SECPublisher 2.1.1.8, created by BCL Technologies Inc., for SEC Filing
   

EX-3.3

                           FORM OF ARTICLES OF MERGER
                                       OF
                        CAPITAL PARTNERS MERGER SUB, INC.
                                      INTO
                 CAPITAL PARTNERS FOR HEALTH & FITNESS, INC.


      Pursuant to North Carolina General Statutes Section 55-11-05(a), the
undersigned entity does hereby submit the following Articles of Merger as the
surviving business entity in a merger between two or more business entities.

      FIRST: The name of the surviving entity is Capital Partners For Health &
Fitness, Inc., a corporation organized under the laws of the State of North
Carolina.

      SECOND: The address of the surviving entity is 101-a New Waverly Place,
Cary, North Carolina 27511.

      THIRD: The name of the merged entity is Capital Partners Merger Sub, Inc.,
a corporation organized under the laws of the State of North Carolina.

      FOURTH: An Agreement and Plan of Merger has been duly adopted in the
manner required by law of each of the business entities participating in the
merger.

      FIFTH: These Articles will be effective upon filing.

      IN WITNESS WHEREOF, the Surviving Corporation has caused these Articles of
Merger to be signed by a duly authorized officer as of February __, 2006.



                                    CAPITAL PARTNERS FOR HEALTH & FITNESS, INC.

                                    By:
                                            -----------------------------------
                                    Name:
                                            -----------------------------------
                                    Title:
                                            -----------------------------------


                                      A-1

EX-3.4

                           FORM OF ARTICLES OF MERGER
                                       OF
                 CAPITAL PARTNERS FOR HEALTH & FITNESS, INC.
                                      INTO
                     CAPITAL PARTNERS ACQUISITION SUB, INC.


      Pursuant to North Carolina General Statutes Section 55-11-05(a), the
undersigned entity does hereby submit the following Articles of Merger as the
surviving business entity in a merger between two or more business entities.

      FIRST: The name of the surviving entity is Capital Partners Acquisition
Sub, Inc., a corporation organized under the laws of the State of North
Carolina.

      SECOND: The address of the surviving entity is 101-a New Waverly Place,
Cary, North Carolina 27511.

      THIRD: The name of the merged entity is Capital Partners Merger Sub, Inc.,
a corporation organized under the laws of the State of North Carolina.

      FOURTH: The text of each amendment to the Articles of Incorporation of the
Surviving Corporation is attached hereto as EXHIBIT A.

      FIFTH: An Agreement and Plan of Merger has been duly adopted in the manner
required by law of each of the business entities participating in the merger.

      SIXTH:  These Articles will be effective upon filing.

      IN WITNESS WHEREOF, the Surviving Corporation has caused these Articles of
Merger to be signed by a duly authorized officer as of February __, 2006.


                                     CAPITAL PARTNERS ACQUISITION SUB, INC.

                                     By:
                                           ------------------------------------
                                     Name:
                                           ------------------------------------
                                     Title:
                                           ------------------------------------

                                      A-1

EX-10.1

                         FORM OF NOTE PURCHASE AGREEMENT

      THIS NOTE PURCHASE AGREEMENT ("Agreement") is made as of _____________,
2006, by and among HEALTH PARTNERSHIP INC., a Colorado corporation, (the
"Company"), and the lenders (each individually a "Lender," and collectively the
"Lenders") named on the Schedule of Lenders attached hereto (the "Schedule of
Lenders"). Capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in Section 1 below.

      WHEREAS, each of the Lenders intends to provide certain Consideration to
the Company as described for each Lender on the Schedule of Lenders;

      WHEREAS, the parties wish to provide for the sale and issuance of the
Notes in return for the provision by the Lenders of the Consideration to the
Company on the terms and subject to the conditions set forth in this Agreement;
and

      WHEREAS, the Company has obtained the written consent of the Roberti
Jacobs Family Trust u/a/d 11-11-99 in connection with the sale and issuance of
the Notes pursuant to that certain Note Purchase Agreement, dated October 31,
2005 by the Company and each lender named therein, a copy of which consent is
attached hereto as Exhibit A.

      NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

      1. Definitions.

      (a) "Consideration" shall mean the amount of money paid by each Lender
pursuant to this Agreement as shown on the Schedule of Lenders.

      (b) "Conversion Shares" shall, for purposes of determining the type of
Equity Securities issuable upon conversion of the Notes, mean if the Notes are
converted to equity pursuant to Section 2.2 below, the Equity Securities issued
in the Next Equity Financing.

      (c) "Conversion Price" shall mean with respect to a conversion pursuant to
Section 2.2 below, a price per share equal to seventy five percent (75%) of the
price paid per share for Equity Securities by the investors in the Next Equity
Financing.

      (d) "Equity Securities" shall mean the Company's Common Stock or Preferred
Stock or any securities conferring the right to purchase the Company's Preferred
Stock or securities convertible into, or exchangeable for (with or without
additional consideration), the Company's Common Stock or Preferred Stock, except
any security granted, issued and/or sold by the Company to any director,
officer, employee or consultant of the Company in such capacity for the primary
purpose of soliciting or retaining their services.

      (e) "Knowledge" shall mean the actual knowledge of any officer of the
Company.

      (f) "Majority Note Holders" shall mean the holders of a majority in
interest of the aggregate principal amount of Notes.


      (g) "Maturity Date" shall mean _____________, 2007.

      (h) "Next Equity Financing" shall mean the next sale (or series of related
sales) by the Company of its Equity Securities following the date of this
Agreement from which the Company receives gross proceeds of not less than
$3,000,000 including the aggregate amount of debt securities converted into
Equity Securities upon conversion of the Notes pursuant to Section 2.2 below;

      (i) "Notes" shall mean the one or more unsecured convertible promissory
notes issued to each Lender pursuant to Section 2.1 below, the form of which is
attached hereto as Exhibit B.

      (j) "Securities" shall have the meaning set forth in Section 6.2 below.

      2. Terms of the Notes.

      2.1 Issuance of Notes. In return for the Consideration paid by each
Lender, the Company shall sell and issue to such Lender one or more unsecured
Notes in the aggregate amount of $1,000,000 (or such increased amount as
determined by the Company's board of directors). Each Note shall have a
principal balance equal to that portion of the Consideration paid by such Lender
for the Note, as set forth in the Schedule of Lenders. Each Note shall be
convertible into Conversion Shares pursuant to Section 2.2 below.

      2.2 Right to Convert Notes/Next Equity Financing. The principal and unpaid
accrued interest of each Note shall automatically be converted into Conversion
Shares upon the closing of the Next Equity Financing. The number of Conversion
Shares to be issued upon such conversion shall be equal to the quotient obtained
by dividing the outstanding principal and unpaid accrued interest on a Note to
be converted, on the date of conversion, by the Conversion Price. At least five
(5) days prior to the closing of the Next Equity Financing, the Company shall
notify the holder of each Note in writing of the terms under which the Equity
Securities of the Company will be sold in such financing. The issuance of
Conversion Shares pursuant to the conversion of each Note shall be upon and
subject to the same terms and conditions applicable to the Equity Securities
sold in the Next Equity Financing. Upon the conversion of a Note into Conversion
Shares, in lieu of any fractional shares to which the holder of the Note would
otherwise be entitled, the Company shall pay the Note holder cash equal to such
fraction multiplied by the Conversion Price. The Company shall not be required
to issue or deliver the Conversion Shares until the Note holder has surrendered
the Note to the Company.

      3. Closing. The initial closing (the "First Closing") of the purchase of
the Notes in the amounts set forth opposite each Lender's name on the Schedule
of Lenders shall take place at the offices of the Company at 12:00 p.m., on
____________, 2006, or at such other time and place as the Company and Lenders
purchasing the aggregate principal amount of the Notes to be sold at the First
Closing agree upon orally or in writing. Any subsequent closing of the purchase
of the Notes (a "Subsequent Closing") in the amounts set forth opposite each
Lender's name on the Schedule of Lenders shall take place at such locations and
at such times as shall be mutually agreed upon orally or in writing by the
Company and Lenders purchasing the aggregate principal amount of the Notes to be
sold at such Subsequent Closing. At each Closing, each Lender shall deliver the
Consideration to the Company and the Company shall deliver to each Lender one or
more executed Notes in return for the respective Consideration provided to the
Company.


      4. Use of Consideration. Notwithstanding anything to the contrary herein,
there shall be no minimum aggregate principal amount of the Notes which must be
sold by the Company to any one or more Lenders before the Company can the
proceeds of respective Consideration provided to the Company at the First
Closing or any Subsequent Closing of the purchase of any Notes.

      5. Representations and Warranties of the Company. In connection with the
transactions provided for herein, the Company hereby represents and warrants to
the Lenders that:

      5.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties.

      5.2 Authorization. All corporate action has been taken on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and (except for the authorization and
issuance of any Conversion Shares issuable in connection with Section 2.2
hereof) performance, of this Agreement and the Notes. Except as may be limited
by applicable bankruptcy, insolvency, reorganization, or similar laws relating
to or affecting the enforcement of creditors' rights, the Company has taken all
corporate action required to make all of the obligations of the Company
reflected in the provisions of this Agreement and the Notes the valid and
enforceable obligations they purport to be.

      5.3 Compliance with Other Instruments. Neither the authorization,
execution and delivery of this Agreement or the Notes, nor the issuance and
delivery of the Notes, will constitute or result in a default or violation of
any law or regulation applicable to the Company or any term or provision of the
Company's current Articles or Bylaws or any material agreement or instrument by
which it is bound or to which its properties or assets are subject.

      5.4 Valid Issuance. The Conversion Shares to be issued, sold and delivered
upon conversion of the Notes will be, when issued in accordance with the terms
of this Agreement and the Notes, duly and validly issued, fully paid and
nonassessable and, based in part upon the representations and warranties of the
Lenders in this Agreement, will be issued in compliance with all applicable
federal and state securities laws.

      5.5 No Violation. The Company is not in violation of any order of any
court, arbitrator or governmental body, material laws, ordinances or
governmental rules or regulations (domestic or foreign) to which it is subject,
or with respect to any material loan agreement, debt instrument or contract with
a supplier or customer of the Company or other agreement to which it is a party
and has not failed to obtain or apply for any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its property or
to the conduct of its business.


      5.6 No Litigation. There are no suits or proceedings pending or, to the
Knowledge of the Company, threatened in any court or before any regulatory
commission, board or other governmental administrative agency against or
affecting the Company which if determined adversely to the Company could result
in a material adverse effect on the Company's business as presently conducted or
its ability to perform its obligations hereunder or under the Notes.

      5.7 Arms' Length Transactions. The transactions evidenced by this
Agreement and the Notes and the other documents and instruments delivered in
connection herewith or therewith (a) are the result of arms' length negotiations
among the parties hereto, (b) are made on commercially reasonable terms and (c)
are undertaken by the Company without any intent to hinder, delay or defraud any
entity to which the Company is or may become indebted.

      6. Representations and Warranties of the Lenders. In connection with the
transactions provided for herein, each Lender hereby represents and warrants to
the Company that:

      6.1 Authorization. This Agreement constitutes such Lender's valid and
legally binding obligation, enforceable in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization, or
similar laws relating to or affecting the enforcement of creditors' rights and
(ii) laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. Each Lender represents that the execution,
delivery and performance of this Agreement has been duly authorized and approved
by such Lender.

      6.2 Purchase Entirely for Own Account. Each Lender acknowledges that this
Agreement is made with Lender in reliance upon such Lender's representation to
the Company that the Notes, the Conversion Shares, and any Common Stock issuable
upon conversion of the Conversion Shares (collectively, the "Securities") will
be acquired for investment for Lender's own account, as principal and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that such Lender has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, each Lender further represents that such Lender does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to the Securities.

      6.3 Disclosure of Information. Each Lender acknowledges that it has
received all the information, documents and materials it considers necessary or
appropriate for deciding whether to acquire the Notes. Each Lender confirms that
it has made such further investigation of the Company as was deemed appropriate
to evaluate the merits and risks of this investment. Each Lender further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Notes.

      6.4 Investment Experience. Each Lender is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Notes. If other than an individual,
each Lender also represents it has not been organized solely for the purpose of
acquiring the Notes.


      6.5 Accredited Investor. Each Lender is an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Securities Act of 1933, as
presently in effect (the "Securities Act").

      6.6 Restricted Securities. Each Lender understands that the Securities are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may not be resold except through a valid registration statement
or pursuant to a valid exemption from the registration requirements under the
Securities Act and applicable state securities laws. Each Lender represents that
it is familiar with Rule 144 of the Securities Act, and understands the resale
limitations imposed thereby and by the Securities Act and applicable state
securities laws.

      6.7 Further Limitations on Disposition. Without in any way limiting the
representations and warranties set forth above, each Lender further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 6 and:

      (a) There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or

      (b) (i) Lender has notified the Company of the proposed disposition and
has furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (ii) if reasonably requested by the
Company, Lender shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act.

      (c) All transferees agree in writing to be subject to the terms hereof,
and any other agreements to which such Securities may be subject, to the same
extent as if they were Lenders hereunder.

      6.8 Legends. It is understood that the certificates evidencing the
Securities, or any other securities issued in respect of the Securities upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall bear the legends required by applicable law as well as such
agreements to which such Securities may be subject, including, without
limitation, legends relating to restrictions on transfer under federal and state
securities laws and legends required under applicable state securities laws, as
well as the following legend:

      "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED UNDER ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT, OR (C) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH OF CASES (A) THROUGH (C)
IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES."


