-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PscxGluVtOOXn/bpjPhsZ2iC2SVGxvb3lyMwlRn/FkKVe4WDo8zoIua2+Q6m7P8h gmUaOPiNIkTV+I4bg2KClw== 0001010549-02-000086.txt : 20020414 0001010549-02-000086.hdr.sgml : 20020414 ACCESSION NUMBER: 0001010549-02-000086 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011205 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESTAURANT TEAMS INTERNATIONAL INC CENTRAL INDEX KEY: 0000921066 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 752337102 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13559 FILM NUMBER: 02553707 BUSINESS ADDRESS: STREET 1: P O BOX 5310 CITY: LONGVIEW STATE: TX ZIP: 75608 BUSINESS PHONE: 903.758.28 MAIL ADDRESS: STREET 1: P O BOX 5310 CITY: LONGVIEW STATE: TX ZIP: 75608 FORMER COMPANY: FORMER CONFORMED NAME: FRESH N LITE INC DATE OF NAME CHANGE: 19971030 8-K/A 1 rtin8ka120501.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): December 5, 2001 ---------------- RTIN HOLDINGS, INC. (Exact name of registrant as specified in its charter) Texas (State of Other Jurisdiction of Incorporation) 001-13559 75-2337102 (Commission File Number) (IRS Employer Identification No.) 2101 E. Loop 281 Longview, Texas 75605 (Address of Principal Executive Offices) (Zip Code) (903) 295-6800 (Registrant's Telephone Number, Including Area Code) RESTAURANT TEAMS INTERNATIONAL, INC. (Former Name or Former Address, if Changed since Last Report) Item 2. Acquisition or Disposition of Assets. On December 5, 2001, the Company signed a Stock Purchase Agreement (the "Agreement") with MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow and Ann E. Rau, under which the Company will acquire, on or before December 21, 2001, all of the issued and outstanding shares of capital stock of MedEx Systems, Inc. and Pegasus Pharmacy, Inc. in exchange for 3,521,127 shares (after giving effect to a 50 to one reverse stock split) of the common stock, $.01 par value, of the Company. Pursuant to the terms of the Agreement Mr. Solow continued as the President of MedEx Systems, Inc. and Ms. Rau became a director of the Company and continued as the President of Pegasus Pharmacy, Inc. MedEx Systems, Inc. and Pegasus Pharmacy, Inc. are engaged in the business of providing hardware and software solutions for writing, transmitting and fulfilling prescriptions for pain management medications. The Company intends to continue the development of this business. Item 5. Other Events. On December 7, 2001, the Company's shareholders approved a 50 to one reverse stock split, recapitalization of the Company with 25,000,000 shares of common stock, $.01 par value, and the change of the Company's name to RTIN Holdings, Inc. Item 7. Exhibits. (a) Financial statements of businesses acquired. To be filed by amendment within 60 days after the date of this Report on Form 8-K. (b) Pro forma financial information. To be filed by amendment within 60 days after the date of this Report on Form 8-K. (c) Exhibits. 2.1 Stock Purchase Agreement by and among Restaurant Teams International, Inc., MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow and Ann E. Rau, dated as of December 6, 2001. MEDEX SYSTEMS, INC. PEGASUS PHARMACY, INC. INDEX TO FINANCIAL STATEMENTS Page ---- Report of Independent Certified Public Accountants F - 1 Financial Statements Combined Balance Sheets as of December 31, 2001 and 2000 F - 2 Combined Statements of Operations for the year ended December 31, 2001 and the Period from April 18, 2000 (Inception) to December 31, 2000 F - 4 Combined Statements of Stockholders' Deficit for the year ended December 31, 2001 and the Period from April 18, 2000 (Inception) to December 31, 2000 F - 5 Combined Statements of Cash Flows for the year ended December 31, 2001 and the Period from April 18, 2000 (Inception) to December 31, 2000 F - 6 Notes to Combined Financial Statements F - 8 Killman, Murrell & Company, P.C. Certified Public Accountants 505 N. Big Spring, Suite 603 1931 E. 37th, Suite 7 4049 St. Christopher Lane Midland, Texas 79701 Odessa, Texas 79762 Dallas Texas 75287 (915) 686-9381 (915) 363-0067/550-4910 (972) 862-3975 Fax (915) 684-6722 Fax (915) 363-0376 Fax (915) 363-0376 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Stockholders Medex Systems, Inc. We have audited the accompanying combined balance sheets of Medex Systems, Inc. (a Louisiana Corporation) and Pegasus Pharmacy, Inc. (a Louisiana Corporation) collectively called "Companies" as of December 31, 2001 and 2000, and the related combined statement of operations, stockholders' deficit and cash flows for the year ended December 31, 2001 and the period April 18, 2000 (Inception) to December 31, 2000. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined 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 audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Medex Systems, Inc. and Pegasus Pharmacy, Inc. as of December 31, 2001 and 2000 and the results of their operations and their cash flows for the year ended December 31, 2001 and the period April 18, 2000 (Inception) to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Companies will continue as going concerns. As discussed in Note 11 to the financial statements, the Companies' significant operating losses raise substantial doubt about their ability to continue as going concerns. Management's plans regarding those matters also are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. KILLMAN, MURRELL & COMPANY, P.C. Dallas, Texas January 26, 2002 (except for Note 12, as to which is the date is February 19, 2002) F - 1
MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. COMBINED BALANCE SHEETS DECEMBER 31, 2001 AND 2000 ASSETS 2001 2000 ----------- ----------- CURRENT ASSETS Cash $ 8,215 $ 23,779 Accounts Receivable, Trade, Net of Allowance for Uncollectible Accounts of $2,312 in 2001 55,125 -- Inventories, Net of Allowance for Obsolescence of $25,000 in 2001 109,996 -- Prepaid Consulting Fees 187,793 -- ----------- ----------- TOTAL CURRENT ASSETS 361,129 23,779 ----------- ----------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 561,469 21,703 Less Accumulated Depreciation (122,899) (845) ----------- ----------- NET EQUIPMENT AND LEASEHOLD IMPROVEMENTS 438,570 20,858 ----------- ----------- OTHER ASSETS Deposits 60,603 5,861 Software Cost, Net of Amortization of $1,718 and $195 2,851 4,374 Prepaid Consulting Fees - Non Current - Note 10 375,587 -- ----------- ----------- TOTAL OTHER ASSETS 439,041 10,235 ----------- ----------- TOTAL ASSETS $ 1,238,740 $ 54,872 =========== ===========
The accompanying notes are an integral part of these combined financial statements F - 2
MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. COMBINED BALANCE SHEETS (CONTINUED) DECEMBER 31, 2001 AND 2000 2001 2000 ----------- ----------- CURRENT LIABILITIES Cash Overdrafts $ 34,613 $ -- Current Portion of Capital Lease Obligations 118,828 -- Revolving Credit Card Balances 34,651 21,545 Accounts Payable 487,050 10,071 Accrued Expenses 265,742 23,823 Advances From RTIN Holdings, Inc. 112,263 -- ----------- ----------- TOTAL CURRENT LIABILITIES 1,053,147 55,439 ----------- ----------- DEFERRED LIABILITIES 10,668 1,821 CAPITALIZED LEASE OBLIGATIONS, Less Current Portion 198,506 -- ----------- ----------- TOTAL LIABILITIES 1,262,321 57,260 ----------- ----------- STOCKHOLDERS' DEFICIT Members Deficit -- (2,388) Common Stock, No Par Value, 1,100 Shares Authorized, Issued and Outstanding in 2001 116,327 -- Additional Paid-In Capital 1,617,860 -- Retained Deficit (1,757,768) -- ----------- ----------- TOTAL STOCKHOLDERS' DEFICIT (23,581) (2,388) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,238,740 $ 54,872 =========== ===========
The accompanying notes are an integral part of these combined financial statements F - 3 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000 2001 2000 ----------- ----------- PHARMACY SALES $ 921,403 $ -- COSTS OF DRUGS 696,162 -- ----------- ----------- GROSS PROFIT 225,241 -- ----------- ----------- COSTS AND EXPENSES Employee Compensation 1,100,303 48,488 General and Administrative 783,077 111,319 Depreciation and Amortization 123,577 1,040 Research and Development 106,376 53,484 ----------- ----------- TOTAL COSTS AND EXPENSES 2,113,333 214,331 ----------- ----------- NON-OPERATING INCOME (EXPENSE): Interest Expense (78,613) (529) Income Tax Expense - Note 7 -- -- ----------- ----------- NET LOSS $(1,966,705) $ (214,860) =========== =========== The accompanying notes are an integral part of these combined financial statements F - 4
MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000 Common Stock Additional ------------------------- Paid-In Retained Members' Shares Amount Capital (Deficit) (Deficit) Total ----------- ----------- ----------- ----------- ----------- ----------- Balance, April 18, 2000 -- $ -- $ -- $ -- $ -- $ -- Members Contributions - Cash -- -- -- -- 317,474 317,474 Members Contributions - Non Cash -- -- -- -- 7,000 7,000 Members Withdrawals -- -- -- -- (112,002) (112,002) Net Loss -- -- -- -- (214,860) (214,860) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2000 -- -- -- -- (2,388) (2,388) Members' Contribution - Cash -- -- -- -- 290,975 290,975 Members' Contribution - Non Cash -- -- -- -- 84,177 84,177 Members' Withdrawals -- -- -- -- (47,500) (47,500) Formation of Corporations Issuance of 1,100 Shares of No Par Value Common Stock and Merger of LLC's Into Corporations 1,100 116,327 -- -- (116,327) -- Former Stockholders' Cash Contributions -- -- 464,232 -- -- 464,232 Former Stockholders' Non Cash Contributions -- -- 193,743 -- -- 193,743 Cash Contributions Made By RTIN -- -- 396,505 -- -- 396,505 Contribution of 140,485 Shares Of RTIN Common Stock by RTIN -- -- 563,380 -- -- 563,380 Net Loss -- -- -- (1,757,768) (208,937) (1,966,705) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2001 1,100 $ 116,327 $ 1,617,860 $(1,757,768) $ -- $ (23,581) =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these combined financial statements F - 5
MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. COMBINED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net (Loss) $(1,966,705) $ (214,860) Adjustments to Reconcile Net Loss to Net Cash From Operating Activities Depreciation and Amortization 123,577 1,040 Increase In Allowance for Doubtful Accounts Receivable 2,312 -- Increase In Allowance for Obsolete Inventory 25,000 -- Write Off of Contributed Software 20,000 -- Changes in Operating Assets and Liabilities Increase in Accounts Receivable (57,437) -- Increase in Inventory (134,996) -- Deposits (54,742) (5,861) Change in Cash Overdrafts 34,613 -- Increase in Accounts Payable 476,979 10,071 Increase in Deferred Revenue 8,847 1,821 Increase in Accrued Liabilities 241,919 23,823 ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (1,280,633) (183,966) ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES Purchase of Leasehold Improvements (19,275) (9,570) Purchase of Equipment (46,465) (5,133) Purchase of Computer Software -- (4,569) Sale of Contributed Computer Equipment 173,413 -- ----------- ----------- NET CASH FROM (USED) IN INVESTING ACTIVITIES 107,673 (19,272) ----------- ----------- CASH FLOW FROM FINANCING ACTIVITIES Capital Contributions From Members 290,975 317,474 Withdrawals Made by Members (47,500) (112,002) Capital Contributions From Stockholders 860,737 -- Advances From Stockholders 143,532 -- Repayment of Advances From Stockholders (143,532) -- Advances From RTIN Holdings, Inc. 112,263 -- Borrowings Under Revolving Credit Card Accounts 24,152 24,352 Payments Made Under Revolving Credit Card Accounts (11,046) (2,807) Payments Made Under Capital Lease Obligations (72,185) -- ----------- ----------- NET CASH FLOWS FROM FINANCING ACTIVITIES 1,157,396 227,017 ----------- -----------
(Continued) The accompanying notes are an integral part of these combined financial statements F - 6 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. COMBINED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000 2001 2000 --------- --------- NET INCREASE (DECREASE) IN CASH $ (15,564) $ 23,779 CASH AT BEGINNING OF YEAR 23,779 -- --------- --------- CASH AT END OF YEAR $ 8,215 $ 23,779 ========= ========= SUPPLEMENTAL DISCLOSURE OFCASH FLOW INFORMATION Cash Paid During the Period For: Interest $ 257 $ 529 ========= ========= Income Taxes $ -- $ -- ========= ========= NON-CASH INVESTING AND FINANCING TRANSACTIONS Marketable Securities Received From RTIN $ 563,380 $ -- Increase in Equity From Prepaid Consulting Agreement (563,380) -- Equipment Acquired Under Capital Leases (389,519) -- Increase In Capital Lease Obligations 389,519 -- Fixed Assets Contributed By Members (84,177) (7,000) Software Contributed By Members (20,000) -- Increase In Members Equity From Contributed Assets 104,177 7,000 Fixed Assets Contributed By Stockholders (173,743) -- Increase In Equity From Contributed Fixed Assets 173,743 -- --------- --------- $ -- $ -- ========= ========= The accompanying notes are an integral part of these combined financial statements F - 7 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS Business -------- Medex Systems, LLC ("Medex LLC") and Pegasus Pharmacy, LLC ("Pegasus LLC") were formed on April 18, 2000 and November 6, 2000, respectively by Mr. Solow and Ms. Rau to explore the possibilities of developing a pharmaceutical prescription writing system that would allow enrolled doctors to submit patient prescriptions to a pharmacy on a wireless and paperless basis. Such a system became a reality in early 2001 and on March 1, 2001, Medex Systems, Inc. ("Medex") and Pegasus Pharmacy, Inc. ("Pegasus") were formed by Mr. Solow and Ms. Rau ("Stockholders") for the purpose of merging with Medex LLC and Pegasus LLC. In March of 2001, Pegasus began filling prescriptions from doctors, which were submitted by facsimile or patient carry in. During 2001, Pegasus filled prescriptions from approximately 780 doctors. In July of 2001, Pegasus began accepting wireless prescriptions from doctors in the New Orleans, Louisiana area and at December 31, 2001, had ten doctors who regularly submit wireless prescriptions to Pegasus. The wireless prescriptions account for approximately fifty five percent (55%) of sales during 2001. On December 18, 2001, all of the issued and outstanding stock of Medex and Pegasus were acquired by RTIN Holdings, Inc., ("RTIN") a publicly traded company with headquarters in Longview, Texas. The accompanying combined financial statements include the accounts of Medex LLC, Medex, Pegasus LLC and Pegasus (collectively called "Company"), which are related through common ownership and management. All significant intercompany balances and transactions have been eliminated in the accompanying financial statement. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Instruments --------------------- Management believes that the fair value of the Company's financial instruments approximate their carrying value due to their short term nature. Cash and Equivalents -------------------- For financial reporting purposes, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Inventories ----------- All inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist of pharmaceutical drugs held for resale to the public. As of December 31, 2001, an allowance for obsolescence in the amount of $25,000 was established for inventory items on which the expiration date may expire before such items are sold. (Continued) F - 8
MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Leasehold Improvements ---------------------- Equipment and leasehold improvements are stated at cost. Maintenance and repairs are charged to expenses as incurred. Major betterments and improvements, which extend the useful life of the related items, are capitalized and depreciated. Depreciation is provided for over the estimated useful life of the asset using the straight-line method. Equipment and leasehold improvements consisted of the following: December 31, Useful Lives ---------------------------- ------------ 2001 2000 (Years) ------------ ------------ ------------ Computer Equipment Owned Under Capital Leases $ 389,518 $ -- 3 Furniture and Other Equipment 133,275 5,133 5 Leasehold Improvements 38,676 16,570 5-6 ------------ ------------ Total 561,469 21,703 Accumulated Depreciation (122,899) (845) ------------ ------------ Equipment and Leasehold Improvements, Net $ 438,570 $ 20,858 ============ ============
Computer Software Cost ---------------------- The cost for computer software acquired is being amortized over three years. Amortization expense was $1,523 and $195 for the years ended December 31, 2001 and 2000, respectively. Accounting for Long-Lived Assets -------------------------------- The Company evaluates long-lived assets and certain identifiable intangibles, to be held and used in the business, for impairment whenever events and changes in circumstances indicate that the carrying amount of an asset may be impaired. In these circumstances, the estimated future undiscounted cash flows associated with the asset are compared with the asset's carrying value to determine if a write down to market value or discounted cash flow is required. Revenue Recognition ------------------- Sales and related costs are recognized by the Company upon the filling of the prescriptions at Pegasus. (Continued) F - 9 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Advertising Costs ----------------- All advertising and promotional costs are expensed when incurred. The Company incurred approximately $5,450 in marketing and advertising costs in 2001. Comprehensive Income -------------------- As of December 31, 2001 and 2000, the Company had no items that represented other comprehensive income and, therefore has not included a schedule of comprehensive income in the financial statements. Income Taxes ------------ The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting basis and the tax basis of assets and liabilities, and are measured using enacted tax rates and laws which will be in effect when the differences are expected to reverse. An allowance is recorded when it is more likely than not that any or all of the deferred tax asset will not be recognized. The provision for income taxes includes taxes currently payable plus the net change during the accounting period in deferred tax assets and liabilities recorded by the Company. Per Share Data -------------- Per share data is not shown because the Company is a private company. Use of Estimates ---------------- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and disclosures of contingent assets and liabilities. Actual results could differ from those estimates. (Continued) F - 10 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Concentration of Credit Risk ---------------------------- The Company places its cash in what it believes to be