      7. Defaults and Remedies.

      7.1 Events of Default. The following events shall be considered Events of
Default with respect to each Note:

      (a) The Company shall default in the payment of any part of the principal
or unpaid accrued interest on any Note for more than thirty (30) days after the
Maturity Date or at a date fixed by acceleration or otherwise;

      (b) The Company shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition for bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting the material allegations
of a petition filed against the Company in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Company, or of all or any substantial part of the properties
of the Company, or the Company or its respective directors or majority
stockholders shall take any action looking to the dissolution or liquidation of
the Company;

      (c) Within sixty (60) days after the commencement of any proceeding
against the Company seeking any bankruptcy reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed, or within sixty (60) days after the appointment without the
consent or acquiescence of the Company of any trustee, receiver or liquidator of
the Company or of all or any substantial part of the properties of the Company,
such appointment shall not have been vacated; or

      (d) The Company shall fail to observe or perform any other obligation to
be observed or performed by it under this Agreement or the Notes within 30
(thirty) days after written notice from the Majority Note Holders to perform or
observe the obligation, or any representation or warranty made by the Company
hereunder or thereunder shall be false in any material respect as of the date
made and such representation or warranty is not cured, if susceptible to cure,
within 30 (thirty) days after the Company's Knowledge of such failure.

      7.2 Remedies. Upon the occurrence of an Event of Default under Section 7.1
hereof, at the option and upon the declaration of the holder of a Note, the
entire unpaid principal and accrued and unpaid interest on such Note, and all
other amounts owing under this Agreement shall, without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived, be
forthwith due and payable, and such holder may, immediately and without
expiration of any period of grace, enforce payment of all amounts due and owing
under such Note and exercise any and all other remedies granted to it at law, in
equity or otherwise; provided, however, that if any Event of Default occurs
under Sections 7.1(b) or 7.1(c), all unpaid principal and accrued and unpaid
interest on such Note, and all other amounts owing under this Agreement, shall
automatically become immediately due and payable.


      8. Miscellaneous.

      8.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties, provided, however,
that the Company may not assign its obligations under this Agreement without the
written consent of the Majority Note Holders (which shall not be unreasonably
withheld), and no Lender may, without the written consent of the Company (which
shall not be unreasonably withheld), assign all or any portion of a Note to any
person or entity. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

      8.2 Governing Law. This Agreement and the Notes shall be governed by and
construed under the laws of the State of Illinois as applied to agreements among
Illinois residents, made and to be performed entirely within the State of
Illinois.

      8.3 Counterparts. This Agreement, and any of the other agreements,
documents and instruments contemplated hereby, may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
signature page to this Agreement, and any of the other Agreements, documents and
instruments contemplated hereby, by facsimile transmission shall be effective as
delivery of a manually signed counterpart hereof or thereof.

      8.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

      8.5 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, if not so confirmed, then on the next business day, (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at the following addresses (or at such other addresses as shall be
specified by notice given in accordance with this Section 8.5):


                           If to the Company:

                           HEALTH PARTNERSHIP INC.
                           3111 N. Seminary
                           Suite 1N
                           Chicago, Illinois  60657

                           --------------------
                           Attention:  Lee Wiskowski

                           If to Lenders:

                           At the respective addresses shown on the Schedule of
                           Lenders.

      8.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Lender agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Lender or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless Lender from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.

      8.7 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled. The Company shall pay all
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement.

      8.8 Entire Agreement; Amendments and Waivers. This Agreement and the Notes
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. The Company's agreements with each of the Lenders are
separate agreements, and the sales of the Notes to each of the Lenders are
separate sales. Nonetheless, any term of this Agreement or the Notes may be
amended and the observance of any term of this Agreement or the Notes may be
waived (either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Majority Note
Holders. Any waiver or amendment effected in accordance with this Section shall
be binding upon each party to this Agreement and any holder of any Note
purchased under this Agreement at the time outstanding and each future holder of
all such Notes.


      8.9 Effect of Amendment or Waiver. Each Lender acknowledges that by the
operation of Section 8.8 hereof, the Majority Note Holders will have the right
and power to diminish or eliminate all rights of such Lender under this
Agreement and each Note issued to such Lender.

      8.10 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

      8.11 Purchase Agreement. Each Lender understands and agrees that the
conversion of the Notes into Conversion Shares may require such Lender's
execution of certain agreements in the form agreed to by investors in the Next
Equity Financing relating to the purchase and sale of such securities as well as
registration, co-sale, rights of first refusal, rights of first offer and voting
rights, if any, relating to such securities.

      8.12 Exculpation Among Lenders. Each Lender acknowledges that it is not
relying upon any person, firm, corporation or stockholder, other than the
Company and its officers and directors in their capacities as such, in making
its investment or decision to invest in the Company. Each Lender agrees that no
other Lender nor the respective controlling persons, officers, directors,
partners, agents, stockholders or employees of any other Lender shall be liable
for any action heretofore or hereafter taken or omitted to be taken by any of
them in connection with the purchase and sale of the Securities.


      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                             HEALTH PARTNERSHIP INC.

                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:

                                             LENDERS:

                                             -----------------------------------
                                             Print Name:
                                                        ------------------------

                                             Amount:

                                             Address:



                               SCHEDULE OF LENDERS


                                     Total             Principal Balance of
Lender                           Consideration            Promissory Note



Lenders' Addresses:



                                    EXHIBIT A

                                     CONSENT

      The undersigned acknowledges and agrees as follows:

      1. Health Partnership Inc. (the "Company") proposes to sale and issue one
or more unsecured convertible promissory notes in the aggregate amount of
$1,000,000 which, at the sole discretion of the Company's Board of Directors,
may be increased to an aggregate amount of $[_______] to certain lenders to
provide consideration to the Company (collectively, the "Contemplated
Transactions").

      2. Pursuant to Section 7.13 of that certain Note Purchase Agreement dated
October 31, 2005 by the Company and the lenders named on the Schedule of Lenders
attached thereto (the "Note Purchase Agreement"), until the later of the
Maturity Date or repayment of the Note (each as defined in the Note Purchase
Agreement), the Company shall not take any action regarding, among others, the
issuance of debt of more than $100,000 or Equity Securities (as defined in the
Note Purchase Agreement) in any amount, without the express written consent of
Gerard Jacobs, or, in the event of his death or incapacity, the trustee of the
Roberti Jacobs Family Trust u/a/d 11-11-99.

      3. The undersigned hereby consents to the Contemplated Transactions upon
the terms stated herein and all such further agreements, instruments,
certificates, documents and other amendments related thereto or deemed necessary
by the Company in order to carry out the Contemplated Transactions.

      4. This Consent is binding upon the successors and assigns of the
undersigned.

      5. This Consent is governed by and construed in accordance with the laws
of the State of Illinois, without regard to choice or conflict of laws
principles.

                                      Roberti Jacobs Family Trust u/a/d 11-11-99


                                      By:
                                         -------------------------------
                                          Gerard Jacobs, Trustee

                                      Date:



                                    EXHIBIT B

         THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE
         NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "SECURITIES ACT"), OR REGISTERED UNDER ANY STATE SECURITIES LAWS. THEY
         MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
         TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF COUNSEL
         SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
         SECURITIES ACT, OR (C) AN EXEMPTION FROM REGISTRATION UNDER THE
         SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH
         OF CASES (A) THROUGH (C) IN ACCORDANCE WITH ANY APPLICABLE STATE
         SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.

                           CONVERTIBLE PROMISSORY NOTE

$                                                            __________ __, 2006

      FOR VALUE RECEIVED, HEALTH PARTNERSHIP INC., a Colorado corporation (the
"Company"), hereby promises to pay to the order of [_________________(the
"Lender"), the principal sum of __________________ ($__________), together with
interest thereon from the date of this Convertible Promissory Note (the "Note").
Interest shall accrue at a rate of seven percent (7%) per annum, compounded
annually. Unless earlier converted into Conversion Shares pursuant to Section
2.2 of that certain Note Purchase Agreement dated _________ __, 2006 among the
Company, Lender and certain other investors (the "Purchase Agreement"), the
principal and accrued interest shall be due and payable by the Company on the
Maturity Date.

      This Note is one of the Notes issued pursuant to the Purchase Agreement,
and capitalized terms not defined herein shall have the meaning set forth in the
Purchase Agreement.

      1. Payment. All payments shall be made in lawful money of the United
States of America at the principal office of the Company, or at such other place
as the holder hereof may from time to time designate in writing to the Company.
Payment shall be credited first to Costs (as defined below), if any, then to
accrued interest due and payable and any remainder applied to principal.
Prepayment of principal, together with accrued interest, may be made at anytime
without the consent of Lender. In connection with the delivery, acceptance,
performance or enforcement of this Note, the Company hereby waives demand,
notice, presentment, protest, notice of dishonor and other notice of any kind,
and asserts to extensions of the time of payment, release, surrender or
substitution of security, or forbearance or other indulgence, without notice.
The Company agrees to pay all amounts under this Note without offset, deduction,
claim, counterclaim, defense or recoupment, all of which are hereby waived.


      2. Conversion of the Notes. This Note shall be convertible into Conversion
Shares in accordance with the terms of Section 2.2 of the Purchase Agreement. As
promptly as practicable after the conversion of this Note, the Company at its
expense shall issue and deliver to the holder of this Note, upon surrender of
this Note, a certificate or certificates for the number of full Conversion
Shares issuable upon such conversion.

      3. Amendments and Waivers; Resolutions of Dispute; Notice. The amendment
or waiver of any term of this Note, the resolution of any controversy or claim
arising out of or relating to this Note and the provision of notice shall be
conducted pursuant to the terms of the Purchase Agreement.

      4. Successors and Assigns. This Note applies to, inures to the benefit of,
and binds the successors and assigns of the parties hereto; provided, however,
that the Company may not assign its obligations under this Note without the
written consent of the Majority Note Holders and the Lender may not, without the
written consent of the Company (which shall not be unreasonably withheld),
assign all or any portion of this Note to any person or entity. Any transfer of
this Note may be effected only pursuant to the Purchase Agreement and by
surrender of this Note to the Company and reissuance of a new note to the
transferee. The Lender and any subsequent holder of this Note receives this Note
subject to the foregoing terms and conditions, and agrees to comply with the
foregoing terms and conditions for the benefit of the Company and any other
Lenders.

      5. Officers and Directors not Liable. In no event shall any officer or
director of the Company be liable for any amounts due and payable pursuant to
this Note.

      6. Expenses. The Company and hereby agrees, subject only to any limitation
imposed by applicable law, to pay all expenses, including reasonable attorneys'
fees and legal expenses, incurred by the holder of this Note ("Costs") in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by declaration or otherwise. The Company agrees that any delay on
the part of the holder in exercising any rights hereunder will not operate as a
waiver of such rights. The holder of this Note shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies,
and no waiver of any kind shall be valid unless in writing and signed by the
party or parties waiving such rights or remedies.

      7. Governing Law. This Note shall be governed by and construed under the
laws of the State of Illinois as applied to other instruments made by Illinois
residents to be performed entirely within the State of Illinois.

      8. Approval. The Company hereby represents that its board of directors, in
the exercise of its fiduciary duty, has approved the Company's execution of this
Note based upon a reasonable belief that the principal provided hereunder is
appropriate for the Company after reasonable inquiry concerning the Company's
financing objectives and financial situation. In addition, the Company hereby
represents that it intends to use the principal of this Note primarily for the
operations of its business, and not for any personal, family or household
purpose.


      IN WITNESS WHEREOF, the Company has executed this Note on the day and year
first above written.

                                           HEALTH PARTNERSHIP INC.

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

EX-10.2

                         FORM OF NOTE PURCHASE AGREEMENT

      This note purchase agreement ("Agreement") is made as of January __, 2006,
by and among HEALTH PARTNERSHIP INC., a Colorado corporation, (the "Company"),
and the lenders (each individually a "Lender," and collectively the "Lenders")
named on the Schedule of Lenders attached hereto (the "Schedule of Lenders").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in Section 1 below.

      Whereas, each of the Lenders intends to provide certain Consideration to
the Company as described for each Lender on the Schedule of Lenders;

      Whereas, the parties wish to provide for the sale and issuance of the
Notes in return for the provision by the Lenders of the Consideration to the
Company on the terms and subject to the conditions set forth in this Agreement;
and

      Whereas, the Company has obtained the written consent of Gerald Jacobs in
connection with the sale and issuance of the Notes pursuant to that certain Note
Purchase Agreement, dated October 31, 2005 by the Company and each lender named
therein, a copy of which consent is attached hereto as Exhibit A.

      NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

      1. Definitions.

      (a) "Common Stock" shall mean the common stock, par value $.0001, of the
Company.

      (b) "Consideration" shall mean the amount of money paid by each Lender
pursuant to this Agreement as shown on the Schedule of Lenders.

      (c) "Equity Securities" shall mean the Company's Common Stock or Preferred
Stock or any securities conferring the right to purchase the Company's Preferred
Stock or securities convertible into, or exchangeable for (with or without
additional consideration), the Company's Common Stock or Preferred Stock, except
any security granted, issued and/or sold by the Company to any director,
officer, employee or consultant of the Company in such capacity for the primary
purpose of soliciting or retaining their services.

      (d) "Knowledge" shall mean the actual knowledge of any officer of the
Company.

      (e) "Majority Note Holders" shall mean the holders of a majority in
interest of the aggregate principal amount of Notes.

      (f) "Maturity Date" shall mean _________ __, 2006.

      (g) "Notes" shall mean the one or more unsecured promissory notes issued
to each Lender pursuant to Section 2.1 below, the form of which is attached
hereto as Exhibit B.


      (h) "Preferred Stock" shall mean the preferred stock, par value $0.10, of
the Company.

      (i) "Securities" shall have the meaning set forth in Section 5.2 below.

      2. Terms of the Notes.

      2.1 Issuance of Notes. In return for the Consideration paid by each
Lender, the Company shall sell and issue to such Lender one or more unsecured
Notes in the aggregate amount up to $1,000,000 (or such increased amount as
determined by the Company's board of directors). Each Note shall have a
principal balance equal to that portion of the Consideration paid by such Lender
for the Note, as set forth in the Schedule of Lenders. Notwithstanding anything
to the contrary herein, there shall be no minimum aggregate principal amount of
the Notes which must be sold by the Company to any one or more Lenders before
the Company can consummate the First Closing (as defined herein) or utilize the
proceeds of the respective Consideration received by the Company at the First
Closing or any Subsequent Closing (as defined herein).

      3. Closing. The initial closing (the "First Closing") of the purchase of
the Notes in the amounts set forth opposite each Lender's name on the Schedule
of Lenders shall take place at the offices of the Company at 12:00 p.m., on
____________, 2006, or at such other time and place as the Company and Lenders
purchasing the aggregate principal amount of the Notes to be sold at the First
Closing agree upon orally or in writing. Any subsequent closing of the purchase
of the Notes (a "Subsequent Closing") in the amounts set forth opposite each
Lender's name on the Schedule of Lenders shall take place at such locations and
at such times as shall be mutually agreed upon orally or in writing by the
Company and Lenders purchasing the aggregate principal amount of the Notes to be
sold at such Subsequent Closing. At each Closing, each Lender shall deliver the
Consideration to the Company and the Company shall deliver to each Lender one or
more executed Notes in return for the respective Consideration provided to the
Company.

      4. Representations and Warranties of the Company. In connection with the
transactions provided for herein, the Company hereby represents and warrants to
the Lenders that:

      4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties.

      4.2 Authorization. All corporate action has been taken on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance, of this Agreement and the
Notes. Except as may be limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement of
creditors' rights, the Company has taken all corporate action required to make
all of the obligations of the Company reflected in the provisions of this
Agreement and the Notes the valid and enforceable obligations they purport to
be.


      4.3 Compliance with Other Instruments. Neither the authorization,
execution and delivery of this Agreement or the Notes, nor the issuance and
delivery of the Notes, will constitute or result in a default or violation of
any law or regulation applicable to the Company or any term or provision of the
Company's current Articles or Bylaws or any material agreement or instrument by
which it is bound or to which its properties or assets are subject.

      4.4 Valid Issuance. The Notes when issued, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
and warranties of the Lenders in this Agreement, and will be issued in
compliance with all applicable federal and state securities laws.

      4.5 No Violation. The Company is not in violation of any order of any
court, arbitrator or governmental body, material laws, ordinances or
governmental rules or regulations (domestic or foreign) to which it is subject,
or with respect to any material loan agreement, debt instrument or contract with
a supplier or customer of the Company or other agreement to which it is a party
and has not failed to obtain or apply for any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its property or
to the conduct of its business.

      4.6 No Litigation. There are no suits or proceedings pending or, to the
Knowledge of the Company, threatened in any court or before any regulatory
commission, board or other governmental administrative agency against or
affecting the Company which if determined adversely to the Company could result
in a material adverse effect on the Company's business as presently conducted or
its ability to perform its obligations hereunder or under the Notes.

      4.7 Arms' Length Transactions. The transactions evidenced by this
Agreement and the Notes and the other documents and instruments delivered in
connection herewith or therewith (a) are the result of arms' length negotiations
among the parties hereto, (b) are made on commercially reasonable terms, and (c)
are undertaken by the Company without any intent to hinder, delay or defraud any
entity to which the Company is or may become indebted.

      5. Representations and Warranties of the Lenders. In connection with the
transactions provided for herein, each Lender hereby represents and warrants to
the Company that:

      5.1 Authorization. This Agreement constitutes such Lender's valid and
legally binding obligation, enforceable in accordance with its terms, except as
may be limited by (a) applicable bankruptcy, insolvency, reorganization, or
similar laws relating to or affecting the enforcement of creditors' rights, and
(c) laws relating to the availability of specific performance, injunctive relief
or other equitable remedies. Each Lender represents that the execution, delivery
and performance of this Agreement has been duly authorized and approved by such
Lender.

      5.2 Purchase Entirely for Own Account. Each Lender acknowledges that this
Agreement is made with Lender in reliance upon such Lender's representation to
the Company that the Notes (collectively, the "Securities") will be acquired for
investment for Lender's own account, as principal and not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
such Lender has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, each Lender
further represents that such Lender does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the
Securities.


      5.3 Disclosure of Information. Each Lender acknowledges that it has
received all the information, documents and materials it considers necessary or
appropriate for deciding whether to acquire the Securities. Each Lender confirms
that it has made such further investigation of the Company as was deemed
appropriate to evaluate the merits and risks of this investment. Each Lender
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Securities.

      5.4 Investment Experience. Each Lender is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities. If other than an
individual, each Lender also represents it has not been organized solely for the
purpose of acquiring the Securities.

      5.5 Accredited Investor. Each Lender is an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Securities Act of 1933, as
presently in effect (the "Securities Act").

      5.6 Restricted Securities. Each Lender understands that the Securities are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may not be resold except through a valid registration statement
or pursuant to a valid exemption from the registration requirements under the
Securities Act and applicable state securities laws. Each Lender represents that
it is familiar with Rule 144 of the Securities Act, and understands the resale
limitations imposed thereby and by the Securities Act and applicable state
securities laws.

      5.7 Further Limitations on Disposition. Without in any way limiting the
representations and warranties set forth above, each Lender further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 5 and:

      (a) There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement;

      (b) (i) Lender has notified the Company of the proposed disposition and
has furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (ii) if reasonably requested by the
Company, Lender shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act; or


      (c) All transferees agree in writing to be subject to the terms hereof,
and any other agreements to which such Securities may be subject, to the same
extent as if they were Lenders hereunder.

      5.8 Legends. It is understood that the certificates evidencing the
Securities, or any other securities issued in respect of the Securities upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall bear the legends required by applicable law as well as such
agreements to which such Securities may be subject, including, without
limitation, legends relating to restrictions on transfer under federal and state
securities laws and legends required under applicable state securities laws, as
well as the following legend:

      "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED UNDER ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT, OR (C) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH OF CASES (A) THROUGH (C)
IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES."

      6. Defaults and Remedies.

      6.1 Events of Default. The following events shall be considered Events of
Default with respect to each Note:

      (a) The Company shall default in the payment of any part of the principal
or unpaid accrued interest on any Note for more than thirty (30) days after the
Maturity Date or at a date fixed by acceleration or otherwise;

      (b) The Company shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition for bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting the material allegations
of a petition filed against the Company in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Company, or of all or any substantial part of the properties
of the Company, or the Company or its respective directors or majority
stockholders shall take any action looking to the dissolution or liquidation of
the Company;

      (c) Within sixty (60) days after the commencement of any proceeding
against the Company seeking any bankruptcy reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed, or within sixty (60) days after the appointment without the
consent or acquiescence of the Company of any trustee, receiver or liquidator of
the Company or of all or any substantial part of the properties of the Company,
such appointment shall not have been vacated; or


      (d) The Company shall fail to observe or perform any other obligation to
be observed or performed by it under this Agreement or the Notes within 30
(thirty) days after written notice from the Majority Note Holders to perform or
observe the obligation, or any representation or warranty made by the Company
hereunder or thereunder shall be false in any material respect as of the date
made and such representation or warranty is not cured, if susceptible to cure,
within 30 (thirty) days after the Company's Knowledge of such failure.

      6.2 Remedies. Upon the occurrence of an Event of Default under Section 6.1
hereof, at the option and upon the declaration of the holder of a Note, the
entire unpaid principal and accrued and unpaid interest on such Note, and all
other amounts owing under this Agreement shall, without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived, be
forthwith due and payable, and such holder may, immediately and without
expiration of any period of grace, enforce payment of all amounts due and owing
under such Note and exercise any and all other remedies granted to it at law, in
equity or otherwise; provided, however, that if any Event of Default occurs
under Sections 6.1(b) or 6.1(c), all unpaid principal and accrued and unpaid
interest on such Note, and all other amounts owing under this Agreement, shall
automatically become immediately due and payable. Notwithstanding anything
herein to the contrary, any payments under the Notes shall be made to all Holder
on a pari passu.

      7. Miscellaneous.

      7.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties, provided, however,
that the Company may not assign its obligations under this Agreement without the
written consent of the Majority Note Holders (which shall not be unreasonably
withheld), and no Lender may, without the written consent of the Company (which
shall not be unreasonably withheld), assign all or any portion of a Note to any
person or entity. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

      7.2 Governing Law. This Agreement and the Notes shall be governed by and
construed under the laws of the State of Illinois as applied to agreements among
Illinois residents, made and to be performed entirely within the State of
Illinois.

      7.3 Counterparts. This Agreement, and any of the other agreements,
documents and instruments contemplated hereby, may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
signature page to this Agreement, and any of the other Agreements, documents and
instruments contemplated hereby, by facsimile transmission shall be effective as
delivery of a manually signed counterpart hereof or thereof.


      7.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

      7.5 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, if not so confirmed, then on the next business day, (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at the following addresses (or at such other addresses as shall be
specified by notice given in accordance with this Section 7.5):

                           If to the Company:

                           HEALTH PARTNERSHIP INC.
                           3111 N. Seminary, Suite 1N
                           Chicago, IL 60657
                           Attention:  Lee Wiskowski

                           If to Lenders:

                           At the respective addresses shown on the Schedule of
                           Lenders.

      7.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Lender agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Lender or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless Lender from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.

      7.7 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled. The Company shall pay all
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement.

      7.8 Entire Agreement; Amendments and Waivers. This Agreement and the Notes
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. The Company's agreements with each of the Lenders are
separate agreements, and the sales of the Notes to each of the Lenders are
separate sales. Nonetheless, any term of this Agreement or the Notes may be
amended and the observance of any term of this Agreement or the Notes may be
waived (either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Majority Note
Holders. Any waiver or amendment effected in accordance with this Section shall
be binding upon each party to this Agreement and any holder of any Note
purchased under this Agreement at the time outstanding and each future holder of
all such Notes.


      7.9 Effect of Amendment or Waiver. Each Lender acknowledges that by the
operation of Section 7.8 hereof, the Majority Note Holders will have the right
and power to diminish or eliminate all rights of such Lender under this
Agreement and each Note issued to such Lender.

      7.10 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

      7.11 Exculpation Among Lenders. Each Lender acknowledges that it is not
relying upon any person, firm, corporation or stockholder, other than the
Company and its officers and directors in their capacities as such, in making
its investment or decision to invest in the Company. Each Lender agrees that no
other Lender nor the respective controlling persons, officers, directors,
partners, agents, stockholders or employees of any other Lender shall be liable
for any action heretofore or hereafter taken or omitted to be taken by any of
them in connection with the purchase and sale of the Securities.


      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                     HEALTH PARTNERSHIP INC.

                                     By:
                                        -------------------------------------
                                     Name:
                                          -----------------------------------
                                     Title:
                                           ----------------------------------


                                     LENDERS:

                                     -----------------------------------------
                                     Print Name:
                                                ------------------------------
                                     Amount:

                                     Address:


                               SCHEDULE OF LENDERS

                                       Total             Principal Balance of
Lender                             Consideration            Promissory Note



Lenders' Addresses:


                                    EXHIBIT A

                                     CONSENT

      The undersigned acknowledges and agrees as follows:

      1. Health Partnership Inc. (the "Company") proposes to sale and issue one
or more unsecured promissory notes in the aggregate amount of $1,000,000 (or
such increased amount as determined by the Company's board of directors) to
certain lenders to provide consideration to the Company (collectively, the
"Contemplated Transactions").

      2. Pursuant to Section 7.13 of that certain Note Purchase Agreement dated
October 31, 2005 by the Company and the lenders named on the Schedule of Lenders
attached thereto (the "Note Purchase Agreement"), until the later of the
Maturity Date or repayment of the Note (each as defined in the Note Purchase
Agreement), the Company shall not take any action regarding, among others, the
issuance of debt of more than $100,000 or Equity Securities (as defined in the
Note Purchase Agreement) in any amount, without the express written consent of
Gerard Jacobs, or, in the event of his death or incapacity, the trustee of the
Roberti Jacobs Family Trust u/a/d 11-11-99.

      3. The undersigned hereby consents to the Contemplated Transactions upon
the terms stated herein and all such further agreements, instruments,
certificates, documents and other amendments related thereto or deemed necessary
by the Company in order to carry out the Contemplated Transactions.

      4. This Consent is binding upon the successors and assigns of the
undersigned.

      5. This Consent is governed by and construed in accordance with the laws
of the State of Illinois, without regard to choice or conflict of laws
principles.

                                  By:
                                     -------------------------------
                                              Gerard Jacobs

                                  Date:


                                    EXHIBIT B
                             FORM OF PROMISSORY NOTE

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED UNDER ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT, OR (C) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH OF CASES (A) THROUGH (C)
IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES.

                                 PROMISSORY NOTE
No. _____                                                       Date of Issuance

$___________                                                   January ___, 2006

      FOR VALUE RECEIVED, Health Partnership Inc., a Colorado corporation (the
"Company"), hereby promises to pay to __________________ (the "Lender"), the
principal sum of _________________ Dollars ($______), together with interest
thereon from the date of this Promissory Note (the "Promissory Note"). Interest
shall accrue at a rate of twelve percent (12%) per annum. The principal amount
and all accrued and unpaid interest shall be due and payable by the Company on
the Maturity Date.

      This Promissory Note is one of the Notes issued pursuant to that certain
Note Purchase Agreement dated as of January __, 2006, by and among the Company,
the Lender and certain other parties, as amended, modified or supplemented from
time to time (the "Purchase Agreement"), and capitalized terms not defined
herein shall have the meaning set forth in the Purchase Agreement.

      1. Payment. All payments shall be made in lawful money of the United
States of America at the principal office of the Company, or at such other place
as the Lender may from time to time designate in writing to the Company. Payment
shall be credited first to Costs (as defined below), if any, then to accrued
interest due and payable and any remainder applied to principal. Prepayment of
principal may be made at any time. In connection with the delivery, acceptance,
performance or enforcement of this Promissory Note, the Company hereby waives
demand, notice, presentment, protest, notice of dishonor and other notice of any
kind, and asserts to extensions of the time of payment, release, surrender or
substitution of security, or forbearance or other indulgence, without notice.
The Company agrees to pay all amounts under this Promissory Note without offset,
deduction, claim, counterclaim, defense or recoupment, all of which are hereby
waived. All payments made under this Promissory Note and the Notes issued
pursuant to the Purchase Agreement shall be made pro rata, based on the
principal amount owing under the Notes.