credit-worthy financial institutions. Cash balances may exceed FDIC insured levels at times during the year. As of December 31, 2001, no balance exceeded the FDIC insured limits. Included in accounts receivable at December 31, 2001, is $52,213 of accounts receivable from insurance companies for prescriptions filled. No significant amount is due from one insurance carrier and management believes the balances are fully collectible. The Company generally collects any co-payments due from customers before prescriptions are released. The Company acquired the majority of its drug inventory from three suppliers during the year ended December 31, 2001. In November 2001, the Company made a concentrated effort to acquire its drug inventory from Mckesson Drug Co. ("McKesson") and $50,000 was deposited with Mckesson to secure inventory shipments. NOTE 3: NOTE PAYABLE The note payable at December 31, 2001, consists of $112,263 of advances under an intercompany loan agreement with RTIN. The loan is due on demand, is unsecured and bears interest at the rate of six percent (6%) per annum from December 31, 2001. NOTE 4: ACCRUED EXPENSES Accrued expenses at December 31, 2001 and 2000 are as follows: 2001 2000 -------- -------- Accrued Payroll $131,238 $ 8,600 Accrued Vacation 31,539 -- Accrued General Expenses 74,584 15,223 Accrued Interest 16,899 -- Sales Taxes Liability 11,482 -- -------- -------- $265,742 $ 23,823 ======== ======== F - 11 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 5: OPERATING LEASES The Company leases building space for its home office and the pharmacy under non-cancelable operating lease agreements having terms that expire at various dates through fiscal year 2006. The Company has options to renew the leases upon expiration for the periods ranging from five to ten years. Total rental expense for operating leases amounted to approximately $133,000 and $38,500 in 2001 and 2000, respectively. The Company also pays real estate taxes, insurance and maintenance expenses associated with these leases. Future minimum lease commitments and rentals at December 31, 2001, under operating leases having an initial or remaining non-cancelable term of one year or more are: Years Ended December 31, Lease Commitments ------------------------ ----------------- 2002 $ 91,234 2003 93,485 2004 83,653 2005 81,991 2006 62,867 --------- Total $ 413,230 ========= NOTE 6: CAPITAL LEASE OBLIGATIONS On February 13, 2001, Medex entered into a master lease agreement with an equipment leasing company. Mr. Solow contributed computer equipment to the Company valued at $173,413. This computer equipment was immediately sold to the leasing company for $173,413. No gain or loss was recognized on the sale of this computer equipment to the leasing company. Under the terms of the lease agreement, Medex leases the equipment sold to the leasing company plus other equipment purchased directly by the leasing company at the request of Medex. Obligations under capital leases have been recorded in the accompanying financial statements at the present value of future minimum lease payments, discounted at twenty and one half percent (20.5%). The capitalized cost and accumulated depreciation of this equipment at December 31, 2001 was $389,519 and $92,195, respectively. (Continued) F - 12 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 6: CAPITAL LEASE OBLIGATIONS (CONTINUED) Future minimum payments under capital leases and the asset purchase agreement are as follows: Year Ending December 31, ------------ 2002 $ 172,101 2003 172,101 2004 51,709 2005 4,109 2006 342 --------- Total 400,362 Less Amount Representing Interest (83,028) --------- Present Value of Net Minimum Lease Payments 317,334 Less Current Portion (118,828) --------- Amounts Due After One Year $ 198,506 ========= NOTE 7: INCOME TAXES Through February 28, 2001, Medex LLC and Pegasus LLC were taxed as partnerships for federal and state income tax purposes. The Company is not entitled to any tax benefits from the operating losses generated through February 28, 2001, as any losses will be included in the tax returns of the individual members. The following is a reconciliation of income tax benefit to the expected tax rate of thirty four (34) percent for the year ended December 31, 2001: Loss From Operations $ 1,966,705 =========== Tax Benefit at Statutory Rate (34%) (668,680) Loss Attributed To Partners 71,039 Change In Valuation Allowance 597,641 ----------- TOTAL TAX BENEFIT $ -- =========== (Continued) F - 13 29 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 7: INCOME TAXES (CONTINUED) The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are as follows as of December 31, 2001: Property and Equipment Depreciation $ 8,542 Deferred Rent Revenue 3,627 Net Operating Loss 585,472 --------- Total Deferred Tax Assets 597,641 Valuation Allowance For Deferred Tax Assets (597,641) --------- NET DEFERRED TAX ASSETS $ -- ========= At December 31, 2001, the Company had net operating losses generated subsequent to February 28, 2001, available to offset future taxable income of approximately $1,721,975, which begin to expire in 2021. F - 14 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 8: EMPLOYMENT AGREEMENTS On December 18, 2001, the Company entered into executive employment agreements with Laurence Solow (Medex's Chief Executive Officer and 67.7% owner of both Medex and Pegasus) and Ann Rau (Pegasus' Chief Executive Officer and 33.3% owner of both Medex and Pegasus). The employment agreements provide for an initial term of two years with automatic extensions of one year periods unless notice of non-extension is given by either party 30 days before expiration. Under the agreements, each executive officer is entitled to a base salary of $200,000, plus 1.5% of the adjusted net profits of Medex and Pegasus, as defined, plus automobile allowances and life and health insurance coverage. The executives are also entitled to options to acquire a total of 125,000 shares each of RTIN's post split common stock at $4.00 per share. The options are exercisable, 40,000 shares each on December 18, 2002, 40,000 shares each on December 18, 2003 and 45,000 shares each on December 31, 2004, if still employed by the Company on the exercise dates. NOTE 9: RELATED PARTY TRANSACTIONS During the year ended December 31, 2000, Mr. Solow contributed cash in the amount of $317,474 and leasehold improvements in the amount of $7,000 to the Company, and withdrew $112,002 in cash from the Company. During the year ended December 31, 2001, Mr. Solow contributed cash in the amount of $898,754 and withdrew $191,032 in cash from the Company. In addition, Mr. Solow contributed furniture, computer software and computer equipment to the Company. Computer equipment in the amount of $173,413, contributed by Mr. Solow, was immediately sold to a leasing company and leased back to the Company. The value assigned to the contributed equipment was $173,413, which is the same as the sales price received from the leasing company. No gain or loss was recognized on the sale of these assets to the leasing company. Furniture valued at $84,177 and computer software valued at $20,000 were contributed by Mr. Solow. During the year ended December 31, 2000, Medex applied for and received a Visa revolving credit card from Whitney National Bank of New Orleans, Louisiana, which had an outstanding balance of $21,545 as of December 31, 2000. For the period of January 1, 2001 through May 28, 2001 additional charges in the amount of $16,721 and payments in the amount of $9,315 were made on the account leaving a balance of $28,920 as of May 28, 2001. Since that time no statements have been received by the Company. This account, along with other matters, is the subject of a dispute between Mr. Solow and Whitney Bank. (Continued) F - 15 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 9: RELATED PARTY TRANSACTIONS (CONTINUED) Prior to November 8, 2001, RTIN had loaned to Medex and Pegasus a total of $265,000 under the terms of certain capital notes called "Bridge Loans" which were secured by one hundred percent of the issued and outstanding capital stock of Medex and Pegasus and bore interest at eighteen percent (18%) per annum. On November 8, 2001, RTIN, Medex, Pegasus, and the shareholders of Medex and Pegasus, entered into a letter agreement which (a) acknowledged the Bridge Loans, (b) granted RTIN an option to purchase 100% of Medex and Pegasus until December 18, 2001, for the issuance by RTIN of $25,000,000 worth of post reverse split common stock of RTIN. On December 5, 2001, RTIN, Medex, Pegasus, Mr. Solow and Ms. Rau entered into a Stock Purchase agreement ("Agreement"). The Agreement provided (a) that RTIN would issue 3,521,127 shares of its post split common stock to Mr. Solow, Ms. Rau or their designees, (b) at closing, the Bridge Loans in the amount of $265,000, plus accrued interest in the amount of $6,505 would be canceled and such amounts would be contributed by RTIN to Medex and Pegasus as capital contributions, (c) RTIN would make additional paid in capital contributions of $328,495 ($38,580 per week for 10 weeks) to Medex and Pegasus, (d) RTIN would loan Medex and Pegasus an additional $500,000 ($350,000 on December 18, 2001 and $ 15,000 a week for ten weeks) under the terms of a loan agreement which provides for interest at six percent (6%) per annum and (e) provided that if RTIN in its sole