      2. Event of Default Interest. Upon the occurrence of an Event of Default
pursuant to the Purchase Agreement, and continuing until such time as such Event
of Default is cured, interest shall be due and payable on the whole of the
unpaid principal balance at an annual rate of fourteen percent (14%) per annum,
compounded annually.


      3. Amendments and Waivers; Resolutions of Dispute; Notice. The amendment
or waiver of any term of this Promissory Note, the resolution of any controversy
or claim arising out of or relating to this Promissory Note and the provision of
notice shall be conducted pursuant to the terms of the Purchase Agreement.

      4. Successors and Assigns. This Promissory Note applies to, inures to the
benefit of, and binds the successors and assigns of the parties hereto;
provided, however, that the Company may not assign its obligations under this
Promissory Note without the written consent of the Majority Note Holders and the
Lender may not, without the written consent of the Company (which shall not be
unreasonably withheld), assign all or any portion of this Promissory Note. Any
transfer of this Promissory Note may be effected only pursuant to the Purchase
Agreement and by surrender of this Promissory Note to the Company and reissuance
of a new note to the transferee. The Lender and any subsequent holder of this
Promissory Note receives this Promissory Note subject to the foregoing terms and
conditions, and agrees to comply with the foregoing terms and conditions for the
benefit of the Company and any other Lenders.

      5. Officers and Directors not Liable. In no event shall any officer or
director of the Company be liable for any amounts due and payable pursuant to
this Promissory Note.

      6. Expenses. The Company hereby agrees, subject only to any limitation
imposed by applicable law, to pay all expenses, including reasonable attorneys'
fees and legal expenses, incurred by the Lender ("Costs") in endeavoring to
collect any amounts payable hereunder which are not paid when due, whether by
declaration or otherwise. The Company agrees that any delay on the part of the
Lender in exercising any rights hereunder will not operate as a waiver of such
rights. The Lender of this Promissory Note shall not by any act, delay, omission
or otherwise be deemed to have waived any of its rights or remedies, and no
waiver of any kind shall be valid unless in writing and signed by the party or
parties waiving such rights or remedies.

      7. Governing Law. This Promissory Note shall be governed by and construed
under the laws of the State of Illinois

      8. Approval. The Company hereby represents that its board of directors, in
the exercise of its fiduciary duty, has approved the Company's execution of this
Promissory Note based upon a reasonable belief that the principal provided
hereunder is appropriate for the Company after reasonable inquiry concerning the
Company's financing objectives and financial situation.

                                       Health Partnership Inc.

                                       By:
                                          --------------------------------

                                       Name:
                                            ------------------------------
                                       Its:
                                           -------------------------------

EX-10.5

   v035422_ex10-5 -- Converted by SECPublisher 2.1.1.8, created by BCL Technologies Inc., for SEC Filing
   

EX-10.6

   v035422_ex10-6 -- Converted by SECPublisher 2.1.1.8, created by BCL Technologies Inc., for SEC Filing
   

EX-10.7

                          FORM OF EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT (this "Agreement"), effective as of February
___, 2006, is by and between CAPITAL PARTNERS FOR HEALTH & FITNESS, INC., a
North Carolina corporation ("Company"), and RANDALL ROHM, an individual residing
in North Carolina ("Executive").

      WHEREAS, Company has entered into an agreement of merger ("Merger
Agreement") with Health Partnership Inc. ("HPI") and two Executive and one
additional shareholder of Company as parties, whereby HPI is paying substantial
sums of cash and amounts of its securities to Executive, and is requiring as a
condition precedent to the closing of the Merger Agreement that Executive agree
to become an executive of Company, subject to the terms and conditions set forth
below and Executive is desirous of entering into this Agreement.

      IN CONSIDERATION of the mutual covenants and agreements contained herein,
as well as for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:

      1. Employment. Company hereby employs Executive, and Executive accepts
such employment, in accordance with the terms and conditions hereinafter set
forth.

      2. Duties.

            (a) Executive shall be employed as Chief Operating Officer of
      Company, and Executive shall perform and discharge well and faithfully the
      duties which may be assigned to him from time to time by the Board of
      Directors of Company (the "Company Board") and the Chief Executive Officer
      of Company in connection with the conduct of Company's businesses,
      including subsidiaries of Company presently existing or acquired by
      Company or HPI after the date hereof (the "Business"). Executive will
      report directly to the Chief Executive Officer of Company, and the
      Executive will also work collaboratively with such other officers of
      Company or its subsidiaries as shall be designated by the Chief Executive
      Officer from time to time.

            (b) Initially, Executive's primary assignment and duty shall be to
      provide full time management of the nine (9) (soon to be ten (10)) health
      clubs owned by Company, from a location in the greater Raleigh-Durham,
      North Carolina metropolitan area.

            (c) Subject to Executive's primary assignment and duties described
      in Section 2(b) above, Executive shall also generally provide advice,
      consultation and management assistance to all of the subsidiaries of
      Company, in regard to the operation of their business and expansion
      organically plus inorganically through acquisition and in regard to such
      other duties and responsibilities as may from time to time be requested by
      the Chief Executive Officer of Company. Executive acknowledges and agrees
      that such duties and responsibilities will require some travel outside the
      Raleigh-Durham, North Carolina, metropolitan area.

      3. Extent of Services. Executive shall devote his entire time and best
efforts to the Business and shall not, during the term of this Agreement, be
engaged (whether or not during normal business hours) in any other business or


professional activity; provided, however, that the provisions of this Section 3
shall not be construed as preventing Executive from engaging in a reasonable
level of charitable activities nor investing his personal assets in businesses
which do not compete with Company or the Business, in such form or manner as
will not require any services on the part of Executive in the operation or the
affairs of the companies in which such investments are made and in which his
participation is solely that of a passive investor.

      4. Compensation.

            (a) For all services rendered by Executive under this Agreement,
Company shall pay Executive for the period from and after the date of this
Agreement through and including the third anniversary of this Agreement, an
annual base salary in an amount equal to Two Hundred Thousand U.S. Dollars (U.S.
$200,000) per annum. Such annual base salary shall be subject to periodic review
by the Chief Executive Officer of Company and the Compensation Committee of the
Company Board (or if no such Committee, then by the Board itself), with the
first such review scheduled for the end of November, 2006. Any raises or bonuses
or such options or warrants paid to Executive during the term of his employment
shall be solely within the discretion of the Company Board. Executive shall be
paid in accordance with the customary payroll practices of Company, subject to
such deductions and withholdings as may be required by law or agreed to by
Executive. During the term of his employment, Executive shall be generally
entitled to participate in benefit plans or programs which are generally made
available to Vice Presidents of Company or of Company's subsidiaries, subject to
all of the rules, regulations, terms and conditions applicable thereto. A
general summary of such benefit plans or programs as currently in effect is
attached hereto as Exhibit A. Company shall have the right at any time to put
into place arrangements pursuant to which some or all of Executive's
compensation and/or benefits set forth above shall be provided to Executive by
or through HPI or by or through other subsidiaries of HPI (rather than directly
by Company), and Executive shall fully cooperate with such arrangements and
shall promptly sign such documents and take all such other actions as shall be
deemed necessary by the legal counsel for Company in order to facilitate such
arrangements.

            (b) Notwithstanding the foregoing, Executive shall be entitled to a
mandatory bonus of Fifty Thousand U.S. Dollars ($50,000) after each calendar
year during the term of this Agreement that the Company's earnings before
interest, taxes, depreciation and amortization, in each case, computed in
accordance with GAAP ("EBITDA") and as calculated in accordance with the terms
of the Merger Agreement, equals or exceeds the sum set forth in Section
9.1(a)(ii) of the Merger Agreement. Such bonus, if any, shall be paid to
Executive promptly following the calculation of the Company's EBITDA for such
year; provided, however, that Executive must remain an employee of the Company
through the end of the year in question to be eligible to receive any bonus.


      5. Term. This Agreement shall commence on the date first set forth above
and shall continue until the third anniversary of the date first set forth
above, unless earlier terminated in accordance with Section 6 of this Agreement.

      6. Termination of Employment.

            (a) Death or Disability of Executive. The employment of Executive
      under this Agreement shall terminate upon his death or, at the option of
      Company, if Executive shall be prevented from fully performing his duties
      hereunder as a result of his disability or illness for a continuous period
      of one hundred eighty (180) days, and Executive shall only be entitled to
      be paid vacation pay and base salary earned or accrued through the date of
      termination, and no severance payment shall be due or payable to Executive
      in such event. Any payments of disability insurance to Executive with
      respect to any policy maintained by Company or any of its subsidiaries
      prior to termination of his employment shall be credited dollar-for-dollar
      against base compensation payable to Executive for the corresponding
      period.

            (b) By Relocation. In the event that Executive's duties require
      relocation to a location outside the Raleigh-Durham, North Carolina,
      metropolitan area, Executive declines to accept such transfer to such
      other geographic location and an alternative position that is mutually
      acceptable to Company and Executive cannot be arranged within the
      Raleigh-Durham, North Carolina, metropolitan area, then Executive shall be


                                       2


      deemed terminated without cause effective ninety (90) days after the
      notice to Executive of the request for relocation, and Executive shall
      only be entitled to be paid vacation pay and base salary earned or accrued
      through the date of termination, and no severance payment shall be due or
      payable to Executive in such event, provided that this shall not affect
      Executive's right to receive any compensation or consideration under any
      other Agreement with Company.

            (c) Termination "For Cause." Company shall have the right to
      terminate the employment of Executive under this Agreement "For Cause," as
      such term is defined below, at any time without further liability or
      obligations to Executive, excepting only that Executive shall be entitled
      to be paid vacation pay and base salary earned or accrued through the date
      of termination, and no severance payment shall be due or payable to
      Executive in such event. For purposes of this Agreement, "For Cause" shall
      refer to any of the following events as determined in the judgment of the
      Company Board:

                  (i) Executive's repeated neglect of or negligence in the
            performance of his duties;

                  (ii) Executive's failure or refusal to follow instructions
            given to him by the Company Board or the Chief Executive Officer or
            Chairman of Company;

                  (iii) Executive's repeated violation of any provision of
            Company's or HPI's Bylaws or of Company's or HPI's other stated
            policies, standards, or regulations, including but not limited to
            policies with respect to trading in HPI's securities;

                  (iv) Executive's being investigated by a government authority,
            indicted, convicted or plea bargaining in regard to any criminal
            offense, other than minor traffic violations, based on Executive's
            conduct occurring during the term of this Agreement;

                  (v) Executive's violation or breach of any material term,
            covenant or condition contained in this Agreement or any other
            agreement between Executive and any of Company, HPI or any of its
            subsidiaries; or

                  (vi) failure of Executive to perform his assignments and
            duties hereunder at a level that is deemed to be acceptable by
            either Company's or HPI's Chief Executive Officer, which failure
            continues for more than thirty (30) days following receipt of
            written notice from Company's or HPI's Chief Executive Officer.

            (d) Accrued Salary. In the event that Company or Executive
      terminates this Agreement for any reason whatsoever, Executive shall be
      paid (less all applicable deductions) all earned and accrued base
      compensation due to Executive for services rendered up to the date of
      termination.

            (e) Severance Payment. Except in the case of termination pursuant to
      Section 6(a) (death or disability of Executive), Section 6(b)
      (relocation), or Section 6(c) (For Cause), in the event that Company
      terminates this Agreement Executive shall be paid an amount equal to all


                                       3


      amounts of his annual base compensation, less all applicable deductions,
      that would have become due and owing to Executive through the third
      anniversary of the date first set forth above, as if Executive's
      employment with Company had not been terminated prior thereto, which
      payments shall be made in regular installments comparable to what would
      have been paid to Executive from time to time, had Executive continued to
      be employed through the third anniversary of this Agreement.

      7. Non-Competition and Non-Solicitation.

            (a) Executive acknowledges that the services to be performed by him
      under this Agreement are of a special, unique, unusual, extraordinary and
      intellectual character, and the provisions of this Section 7 are
      reasonable and necessary to protect the Business.

            (b) In consideration of the foregoing acknowledgments by Executive,
      and in consideration of the compensation and benefits to be paid or
      provided to Executive by Company, Executive covenants that he will not,
      during the term of this Agreement and for a period of one (1) year
      thereafter, directly or indirectly:

                  (i) except in the course of his employment hereunder, engage
            or invest in, own, manage, operate, finance, control, or participate
            in the ownership, management, operation, financing, or control of,
            be employed by, associated with, or in any manner connected with,
            any business whose products or services compete in whole or in part
            with the products or services of Company or HPI; provided, however,
            that Executive may purchase or otherwise acquire up to (but not more
            than) one percent (1%) of any class of securities of any enterprise
            (but without otherwise participating in the activities of such
            enterprise) if such securities are listed on any national or
            regional securities exchange or have been registered under Section
            12(g) of the Securities Exchange Act of 1934;

                  (ii) whether for Executive's own account or for the account of
            any other person, solicit business of the same or similar type of
            business then being carried on by Company, from any person or entity
            known by Executive to be a customer of Company or HPI, whether or
            not Executive had personal contact with such person or entity during
            and by reason of Executive's employment with Company;

                  (iii) whether for Executive's own account or the account of
            any other person (A) solicit, employ or otherwise engage as an
            Executive, independent contractor or otherwise, any person who is or
            was an employee of Company or HPI at any time during the term of
            this Agreement or in any manner induce or attempt to induce any
            employee of Company or HPI to terminate his employment with Company
            or HPI, or (B) interfere with Company's or HPI's relationship with
            any person or entity, including any person or entity who at any time
            during the term of this Agreement was an employee, contractor,
            supplier or customer of Company or HPI; or

                  (iv) at any time during or after the term of this Agreement,
            disparage Company or HPI, or any of their respective shareholders,
            directors, executives, officers, employees or agents.

                                       4


            (c) If any covenant of this Section 7 is held to be unreasonable,
      arbitrary or against public policy, such covenant will be considered to be
      divisible with respect to scope, time and geographic area, and such lesser
      scope, time or geographic area, or all of them, as a court of competent
      jurisdiction may determine to be reasonable, not arbitrary and not against
      public policy, will be effective, binding and enforceable against
      Executive.

            (d) Executive acknowledges and agrees that should Executive transfer
      between or among Company and HPI or any of its affiliated companies
      including, without limitation, any parent, subsidiary or other corporately
      related entity (a "Company Affiliate") wherever situated, or otherwise
      become employed by any Company Affiliate, or should he be promoted or
      reassigned to functions other than the duties set forth in this Agreement,
      or should Executive's compensation and benefit package change (either
      higher or lower), the terms of this Section 7 shall continue to apply with
      full force.

            (e) In the event Executive is terminated other than For Cause,
      Executive may, in his sole discretion, elect to waive any severance
      payment which may otherwise be due and owing to Executive pursuant to
      Section 6(e) above in exchange for Company's agreement that the
      restrictions of Section 7(b)(i) shall be deemed null and void and
      unenforceable against Executive and Company shall not attempt to enforce
      the same.

            (f) Executive agrees and acknowledges that Company does not have an
      adequate remedy at law for the breach or threatened breach by Executive of
      this Section 7 and agrees that Company may, in addition to the other
      remedies which may be available to it under this Agreement, file suit in
      equity to enjoin Executive from such breach or threatened breach.

            (g) All references in Section 7(b) hereof to Company shall be deemed
      to include any subsidiary or other Affiliate of Company or HPI.

      8. Certain Representations. Executive acknowledges that as a publicly
traded company functioning under the recently enacted Sarbanes-Oxley Act,
Company and its subsidiaries are subject to close scrutiny regarding their
activities, internal financial controls, and public comments and disclosures. To
appropriately protect HPI and its subsidiaries including Company, Executive
expressly acknowledges and agrees as follows:

      (a) Executive's employment by Company shall be full-time employment.
Except as expressly provided herein, during the period of such employment by
Company, Executive shall not have, provide or perform any work, advice,
assistance, consultation, analysis, input, participation, or interest whatsoever
(including but not limited to any financial interest, direct or indirect, legal
or beneficial) in or for the benefit of any corporation, partnership, joint
venture, limited liability company, sole proprietorship, or any other entity
whatsoever, whether for-profit or non-profit and regardless of whether or not
such entity competes against the Business, excepting volunteer activities for
local churches or schools and passive real estate investments or investments in
publicly traded stocks provided that such volunteer activities and investments
do not interfere with the performance of Executive's work for Company. In the
event that Company determines in its sole discretion that any of such activities
are interfering with the performance of Executive's duties for Company, it will
provide Executive with written notice of the same, and Executive shall have ten
(10) days either to cure such interference to the satisfaction of Company or to


                                       5


cease the interfering activities. Executive understands and agrees that any
activities other than those expressly set forth above must be pre-approved in
writing by the Chief Executive Officer and the Chairman of Company, and that any
revenues and profit derived from such activities shall belong solely to Company.
Executive agrees to provide Company any and all requested information in order
for Company to audit and determine the net income of Executive's activities
identified herein.

            (b) During and following any termination of Executive's employment
      by Company for any reason and under any circumstances whatsoever:

                  (i) Executive shall refrain from making any public or private
            disclosures regarding Company, HPI or their respective directors,
            officers, executives, employees or shareholders, except disclosures
            of such information as may have been publicly disclosed by HPI,
            Company or their respective subsidiaries including Company from time
            to time in press releases or in filings with the U.S. Securities and
            Exchange Commission, and except as may be required by applicable law
            or court order; and

                  (ii) Executive shall refrain from making public or private
            disparaging remarks regarding the Business, Company, HPI or their
            respective directors, officers, executives, employees or
            shareholders, or Company's or HPI's common stock, provided, however,
            that this agreement shall not be deemed to be violated by isolated
            verbal remarks in a social setting which are not repeated after they
            are objected to by either the Chief Executive Officer or the
            Chairman of Company.

            (c) Executive further represents, warrants and covenants as follows:

                  (i) that Executive is not subject to any contract, non-compete
            agreement, decree or injunction which prohibits or restricts his
            performance of the duties set forth herein with Company, the
            continued operation of the Business or the expansion thereof to
            other geographical areas, customers and suppliers or lines of
            business; and

                  (ii) that no claims or lawsuits are pending at the time of
            this Agreement against Executive or any corporation or other entity
            wherein he was or is an officer or Executive, except as detailed as
            an exhibit to the Merger Agreement.

            (d) If during the period of his employment by Company, Executive
      violates this Section 8 or any of the representations, warranties and
      covenants made by Executive in this Section 8 prove to be false, then
      following discovery of the violation or falsehood, Executive shall
      immediately pay and turn over to Company any and all software, software
      programs, other work product, copyrights, domain names, contract rights,
      accounts receivable, cash, stock, options, warrants, membership interests,
      other interests, salary, bonuses, royalties, commissions, fees and any and
      all other assets, consideration and compensation of any nature whatsoever
      which has been obtained by Executive or any of his immediate family
      members or affiliates (directly or indirectly, legally or beneficially) in
      regard to such violation, and in addition Company and HPI shall have the
      unilateral right to cancel any or all stock options or warrants issued to


                                       6


      Executive after the date of this Agreement ("Future Equity Instruments")
      and outstanding as of the date of discovery by Company of such violation
      or falsehood, all as liquidated and punitive damages in regard to such
      violation or falsehood.

            (e) Executive acknowledges and agrees that in the event that there
      is a dispute regarding Executive's employment with Company brought by any
      former employer, Company will request that its legal counsel represent
      Executive, and will further advance funds for any legal fees and costs
      associated with such representation (collectively, the "Legal Defense Fees
      and Costs Paid by Company") so long as:

                  (i) Executive has not violated any of the representations and
            obligations set forth in this letter, including those set forth in
            this Agreement;

                  (ii) Company's legal counsel concludes (with Executive's
            assent) that he can represent both Company and Executive personally
            without violating any ethical obligations that such counsel may
            have; and

                  (iii) Executive remains employed by Company.

      Executive specifically acknowledges that should any of these conditions
      not be met, Executive will be obligated to retain separate legal counsel
      and that any legal fees and costs associated with such counsel shall be
      solely his responsibility. Executive also acknowledges and agrees that
      pursuant to Section 4 above any Legal Defense Fees and Costs Paid by
      Company in connection with such a dispute may, in Company's sole
      discretion, be set-off against any raise or bonus that Executive otherwise
      is or may be eligible to receive from Company.

      9. Nondisclosure of Proprietary Information. Executive shall not, either
during or after his employment with Company, disclose to anyone outside Company
nor use other than for the purpose of the Business, any Proprietary Information
or any information received in confidence by Company or any Company Affiliate
from any third party. For purposes of this Agreement, "Proprietary Information"
is information and data, whether in oral, written, graphic, or machine-readable
form relating to Company's or any Company Affiliate's past, present and future
businesses, including, but not limited to, computer programs, routines, source
code, object code, data, information, documentation, know-how, technology,
designs, procedures, formulas, discoveries, inventions, trade secrets,
improvements, concepts, ideas, product plans, development plans, research and
development, acquisition plans, pricing policies, personnel information,
financial information, customer lists and marketing programs and including,
without limitation, all documents marked as confidential or proprietary and/or
containing such information, which Company or any Company Affiliate has acquired
or developed and which has not been made publicly available by Company or any
Company Affiliate.

      10. Return of Documents. Upon the termination of Executive's employment
with Company or upon the earlier request of Company, Executive shall return to
Company all materials belonging to Company, including all materials containing
or relating to any Proprietary Information in any written or tangible form that
Executive may have in his possession or control.

      11. Ownership of Work Product. Executive hereby assigns to Company his
entire right, title and interest in all "Developments." "Developments" shall
mean any idea, invention, design of a useful article (whether the design is


                                       7


ornamental or otherwise), computer program including source code and object code
and related documentation, and any other work of authorship, or audio/visual
work, written, made or conceived solely or jointly by Executive during
Executive's employment with Company, whether or not patentable, subject to
copyright or susceptible to other forms of protection that relate to the actual
or anticipated businesses or research or development of Company, or are
suggested by or result from any task assigned to Executive or work performed by
Executive for or on behalf of Company. Executive acknowledges that the
copyrights in Developments created by him in the scope of his employment belong
to Company by operation of the law, or may belong to a customer of Company
pursuant to a contract between Company and such customer. In connection with any
of the Developments assigned above, Executive agrees to promptly disclose them
to Company, and Executive agrees, on the request of Company, to promptly execute
separate written assignments to Company and to do all things reasonably
necessary to enable Company to secure patents, register copyrights or obtain any
other forms of protection for Developments in the United States and in other
countries. In the event Company is unable, after reasonable effort, to secure
Executive's signature on any letters patent, copyright or other analogous
protection relating to a Development, whether because of Executive's physical or
mental incapacity or for any other reason whatsoever, Executive irrevocably
designates and appoints Company and its duly authorized officers and agents as
his agents and attorneys-in-fact to act for and in his behalf and stead to
execute and file any such application or applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters
patent, copyright or other analogous protection thereon, with the same legal
force and effect as if executed by Executive. Company, its subsidiaries,
licensees, successors and assigns (direct or indirect), are not required to
designate Executive as the inventor or author of any Development, when such
Development is distributed publicly or otherwise. Executive waives and releases,
to the extent permitted by law, all of his rights to such designation and any
rights concerning future modifications of such Developments.

      12. Possession of Other Materials. Executive represents that he has not
brought and will not bring with him to Company, or use in the performance of
Executive's responsibilities for Company, any materials or documents of a former
employer which are not generally available to the public or which did not belong
to Executive or Company, unless Executive has obtained written authorization
from the former employer or other owner for their possession and use and
provided Company with a copy thereof

      13. Indemnification. Executive agrees to indemnify, defend and hold
harmless Company and each Company Affiliate and each of the directors, officers,
executives, employees and shareholders of Company and each Company Affiliate
from and against all liabilities, obligations, losses, expenses, costs
(including attorneys fees), claims, deficiencies and damages incurred or
suffered by Company and each Company Affiliate and each of their respective
directors, officers, executives and shareholders, resulting from:

            (a) Executive's breach of the terms of this Agreement, including but
      not limited to any breach of Executive's representations, warranties and
      covenants;

            (b) Executive's breach of any agreement with a third party
      restricting competition, intellectual property, confidential information
      or disclosure;

            (c) Executive's grossly negligent acts; or

                                       8


            (d) Executive's improper willful acts, without any limitations or
      qualifications whatsoever, and as an express inducement to Company to
      enter into this Agreement Executive waives any and all arguments, grounds,
      facts, circumstances, reasons, basis, and defenses whatsoever, whether
      based in law or in equity, regarding the full force and effect and legally
      binding nature of this agreement of Executive to indemnify and hold
      harmless Company and each of their respective directors, officers,
      executives, employees and shareholders, as aforesaid.

This indemnification provision shall survive any termination of Executive's
employment relationship with Company. In addition to all other remedies
available, Company shall have the unilateral right to cancel any or all of the
Future Equity Instruments, if Executive defaults on such indemnification
obligations.

      14. Assignment. This Agreement may not be assigned by Executive under any
circumstances. This Agreement may be assigned by Company, or to any successor of
Company in connection with a merger, consolidation, or sale of all or
substantially all of the assets of Company, so long as such assignee assumes all
of Company's obligations hereunder.

      15. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail, return receipt requested, or if in writing and delivered in person to the
intended recipient or if in writing and delivered by bonded overnight courier,
to the following address:

     To Executive:        At the address set forth on the signature page hereof.

     To Company:          Capital Partners for Health & Fitness, Inc.
                          Attention: Chief Executive Officer
                          5 Revere Drive - Suite 510
                          Northbrook, IL 60062

or to such other address as either Executive or Company may give to the other
from time to time by written notice in the manner set forth above.

      16. Waiver of Breach. Any waiver by Company or Executive of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.

      17. Choice of Law, Jury Waiver. This Agreement shall be deemed to have
been made in the State of Illinois, and shall take effect as an instrument under
seal within Illinois. Both parties further acknowledge that the last act
necessary to render this Agreement enforceable is its execution by Company in
Illinois, and that the Agreement thereafter shall be maintained in Illinois. The
validity, interpretation and performance of this Agreement, and any and all
other matters relating to Executive's employment and separation of employment
from Company shall be governed by, and construed in accordance with the internal
law of Illinois, without giving effect to conflict of law principles. Both
parties agree that any action, demand, claim or counterclaim (jointly "Action")
relating to (i) Executive's employment and separation of his employment, and
(ii) the terms and provisions of this Agreement or to its breach, shall be
commenced in Illinois in a court of competent jurisdiction. Both parties further
acknowledge that venue shall exclusively lie in Illinois and that material
witnesses and documents would be located in Illinois. Both parties further agree
that any Action shall be tried by a Judge alone, and both parties hereby waive
and forever renounce the right to a trial before a civil jury.

      18. Entire Agreement. This Agreement contains the entire agreement of the
parties regarding the subject matter hereof and supersedes all prior or
contemporary agreements or understandings, whether written or oral with respect
thereto. This Agreement may be changed only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought. Failure to insist upon strict compliance with
any provision of this Agreement shall not be deemed a waiver of such provision
or of any other provision in the Agreement.

                                       9


      19. Counterparts. This Agreement may be executed in one or more
counterparts, whether by original, photocopy, facsimile or e-mail in PDF format,
each of which shall be deemed an original and all of which, when taken together,
shall constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.