discretion, elects not to or fails to fulfill its funding obligations, Mr. Solow may elect to rescind the purchase transaction. In the event of rescission, Medex and Pegasus will retain any capital contributions ($396,490) at December 31, 2001 from RTIN as liquidated damages, but not the loans in the amount of $112,263 at December 31, 2001. On December 18, 2001, all of the issued and outstanding stock of Medex and Pegasus were acquired by RTIN under the terms of the agreement. In connection with the acquisition of Medex and Pegasus by RTIN, Pegasus is required to designate fifty two percent of its cash collections for the sole purpose of funding pharmaceutical payments to drug wholesalers. NOTE 10: COMMITMENTS AND CONTINGENCIES Under the terms of the consulting agreement the Company agreed to assist Mr. Stolier in making his quarterly tax payments by either (a) purchasing from Mr. Stolier a sufficient number of shares to meet his quartherly tax payments at the greater of the $3.50 per share or the current market price per share on the date of acquisition by the Company or (b) registering such shares so that Mr. Stolier can sell the shares in the open market. In connection with the acquisition by RTIN of the Company, RTIN issued 140,845 shares of its post split common stock to Mr. Jack Stolier in exchange for consulting services to be provided by Mr. Stolier to Medex. The consulting agreement covers services to be rendered between January 1, 2002 and through December 31, 2004. The value of the 140,845 shares ($563,380) is carried as prepaid consulting fees at December 31, 2001 and will be amortized to be expense over the three years beginning January 1, 2002. During March of 2001, Pegasus ordered and received from Bergen Brunswig Drug Company ("Bergen") $250,136 of prescription drug merchandise. Payment for the merchandise has not been made as of December 31, 2001. On September 24, 2001, Bergen filed suit against Medex, Pegasus and Mr. Solow for payment, together with interest at eighteen percent, costs of collection and reasonable attorney's fees. F - 16 MEDEX SYSTEMS, INC PEGASUS PHARMACY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 AND 2000 NOTE 11: GOING CONCERN The Company's financial statements have been prepared on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has experienced significant operating losses since its inception on April 18, 2000. The continuance of such losses creates an uncertainty as to the Company's ability to continue as a going concern. From inception through March of 2001, the Company was in the development stage and had no revenue. Beginning in March of 2001, the Company began having revenue from the sales of pharmaceutical prescription drugs but the Company continued to recognize losses as it attempted to build sales of pharmaceutical drugs. In October 2001, management knew that it must raise additional working capital, and began working with RTIN to raise working capital. As of December 31, 2001, RTIN has infused $508,753 of cash into the Company, but that was not enough to guarantee success of the Company. RTIN, which does not have additional cash to support the Company's losses until operations turn positive cash flow, is in the process of trying to raise additional capital. RTIN has several prospects for raising capital, but such funds have not come about as of the date of this report. The ability of the Company to continue as a going concern is dependent on RTIN's ability to raise additional capital until the Company's operations turn positive. The financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amounts of liabilities that may be necessary, should the Company be unable to continue as a going concern. NOTE 12: SUBSEQUENT EVENT RTIN has made $911,297 of the capital contributions and loans to Medex and Pegasus through February 19, 2002, but has not made the funding in accordance with the terms of the Stock Purchase Agreement mentioned in Note 9. On February 6, 2002, RTIN and the Stockholders entered into a Registration Rights Agreement whereby the Stockholders granted RTIN until February 28, 2002, to complete its funding obligations under the terms of the Stock Purchase Agreement in exchange for RTIN granting to the Stockholders the right to demand registration by RTIN at RTIN's expense of up to ten percent (10%) of the registrable securities held by the Stockholders at any time after February 6, 2002, and the right to demand registration of the remaining registrable securities held by the Stockholders after January 1, 2003. F - 17 RTIN HOLDINGS, INC. PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (Unaudited) On December 18, 2001, RTIN Holdings, Inc. ("RTIN") acquired all of the outstanding