EMPLOYEE:                                  COMPANY:

                                           CAPITAL PARTNERS FOR HEALTH
                                           & FITNESS, INC

- -------------------------------------
RANDALL ROHM
                                           By:
                                              ----------------------------------
Address:                                      Gerard M. Jacobs
       ------------------------------         Chief Executive Officer
                                              Chief Executive Officer
       ------------------------------



                                       10




                                    EXHIBIT A

                              SUMMARY OF COMPANY'S
                 VICE PRESIDENTS' BENEFITS AS OF FEBRUARY, 2006

1.    Medical insurance where a PPO or HMO plan is offered.((1)) 2. Dental and
      vision insurance, if plan is obtained.(1)

3.    Fifteen (15) vacation days per year.

4.    Ten (10) paid holidays per year.

5.    Company paid supplemental policies including Accident, Personal Recovery,
      Disability and Cancer insurance, if supplemental policies are obtained.(1)

6.    Company paid executive life insurance plan with a death benefit tied to
      annual salary or multiple thereof, if plan is obtained.(1)










- ------------
((1)) Current Capital Partners plans in this area, if any, will be maintained
      until Company elects to move to different coverage.


                                       A-1

EX-23.

                    Consent of Pender Newkirk & Company, CPAs
                    Independent Registered Public Accountants



Board of Directors
Kapital Engine Investments, Inc.
Raleigh, NC


We consent to the incorporation in the Current Report (Form 8-K) dated February
13, 2006, pertaining to the "Agreement and Plan of Merger" by and among Health
Partners, Inc., Capital Partners Merger Sub, Inc., Capital Partners Acquisition
Sub, Inc., Capital Partners For Health & Fitness, Inc., Randall Rohm, and Thomas
Flynn of our report dated November 1, 2005 with respect to the December 31, 2004
and 2003 consolidated financial statements.


/s/ Pender Newkirk & Company


Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
February 13, 2006

EX-99.1

                        Consolidated Financial Statements

                        Kapital Engine Investments, Inc.

                     Years Ended December 31, 2004 and 2003

        Report of Independent Registered Certified Public Accounting Firm



                        Consolidated Financial Statements

                     Years Ended December 31, 2004 and 2003
        Report of Independent Registered Certified Public Accounting Firm

Contents


      Report of Independent Registered Certified Public Accounting Firm

Financial Statements:

      Consolidated Balance Sheet
      Consolidated Statements of Operations
      Consolidated Statements of Changes in Stockholders' Equity
      Consolidated Statements of Cash Flows
      Notes to Consolidated Financial Statements



        Report of Independent Registered Certified Public Accounting Firm



Board of Directors
Kapital Engine Investments, Inc.
Raleigh, North Carolina

We have audited the accompanying balance sheet of Kapital Engine Investments,
Inc. as of December 31, 2004 and the related statements of operations, changes
in stockholders' equity, and cash flows for the two years then ended. These
financial statements are the responsibility of the management of Kapital Engine
Investments, Inc. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required at
this time, to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kapital Engine Investments,
Inc. as of December 31, 2004 and the results of its operations and its cash
flows for the two years then ended in conformity with United States generally
accepted accounting principles.



Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
November 1, 2005



                        Kapital Engine Investments, Inc.

                           Consolidated Balance Sheets

                                December 31, 2004



                                                                                       
Assets
Current assets:
      Cash                                                                                $     1,200
      Accounts receivable, net of allowances of $2,097,000                                     82,600
      Related party receivables                                                               361,300
      Advances to shareholders                                                                129,800
      Prepaid expenses                                                                         38,000
                                                                                          -----------

Total current assets                                                                          612,900

Property & equipment, net of accumulated depreciation of $3,020,300                         2,574,100
Identified intangible assets, net of accumulated amortization of $48,400                       25,200
Other long-term assets                                                                         60,600
                                                                                          -----------

 Total assets                                                                             $ 3,272,800
                                                                                          -----------

Liabilities and Stockholders' Equity
Current liabilities:
      Cash overdraft                                                                      $   238,800
      Accounts payable                                                                        315,300
      Accrued payroll and payroll taxes                                                        90,300
      Notes payable, current                                                                1,191,600
      Capital leases, current                                                                 446,200
      Deferred revenue, current                                                             2,685,200
      Other accrued liabilities                                                               271,000
                                                                                          -----------

Total current liabilities                                                                   5,238,400
Long-term liabilities:
      Deferred revenue, less current portion                                                1,097,400
      Notes payable, less current portion                                                     237,000
      Capital leases, less current portion                                                    401,700

Stockholders' deficit:
      Common stock; $1.00 par value;  1,000 shares authorized;  1,000 shares issued and
         outstanding at December 31, 2004                                                       1,000
      Additional paid-in capital                                                              424,500
      Accumulated deficit                                                                  (4,127,200)
                                                                                          -----------

Total stockholders' deficit                                                                (3,701,700)
                                                                                          -----------

 Total liabilities and stockholders' equity                                               $ 3,272,800
                                                                                          -----------


    The accompanying notes are an integral part of the financial statements.



                        Kapital Engine Investments, Inc.

                      Consolidated Statements of Operations




                                                               Years Ended December 31,
                                                             ----------------------------

                                                                 2004            2003
                                                             ------------    ------------
                                                                       
Revenues:
      Membership revenue                                     $  9,661,200    $  7,006,700
      Membership refunds                                         (128,700)       (156,800)
      Other returns                                              (156,800)        (91,100)
                                                             ------------    ------------

 Total revenue                                                  9,375,700       6,758,800
                                                             ------------    ------------

      General and administrative expenses                       7,998,600       7,344,100

  Other expense (income):
      Loss on sale of fixed assets                                  9,900          51,000
      Other income                                               (126,000)       (150,900)
      Interest expense                                            141,700         124,400
                                                             ------------    ------------

             Total other expenses (income)                         25,600          24,500

Net income (loss)                                            $  1,351,500    $   (609,800)
                                                             ------------    ------------

Basic and dilutive income (loss) per share of common stock   $   1,351.50    $    (609.80)
                                                             ------------    ------------

Weighted average common stock outstanding                           1,000           1,000
                                                             ------------    ------------

Weighted average diluted common stock outstanding                   1,000           1,000
                                                             ------------    ------------


    The accompanying notes are an integral part of the financial statements.



                        Kapital Engine Investments, Inc.
           Consolidated Statements of Changes in Stockholders' Equity
                     Years Ended December 31, 2004 and 2003



                                    Common Stock            Additional
                             ---------------------------     Paid-in      (Accumulated
                                Shares         Amount        Capital        Deficit)          Total
                             ------------   ------------   ------------   ------------    ------------
                                                                           
Balance, December 31, 2002          1,000   $      1,000   $    424,500   $ (3,634,500)   $ (3,209,000)

Distributions                                                                 (844,400        (844,400)
Net loss                                                                      (609,800)       (609,800)
                             ------------   ------------   ------------   ------------    ------------
Balance, December 31, 2003          1,000          1,000        424,500     (5,088,700)     (4,663,200)

Distributions                                                                 (390,000)       (390,000)
Net income                                                                   1,351,500       1,351,500
                             ------------   ------------   ------------   ------------    ------------
Balance, December 31, 2004          1,000   $      1,000   $    424,500   $ (4,127,200)   $ (3,701,700)
                             ------------   ------------   ------------   ------------    ------------



    The accompanying notes are an integral part of the financial statements.



                        Kapital Engine Investments, Inc.
                      Consolidated Statements of Cash Flows




                                                                              Years Ended December 31,
                                                                            ----------------------------
                                                                                2004            2003
                                                                            ------------    ------------
                                                                                      
Operating activities
      Net income (loss)                                                     $  1,351,500    $   (609,800
                                                                            ------------    ------------

      Adjustments to reconcile net loss to net cash provided by operating
         activities:
            Provisions for allowance for doubtful accounts                     1,356,300         300,600
            Depreciation and amortization                                        589,500         514,200
            Loss on sale of assets                                                 9,900          51,000
            Increase (decrease) in:
                  Accounts receivables                                        (1,337,900)       (341,600)
                  Prepaid expenses                                               114,400        (152,400)
                  Other assets                                                     6,000           5,600
                  Accounts payable                                                52,800         (25,500)
                  Deferred revenue                                            (1,103,200)      1,493,200
                  Other accrued liabilities                                       40,800          33,200
                                                                            ------------    ------------

      Total adjustments                                                         (271,400)      1,878,300
                                                                            ------------    ------------

      Net cash provided by operating activities                                1,080,100       1,268,500
                                                                            ------------    ------------

Investing activities
      Purchase of property and equipment                                        (278,300)       (191,600)
      Proceeds from sale of assets                                                57,000             500
                                                                            ------------    ------------

      Net cash used in investing activities                                     (221,300)       (191,100)
                                                                            ------------    ------------

Financing activities
      Increase in bank overdraft                                                 238,800
      Increase in advances to shareholders                                      (129,800)
      Related party receivables                                                 (338,400)          1,400
      Proceeds from notes payable and capital leases                             506,500       1,375,900
      Payment on notes payable and capital leases                               (759,700)     (1,942,900)
      Payment on minority interest                                                     0        (103,300)
      Distributions to shareholders                                             (390,000)       (844,400)
                                                                            ------------    ------------

      Net cash used by financing activities                                     (872,600)     (1,513,300)
                                                                            ------------    ------------

Net decrease in cash and cash equivalents                                        (13,800)       (435,900)
Cash and cash equivalents, beginning of year                                      15,000         450,900
                                                                            ------------    ------------

Cash and cash equivalents, end of period                                    $      1,200    $     15,000
                                                                            ------------    ------------

Supplemental disclosure of cash flow information and non-cash financing
   activities:
Cash paid during the year for interest                                      $    141,700    $    124,400
                                                                            ------------    ------------
Assets acquired with capital leases                                         $     56,500    $  1,016,600
                                                                            ------------    ------------



    The accompanying notes are an integral part of the financial statements.



                        KAPITAL ENGINE INVESTMENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 For the years ended December 31, 2004 and 2003

1. Nature of Business

      Kapital Engine Investments, Inc. and the Subsidiaries (collectively, the
Company) are primarily engaged in design, management and operation of fitness
centers, principally in the Raleigh, North Carolina area. The Company was
incorporated in the state of Nevada in 2002. As of December 31, 2004, the
Company owned and operated nine fitness clubs.

      The fitness clubs offer weight training, cardiovascular equipment,
aerobics classes, yoga, tanning, babysitting and basketball courts. Operations
focus on prospecting for new members, membership sales, and renewals.
Memberships may be prepaid or paid monthly. The majority of the memberships sold
are for two year periods.

2. Significant Accounting Policies

      Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. In recording transactions and balances resulting from
business operations, the Company uses estimates based on the best information
available. The Company revises the recorded estimates when better information is
available, facts change, or the Company can determine actual amounts. Those
revisions can affect operating results.

      Principles of Consolidation - The consolidated financial statements
include the accounts of Kapital Engine Investments, Inc. and its wholly owned
subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.

      Revenue Recognition -- The Company receives a one-time enrollment fee and
offers discounts on pre-payment of multi-year contracts at the time a member
joins and monthly membership dues for usage from its members. The enrollment
fees are nonrefundable after 30 days. The Company records income on the basis of
cash received and adjusts the cash income for net changes in accounts receivable
and calculates a deferral of cash income to subsequent periods based on a sample
of membership contracts entered into during the year. In addition, monthly
membership dues paid in advance of a center's opening are deferred until the
center opens. The Company offers members month-to-month memberships and
recognizes as revenue the monthly membership dues in the month to which they
pertain.

      The Company also receives rental revenue from several third party vendors
who operate refreshment areas within each fitness center. Rental revenue from
this activity is recognized monthly.

      Fair Value of Financial Instruments - Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information
available to management. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair values. These
financial instruments include cash, accounts receivable, accounts payable, and
accrued expenses. Fair values were assumed to approximate carrying values for
these financial instruments since they are short-term in nature and their
carrying amounts approximate fair values or they are receivable or payable on
demand. The fair value of the Company's notes payable is estimated based upon
the quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities and
approximates the carrying amounts of the notes.



      Cash and Cash Equivalents - The Company considers all unrestricted cash
accounts and highly liquid debt instruments purchased with original maturities
of three months or less to be cash and cash equivalents.

      Accounts Receivable - Accounts receivable principally consists of amounts
due from the Company's membership base. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of the
Company's members to make required payments. The Company considers facts such
as: historical collection experience, the age of the receivable balance, and
general economic conditions that may affect our member's ability to pay.

The roll forward of these allowances at December 31, 2004 are as follows:

      Allowance for doubtful accounts:
      Balance, beginning of period       $  740,600
      Provisions                          1,356,400
      Write-offs against allowance

      Balance, end of period             $2,097,000

      Prepaid Expenses and Other Receivables - Prepaid expenses and other
receivables consisted primarily of prepaid legal fees, rent and security
deposits.

      Property and Equipment - Property, equipment and leasehold improvements
are recorded at cost. Improvements are capitalized, while repair and maintenance
costs are charged to operations when incurred.

      Depreciation is computed primarily using the straight-line method over
estimated useful lives of the assets. Leasehold improvements are amortized using
the straight-line method over the shorter of the lease term or the estimated
useful life of the improvement. Construction in progress is not depreciated
until placed in service and then is depreciated over the useful life of the
asset.

      Impairment of Long-lived Assets - The carrying value of long-lived assets
is reviewed annually and whenever events or changes in circumstances indicate
that such carrying values may not be recoverable. The Company considers a
history of consistent and significant operating losses to be its primary
indicator of potential impairment. Assets are grouped and evaluated for
impairment at the lowest level for which there are identifiable cash flows,
which is generally at an individual location. The determination of whether
impairment has occurred is based on an estimate of undiscounted future cash
flows directly related to that center, compared to the carrying value of these
assets. If an impairment has occurred, the amount of impairment recognized is
determined by estimating the fair value of these assets and recording a loss if
the carrying value is greater than the fair value. For the years ended December
31, 2004 and 2003 there was no impairment charge recorded.

      Advertising costs - are charged to operations when incurred. The costs of
direct-response advertising are capitalized and amortized over the period during
which future benefits are expected to be received. Advertising expense for the
year ended December 31, 2004 and 2003 were $166,300 and $374,600, respectively.
There was no direct-response advertising for the periods presented.

      Operating Leases - Rent expense for operating leases was approximately
$1,742,200 and $1,324,700 for the years ended December 31, 2004 and 2003,
respectively. Certain lease agreements call for escalating lease payments over
the term of the lease, resulting in a deferred rent liability due to the expense
being recognized on the straight-line basis over the life of the lease.



      Income Taxes - The Company, with the consent of the stockholders, has
elected under Sections 1361 through 1379 of the Internal Revenue Code to be
treated substantially as a partnership instead of as a corporation for income
tax purposes. As a result, the stockholders will report the entire corporate
taxable income and investment credit on their individual tax returns. Therefore,
no provision for income taxes has been made to these financial statements.

      Earnings per Common Share - Basic earnings per common share (EPS) is
computed by dividing net income applicable to common shareholders by the
weighted average number of shares of common stock for each year. Diluted EPS is
computed similarly to basic EPS, except that the numerator is adjusted to add
back any redeemable preferred stock accretion and the denominator is increased
for the conversion of any dilutive common stock

      New Accounting Pronouncements - In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections. SFAS No. 154 changes the requirements
for the accounting for and reporting of a change in accounting principle. In
addition, it carries forward without change the guidance contained in APB
Opinion No. 20 for reporting the correction of an error in previously issued
financial statements and a change in accounting estimate. SFAS No. 154 requires
retrospective application to prior periods' financial statements of changes in
accounting principle in most circumstances. The provisions of SFAS No. 154 are
effective in fiscal years beginning after December 15, 2005. The Company plans
to prospectively adopt SFAS No. 154 at the beginning of the 2006 fiscal year.

In June 2005, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 05-06, Determining the Amortization Period for Leasehold Improvements
Purchased after Lease Inception or Acquired in a Business Combination ("EITF
05-06"). EITF 05-06 concludes that the amortization period for leasehold
improvements acquired in a business combination and leasehold improvements that
are in service significantly after and not contemplated at the beginning of the
lease term should be amortized over the shorter of the useful life of the assets
or a term that includes required lease periods and renewals that are deemed to
be reasonably assured at the date of inception. As of September 30, 2005 this
pronouncement had no impact on the financial statements.

Other recent accounting pronouncements issued by the FASB (including its EITF),
the AICPA, and the SEC did not or are not believed by management to have a
material impact on the Company's present or future financial statements.

3. Property and Equipment

     Property and equipment at December 31, 2004 consists of the following:



                                     Useful Lives             2004
                                 ------------------   --------------------
                                                
   Leasehold improvements          10 years           $          2,361,100
   Construction in progress                                         42,500
                                                      ---------------------

                                                                 2,403,600
Equipment:
   Fitness                           7 - 10 years                2,804,600
   Computer and telephone              5 years                      94,100
   Decor and signage                   10 years                    110,900
   Furniture and fixtures              10 years                    181,200

                                                      ---------------------

                                                      ---------------------

   Property and equipment, gross                                 5,594,400
   Less accumulated depreciation                                 3,020,300
                                                      ---------------------

   Property and equipment, net                        $          2,574,100
                                                      =====================




4. Intangible Assets and Debt Issuance Costs

      Intangible assets consist of a covenant-not-to-compete. This asset is
stated at cost and is being amortized by the straight-line method over its
estimated lives.

      Debt issuance costs are classified within other assets and are being
amortized as additional interest expense over the life of the underlying debt,
one to three years, using the straight-line method. Amortization of debt issue
costs was $4,900 and $3,000 for December 31, 2004 and 2003, respectively.

Estimated amortization of intangibles for the next year is as follows:

                                   Year             Amortization Expense
                                   ----             --------------------

                                   2005                   $    4,893
                                   2006                   $    4,893
                                   2007                   $    4,893
                                   2008                   $    4,893
                                   2009                   $    4,893

5. Notes Payable



                                                                             
      Notes payable at December 31, 2004 consists of the following:

      Note payable to bank, due in monthly installments of $9,018 through
November 2005, including interest at 5.25%, with a final payment of $255,500
plus unpaid interest                                                              $ 331,300

      Note payable to bank, due in monthly installments of $4,082 through
November 2005, including interest at 5.25%, with a final payment of $189,100
plus unpaid interest                                                                150,100

      Note payable to bank, due in monthly installments of $8,658 through
November 2005, including interest at 5.25%, with a final payment of $247,500
plus unpaid interest                                                                318,300

      Note payable to bank, due in monthly installments of $6,389 through March
2007, including interest at 5.25%, with a final payment of $39,400 plus unpaid
interest                                                                            178,900

      Note payable to bank, monthly interest only payments through December
2005, including interest at 7.00%, collateralized by certain equipment, with a
final payment of $100,000 plus unpaid interest                                      100,000

      Note payable to bank, due in monthly installments of $7,702 through June
2006, including interest at 4.559%, with a final payment of $40,800 plus unpaid
interest                                                                            100,000

      Note payable to bank, due in monthly installments of $19,254 through May
2006, including interest at 4.429%, with a final payment of $86,200 plus unpaid
interest                                                                            250,000

                                                                                -----------

      Total notes payable                                                         1,428,600
                                                                                -----------

      Less current maturities                                                     1,191,600
                                                                                -----------

      Total notes payable, less current portion                                   $ 237,000
                                                                                ===========

      The Company was in compliance in all material respects with all
restrictive and financial covenants under its various credit facilities as of
December 31, 2004.

      Aggregate annual future maturities of notes payable at December 31, 2004
are as follows:

   2005                                                                        $  1,191,600
   2006                                                                             199,500
   2007                                                                              37,500
                                                                               ------------

                                                                               $  1,428,600
                                                                               ============




6. Capital Leases

     The Company is a party to capital equipment leases with third parties which
provide for monthly rental payments of approximately $60,200 as of December 31,
2004. All of the fitness equipment, which is included in property and equipment
has been recorded under capital leases.



                                                                            
   Equipment                                                                   $  2,804,600
                                                                               ------------
                                                                                  2,804,600
   Less accumulated depreciation                                                  1,286,600
                                                                               ------------
                                                                               $  1,518,000
                                                                               ============


      Future minimum lease payments and the present value of net minimum lease
payments on capital leases at December 31, 2004 are as follows:

   2005                                                                        $    524,500
   2006                                                                             311,700
   2007                                                                              43,000
   2008
   2009
   Thereafter
                                                                               ------------

                                                                                    879,200
   Less amounts representing interest                                                31,300
                                                                               ------------

   Present value of net minimum lease payments                                      847,900
   Current portion                                                                  446,200
                                                                               ------------

                                                                               $    401,700
                                                                               ============



7. Related Party Transactions

The advances to shareholders account is made up of advances to the majority
shareholders. These advances are non-interest bearing, unsecured and due on
demand.

8. Commitments and Contingencies

      Lease Commitments - The Company leases certain property under operating
leases. The minimum annual payments under all noncancelable operating leases at
December 31, 2004 are as follows:

       Lease Commitment     Lease Income   Net Lease Commitment

2005   $      1,444,900   $        162,000   $      1,282,900
2006          1,157,000             36,000          1,121,000
2007            789,100             36,000            753,100
2008            688,700                               688,700
2009            721,200                               721,200
             Thereafter          1,231,700          1,231,700
       ----------------   ----------------   ----------------
       $      6,032,600   $        234,000   $      5,798,600
       ================   ================   ================

      Litigation - The Company is engaged in legal proceedings incidental to the
normal course of business. Although the ultimate outcome of these matters cannot
be determined, management believes that the final disposition of these
proceedings will not have a material adverse effect on the consolidated
financial position or results of operations of the Company.



9. Income Taxes

The individual companies in this consolidation file separate income tax returns
with the federal government and the State of North Carolina. The companies have
elected to be taxes as S-Corporations or LLC's and therefore have no actual tax
expense. The pro forma federal income tax provision below has been calculated as
if the consolidated entity was a C-Corporation.

Pro forma income tax expense consists of the following:

                                             2004             2003
Taxes currently payable (receivable):
         Federal                         $     72,200    $    231,300
         State                                  9,700          31,000
Change in deferred income tax expense         433,800        (483,400)
                                         ------------    ------------
                                         $    515,800    $   (221,100)

Net income (loss) as reported            $  1,351,500    $   (609,800)
Net income after pro forma tax expense   $    835,700    $   (388,700)

Pro forma earnings per share             $        800    $       (389)

The company has no carryovers available for future periods.

Income taxes are based on estimates of the annual effective tax rate and
evaluations of possible future events and transactions and may be subject to
subsequent refinement or revision.



                        Consolidated Financial Statements

                        Kapital Engine Investments, Inc.

                      As of September 30, 2005 and for the
                  Nine Months Ended September 30, 2005 and 2004
                                   (unaudited)



                        Kapital Engine Investments, Inc.

                        Consolidated Financial Statements

                      As of September 30, 2005 and for the
                  Nine Months Ended September 30, 2005 and 2004
                                   (unaudited)


                                    Contents


Consolidated Financial Statements:

Consolidated Balance Sheet (unaudited)                                       1
Consolidated Statements of Operations (unaudited)                            2
Consolidated Statement of Changes in Stockholders' Equity (unaudited)        3
Consolidated Statements of Cash Flows (unaudited)                            4
Notes to Consolidated Financial Statements (unaudited)                       5



                        Kapital Engine Investments, Inc.

                           Consolidated Balance Sheet

                               September 30, 2005
                                   (unaudited)


                                                                        
Assets
Current assets:
      Cash                                                                 $    20,400
      Accounts receivable, net of allowances of $3,314,500                     580,300
      Related party receivables                                                206,700
      Advances to shareholders                                                 129,800
                                                                           -----------

Total current assets                                                           937,200

Property & equipment, net of accumulated depreciation of $3,478,800          2,124,800
Identified intangible assets, net of accumulated amortization of $53,200        20,400
Other long-term assets                                                          60,600
                                                                           -----------

 Total assets                                                              $ 3,143,000
                                                                           -----------

Liabilities and Stockholders' Deficit
Current liabilities:
      Cash overdraft                                                       $    80,100
      Accounts payable                                                         152,500
      Accrued payroll and payroll taxes                                        102,900
      Notes payable, current                                                   940,200
      Capital leases, current                                                  433,300
      Deferred revenue, current                                              2,106,400
      Other accrued liabilities                                                323,100
                                                                           -----------

Total current liabilities                                                    4,138,500
Long-term liabilities:
      Deferred revenue, less current portion                                   742,400
      Notes payable, less current portion                                       48,600
      Capital leases, less current portion                                     112,300

Stockholders' deficit:
      Common stock; $1.00 par value; 1,000 shares authorized; 1,000
         shares issued and outstanding                                           1,000
      Additional paid-in capital                                               424,500
      Accumulated deficit                                                   (2,324,300)
                                                                           -----------

Total stockholders' deficit                                                 (1,898,800)
                                                                           -----------

 Total liabilities and stockholders' deficit                               $ 3,143,000
                                                                           -----------



The accompanying notes are an integral part of the consolidated financial
statements.


                                       1


                        Kapital Engine Investments, Inc.

                      Consolidated Statements of Operations
                                   (unaudited)



                                                             Nine Months Ended
                                                              September 30,
                                                      --------------------------------
                                                           2005              2004
                                                      --------------    --------------
                                                                  
Revenues:
      Membership revenue                              $    6,751,700    $    7,699,900
      Membership refunds                                     (33,800)         (100,100)
      Other returns                                          (99,300)         (126,800)
                                                      --------------    --------------

 Total revenue                                             6,618,600         7,473,000
                                                      --------------    --------------

  General and administrative expenses                      4,873,100         5,837,000

  Other expense (income):
      Other income                                          (277,400)          (78,800)
      Interest expense                                        87,900           120,200
                                                      --------------    --------------

             Total other expenses (income)                  (189,500)           41,400

Net income                                            $    1,935,000    $    1,594,600
                                                      --------------    --------------

Basic and dilutive income per share of common stock   $     1,935.00    $     1,594.60
                                                      --------------    --------------

Weighted average common stock outstanding                      1,000             1,000
                                                      --------------    --------------

Weighted average diluted common stock outstanding              1,000             1,000
                                                      --------------    --------------


The accompanying notes are an integral part of the consolidated financial
statements


                                       2


                        Kapital Engine Investments, Inc.
            Consolidated Statement of Changes in Stockholders' Equity
                      Nine Months Ended September 30, 2005
                                   (unaudited)



                                                                  Additional
                                                                    Paid-In       (Accumulated
                                  Shares           Amount           Capital         Deficit)            Total
                              --------------   --------------   --------------   --------------    --------------
                                                                                    
Balance, December 31, 2004             1,000   $        1,000   $      424,500   $   (4,127,200)   $   (3,701,700)
                              --------------   --------------   --------------   --------------    --------------

Distributions                                                                          (132,100)         (132,100)
Net income                                                                            1,935,000         1,935,000
                              --------------   --------------   --------------   --------------    --------------
Balance, September 30, 2005            1,000   $        1,000   $      424,500   $   (2,324,300)   $   (1,898,800)
                              --------------   --------------   --------------   --------------    --------------



The accompanying notes are an integral part of the consolidated financial
statements


                                       3


                        Kapital Engine Investments, Inc.
                      Consolidated Statements of Cash Flows
                                   (unaudited)




                                                                                             Nine Months Ended
                                                                                               September 30,
                                                                                      --------------------------------
                                                                                           2005              2004
                                                                                      --------------    --------------
                                                                                                  
Operating activities
        Net income                                                                    $    1,935,000    $    1,594,600
                                                                                      --------------    --------------

        Adjustments to reconcile net income to net cash provided by operating
activities:
                Provisions for allowance for doubtful accounts                             1,217,500           983,100
                Depreciation and amortization                                                463,300           463,900
                Increase (decrease) in:
                        Accounts receivables                                              (1,715,200)         (953,900)
                        Prepaid expenses                                                      38,000           101,800
                        Other assets                                                         154,600           (96,400)
                        Accounts payable                                                    (162,800)         (188,100)
                        Deferred revenue                                                    (933,800)         (986,700)
                        Other accrued liabilities                                             64,700            50,300
                                                                                      --------------    --------------

        Total adjustments                                                                   (873,700)         (626,000)
                                                                                      --------------    --------------
        Net cash provided by operating activities                                          1,061,300           968,600
                                                                                      --------------    --------------
Investing activities
        Purchase of property and equipment                                                    (9,200)         (223,700)
                                                                                      --------------    --------------
        Net cash used in investing activities                                                 (9,200)         (223,700)
                                                                                      --------------    --------------
Financing activities
        Increase (Decrease) in bank overdraft                                               (158,700)           54,900
        Increase in advances to shareholders                                                (129,800)
        Proceeds from notes payable                                                           15,400            56,500
        Payment on notes payable and capital leases                                         (757,500)         (568,900)
        Distributions to shareholders                                                       (132,100)          171,300
                                                                                      --------------    --------------
        Net cash used by financing activities                                             (1,032,900)         (758,600)
                                                                                      --------------    --------------
Net increase (decrease) in cash                                                               19,200           (13,700)
Cash, beginning of year                                                                        1,200            15,000
                                                                                      --------------    --------------
Cash, end of period                                                                   $       20,400    $        1,300
                                                                                      --------------    --------------
Supplemental disclosure of cash flow information and non-cash financing activities:
Cash paid during the year for interest                                                $       87,900    $      463,900
                                                                                      --------------    --------------


The accompanying notes are an integral part of the consolidated financial
statements.


                                       4


                        Kapital Engine Investments, Inc.

                   Notes to Consolidated Financial Statements

                      As of September 30, 2005 and for the
                  Nine Months Ended September 30, 2005 and 2004
                                   (unaudited)

1.    Background Information


      Kapital Engine Investments, Inc. and the Subsidiaries (collectively, the
Company) are primarily engaged in design, management and operation of fitness
centers, principally in the Raleigh, North Carolina area. The Company was
incorporated in the state of Nevada in 2002. As of December 31, 2004, the
Company owned and operated nine fitness clubs.

      The fitness clubs offer weight training, cardiovascular equipment,
aerobics classes, yoga, tanning, babysitting and basketball courts. Operations
focus on prospecting for new members, membership sales, and renewals.
Memberships may be prepaid or paid monthly. The majority of the memberships sold
are for two year periods.

2.    Basis of Presentation

In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the nine months ended September 30, 2005 and 2004, (b) the
financial positions at September 30, 2005, and (c) cash flows for the nine month
periods ended September 30, 2005 and 2004, have been made.

The unaudited consolidated financial statements and notes are presented as
permitted by Regulation SB. Accordingly, certain information and note
disclosures normally included in condensed financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been omitted. The accompanying consolidated financial statements
and notes should be read in conjunction with the audited consolidated financial
statements and notes of the Company for the fiscal year ended December 31, 2004.
The results of operations for the nine months ended September 30, 2005 are not
necessarily indicative of those to be expected for the entire year.

                                       5

EX-99.2

Merger

On February 13, 2006, Health Partnership Inc., a Colorado corporation (the
"Company") acquired all of the outstanding common stock of Capital Partners For
Health & Fitness, Inc., a North Carolina corporation ("Capital Partners"). The
aggregate consideration to the Capital Partners shareholders is comprised of (a)
$6,992,859 in cash ("cash consideration); (b) 3,495,430 shares of the Company's
restricted common stock with a fair value of $4,369,300; and (c) the Earnout
Consideration, if earned. The fair value of the Company's shares was based upon
the January 31, 2006 Private Placement Offering.

As part of the Merger, it was agreed that no portion of the Cash Consideration
would be paid at the closing of the Merger. Instead, the Company delivered to
each of Capital Partners' shareholders, promissory notes in the aggregate
principal amount of $6,992,859 due on the earlier of June 30, 2006 or such time
as the Company shall have raised capital sufficient to fund the entire amount of
Cash Consideration. The promissory notes accrue simple interest at the annual
rate of five percent (5%) for the first sixty days, and will accrue simple
interest at the annual rate of ten percent (10%) thereafter.

Capital Partners' shareholders are collectively entitled to earn additional
consideration. This additional consideration is a one-time payment in cash and a
one-time payment in the Company's common stock (collectively "the Earnout
Consideration"). The Earnout Consideration is equal to (1) the amount, if any,
by which (a) one-half of Capital Partners' earnings before interest, taxes,
depreciation and amortization (computed in accordance with GAAP) during the
first eight full calendar quarters following the Merger (as certified by the
Company's independent public accountant) exceeds (b) an amount equal to the sum
of (i) $3,158,933 plus (ii) one-half of the amount of any portion of $400,000 of
bridge loan made by the Company to Capital Partners that is used by Capital
Partners for working capital purposes, (2) multiplied by 4.2.

The merger was recorded by allocating the cost of the assets acquired, including
intangible assets and liabilities assumed, based on their estimated fair values
at February 13, 2006. The excess of cost of the merger over the net of the
amounts assigned to the fair value of the assets acquired and the liabilities
assumed is recorded as goodwill. The Company is in the process of obtaining
valuations of certain assets; thus the allocation of the purchase price is
subject to refinement. The purchase price has been allocated as follows:

Accounts receivable                                                $    580,300
Related party receivables                                               206,700
Advances to shareholders                                                129,800
Property and equipment                                                2,124,800
Customer list/brand name                                              2,699,000
Identifiable intangible assets                                           20,400
Goodwill                                                             10,562,900
Other long-term assets                                                   60,600
Accounts payable and accrued liabilities                               (638,200)
Current and long-term notes payable                                    (988,800)
Current and long-term capital leases                                   (545,600)
Current and long-term deferred revenue                               (2,848,800)

Total purchase price                                               $ 11,363,100
                                                                   ============



Pro Forma Results

The following unaudited pro forma financial information presents the combined
results of operations of the Company and Capital Partners as if the merger had
occurred at January 1, 2005 and 2004. The pro forma results are presented below
for September 30, 2005 and for the nine months then ended and for the year ended
December 31, 2004 and combine the results of the Company and Capital Partners
from January 1, 2004 through September 30, 2005. The unaudited pro forma
financial information is not intended to represent or be indicative of the
Company's consolidated results of operations or financial condition that would
have been reported had the merger been completed as of the beginning of the
periods presented and should not be taken as indicative of the Company's future
consolidated results of operations or financial condition.

The pro forma net earnings for the nine months ended September 30, 2005 and the
year ended December 31, 2004 include $674,800 and $899,700, respectively, for
amortization of the purchased customer list/brand name. Also included for the
nine months ended September 30, 2004 and the year ended December 31, 2004 is
$524,500 and $641,000, respectively, for interest related to the note payable
issued as part of the acquisition price.



Pro Forma Results

The following unaudited pro forma financial information presents the combined
results of operations

The Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2005 of
Capital Partners and Health Partnership Inc.

Unaudited Pro Forma Consolidated Statements of Operations for the Nine Months
Ended September 30, 2005 of Capital Partners and Health Partnership Inc.

Unaudited Pro Forma Consolidated Statements of Operations for the year ended
December 31, 2004 of Capital Partners and Health Partnership Inc.



                   Capital Partners for Health & Fitness, Inc.

                 Unaudited Pro Forma Consolidated Balance Sheet
                               September 30, 2005



                                                         Capital        Health         Pro Forma
                                                        Partners      Partnership     Adjustments          Pro Forma
                                                      ------------    ------------    ------------       ------------
                                                                                             
Assets
Current assets:
    Cash                                              $     20,400    $     53,400    $                  $     73,800
    Accounts receivable, net                               580,300                                            580,300
    Related party receivables                              206,700                                            206,700
    Advances to shareholders                               129,800                                            129,800
        Total current assets                               937,200          53,400                            990,600

Property and equipment, net                              2,124,800                                          2,124,800

Identified intangible assets, net                           20,400                       1,124,500(3)       1,144,900
Goodwill                                                                                10,562,900(3)      10,562,900
Other long term assets                                      60,600                                             60,600
                                                      ------------    ------------    ------------       ------------

         Total assets                                 $  3,143,000    $     53,400    $ 11,687,400       $ 14,883,800
                                                      ============    ============    ============       ============

Liabilities and Stockholders' Equity
Current liabilities:
    Cash overdraft                                    $     80,100    $               $                  $     80,100
    Accounts payable, trade                                152,500                                            152,500
    Accrued interest expense                                                 8,700       1,165,500(1)       1,174,200
    Accrued payroll and payroll taxes                      102,900                                            102,900
    Notes payable, current                                 940,200         434,800       6,992,900(1)       8,367,900
    Capital leases, current                                433,300                                            433,300
    Deferred revenue, current                            2,106,400                                          2,106,400
    Other accrued liabilities                              323,100                                            323,100
                                                      ------------    ------------    ------------       ------------
        Total current liabilities                        4,138,500         443,500       8,158,400         12,740,400

Long-term liabilities:
    Deferred revenue less current portion                  742,400                                            742,400
    Notes payable, less current portion                     48,600                                             48,600
    Capital leases, less current portion                   112,300                                            112,300
                                                      ------------    ------------    ------------       ------------
         Total long-term liabilities                       903,300                                            903,300

Stockholders' equity:
    Preferred stock
    Common stock                                             1,000           1,600            (700)(1)(2)       1,900
    Additional paid-in capital                             424,500       2,772,400       3,945,400 (1)(2)   7,142,300
    Accumulated deficit                                 (2,324,300)     (3,164,100)       (415,700)(1)(2)  (5,904,100)
                                                      ------------    ------------    ------------       ------------
        Total stockholders' equity                      (1,898,800)       (390,100)      3,529,000          1,240,100

         Total liabilities and stockholders' equity   $  3,143,000    $     53,400    $ 11,687,400       $ 14,833,800
                                                      ============    ============    ============       ============


(1)   For pro forma presentation, Health Partnership issued a note payable for
      $6,992,859 which is expected to be repaid via the issuance of 5,594,287
      shares of common stock, in consideration for all of the outstanding common
      stock of Capital Partners.

(2)   For pro forma presentation, the issuance of 3,496,430 shares of common
      stock will be valued at $1.25 per share. (3) For pro forma presentation,
      the excess of the purchase price over the net book value has been
      allocated to customer list and brand name and goodwill. The net book value
      of property and equipment approximates fair value, as the majority of
      these assets are capital leased items.

The accompanying notes are an integral part of the financial statements.



                   Capital Partners for Health & Fitness, Inc.

            Unaudited Pro Forma Consolidated Statements of Operations

                  For the Nine Months Ended September 30, 2005



                                                          Capital          Health           Pro-Forma
                                                         Partners        Partnership       Adjustments         Pro Forma
                                                      --------------    --------------    --------------    --------------
                                                                                                
Revenues:
    Membership revenue                                $    6,751,700    $                 $                 $    6,751,700
    Membership refunds                                       (33,800)          (33,800)
    Other returns                                            (99,300)          (99,300)
                                                      --------------    --------------    --------------    --------------

Total revenue                                              6,618,600                                             6,618,600

General and administrative expenses                        4,873,100           174,100           674,800(2)      5,721,900

Other expenses (income):
    Other income                                            (277,400)                                             (277,400)
    Interest expense                                          87,900             8,700           524,500           621,100
                                                      --------------    --------------    --------------    --------------
        Total other expenses (income)                       (189,500)            8,700           524,500           343,700

Net (loss) income                                     $    1,935,000    $     (182,800)   $   (1,199,300)(3)$      553,000
                                                      ==============    ==============    ==============    ==============


Basic and dilutive income per share of common stock   $     1,935.00    $        (0.23)   $                 $         0.12
                                                      ==============    ==============    ==============    ==============

Weighted average common shares outstanding                     1,000           792,503         3,495,230(1)      4,288,733
                                                      ==============    ==============    ==============    ==============

Weighted average diluted common share outstanding              1,000           792,503         3,495,230(1)      4,288,733
                                                      ==============    ==============    ==============    ==============



      (1)   Additional shares of common stock issued upon completion of the
            merger.

      (2)   Additional amortization expense related to the customer list and
            brand recognition.

      (3)   Additional interest expense related to the note payable issued as
            part of the merger.


The accompanying notes are an integral part of the financial statements.



                   Capital Partners for Health & Fitness, Inc.

            Unaudited Pro Forma Consolidated Statements of Operations

                      For the Year Ended December 31, 2004



                                                          Capital          Health           Pro Forma
                                                         Partners        Partnership        Adjustments        Pro Forma
                                                      --------------    --------------    --------------    --------------
                                                                                                
Revenues:
    Membership revenue                                $    9,661,200    $                 $                 $    9,661,200
    Membership refunds                                      (128,700)         (128,700)
    Other returns                                           (156,800)         (156,800)
                                                      --------------    --------------    --------------    --------------

Total revenue                                              9,375,700                                             9,375,700
                                                      --------------    --------------    --------------    --------------

General and administrative expenses                        7,998,600            10,100           899,700         8,908,400

Other expenses (income):
    Loss on sale of fixed assets                               9,900                                                 9,900
    Gain on forgiveness of debt                           (2,657,700)                         (2,657,700)
    Other (income) expense                                  (126,000)           46,500                             (79,500)
    Interest expense                                         141,700                             641,000           782,700
                                                      --------------    --------------    --------------    --------------
        Total other expenses (income)                         25,600        (2,611,200)          641,000        (1,944,600)

                                                      --------------    --------------    --------------    --------------
Net income                                            $    1,351,500    $    2,601,100    $    1,540,700    $    2,411,900
                                                      --------------    --------------    --------------    --------------


Basic and dilutive income per share of common stock   $     1,351.50    $          .07                      $          .57
                                                      --------------    --------------    --------------    --------------

Weighted average common shares outstanding            $        1,000           752,502         3,496,230         4,248,732
                                                      --------------    --------------    --------------    --------------

Weighted average diluted common share outstanding              1,000           752,502         3,496,230         4,248,732
                                                      --------------    --------------    --------------    --------------



      (1)   Additional shares of common stock issued upon completion of the
            merger.
      (2)   Additional amortization expense related to the customer list and
            brand recognition.
      (3)   Additional interest expense related to the note payable issued as
            part of the merger.

The accompanying notes are an integral part of the financial statements.