stock of Medex Systems, Inc. ("Medex") and Pegasus Pharmacy, Inc. ("Pegasus") in exchange for issuing 3,521,127 shares of RTIN's post reverse split common stock valued at $4.00 per share. The acquisition of Medex and Pegasus will be accounted for as purchases whereby, the basis for accounting for Medex and Pegasus will be based upon their fair market value at the date of acquisition. The unaudited Pro Forma Combined Condensed Statements of Operations (Pro Forma Statements of Operations) for the years ended December 31, 2000 and 2001, gives pro forma effect to the acquisition of Medex and Pegasus as if they had occurred on April 18, 2000 (their inception). The Pro Forma Statements of Operations are based on the historical results of operations of RTIN, Medex and Pegasus. The unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 2001, (Pro Forma Balance Sheet) gives pro forma effect to the acquisition of Medex and Pegasus as if it had occurred on December 31, 2001. The Pro Forma Statement of Operations, the Pro Forma Balance Sheet and the accompanying notes (Pro Forma Financial Information) should be read in conjunction with and are qualified by historical financial statements of RTIN and notes thereto, and the historical financial statements of Medex and Pegasus and the notes thereto appearing elsewhere herein. The Pro Forma Information is intended for informational purposes only and is not necessarily indicative of the future financial position or results of operations of RTIN after the acquisition of Medex and Pegasus, or the financial position or results of operations of RTIN that would have actually occurred had the acquisition of Medex and Pegasus been effected on the date of the periods presented. F - 18
RTIN HOLDINGS, INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET DECEMBER 31, 2001 (UNAUDITED) Medex and Pro Forma Pro Forma RTIN Pegasus Adjustments Total ------------ ------------ ------------ ------------ CURRENT ASSETS Cash $ 8,356 $ 8,215 $ -- $ 16,571 Accounts Receivable, Net -- 55,125 -- 55,125 Inventories, Net 6,504 109,996 -- 116,500 -- 187,793 -- 187,793 ------------ ------------ ------------ ------------ TOTAL CURRENT ASSETS 14,860 361,129 -- 375,989 ------------ ------------ ------------ ------------ EQUIPMENT AND LEASEHOLD IMPROVEMENTS, At Cost 3,250,123 561,469 (122,899)(E) 3,688,693 Less Accumulated Depreciation (875,496) (122,899) 122,899 (E) (875,496) ------------ ------------ ------------ ------------ NET EQUIPMENT AND LEASEHOLD IMPROVEMENTS 2,374,627 438,570 -- 2,813,197 ------------ ------------ ------------ ------------ OTHER ASSETS Prepaid Expenses -- 375,587 -- 375,587 Deposits -- 60,603 -- 60,603 Software Cost, Net -- 2,851 -- 2,851 Goodwill -- 14,504,579 (A) 14,504,579 Investment in Medex 14,593,261 -- (14,084,508)(B) -- -- -- (112,263)(C) -- -- -- (396,490)(D) -- ------------ ------------ ------------ ------------ TOTAL OTHER ASSETS 14,593,261 439,041 (88,682) 14,943,620 ------------ ------------ ------------ ------------ TOTAL ASSETS $ 16,982,748 $ 1,238,740 $ (88,682) $ 18,132,806 ============ ============ ============ ============
F - 19
RTIN HOLDINGS, INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET DECEMBER 31, 2001 (UNAUDITED) Medex and Pro Forma Pro Forma RTIN Pegasus Adjustments Total ------------ ------------ ------------ ------------ Cash Overdrafts $ 14,539 $ 34,613 $ -- $ 49,152 Notes Payable 2,579,641 -- -- 2,579,641 Convertible Debentures 1,996,301 -- -- 1,996,301 Accounts Payable 295,292 487,050 -- 782,342 Current Portion of Capital Lease Obligations -- 118,828 -- 118,828 Revolving Credit Card Balances -- 34,651 -- 34,651 Accrued Expenses 1,501,165 265,742 -- 1,766,907 Advances From RTIN Holdings, Inc. -- 112,263 (112,263)(C) -- ------------ ------------ ------------ ------------ TOTAL CURRENT LIABILITIES 6,386,938 1,053,147 (112,263) 7,327,822 ------------ ------------ ------------ ------------ DEFERRED LIABILITIES 48,958 10,668 -- 59,626 CAPITALIZED LEASE OBLIGATIONS - Less Current Portion -- 198,506 -- 198,506 TOTAL LIABILITIES 6,435,896 1,262,321 (112,263) 7,585,954 ------------ ------------ ------------ ------------ STOCKHOLDERS' EQUITY (DEFICIT) Common Stock 44,002 116,327 (116,327)(B) 44,002 Additional Paid-In-Capital 27,296,134 1,617,860 14,504,579 (A) -- -- -- (396,490)(D) -- -- -- (15,725,949)(B) 27,296,134 Retained Deficit (16,019,828) (1,757,768) 1,757,768 (B) (16,019,828) Treasury Stock (773,456) -- -- (773,456) ------------ ------------ ------------ ------------ TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 10,546,852 (23,581) 23,581 10,546,852 ------------ ------------ ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 16,982,748 $ 1,238,740 $ (88,682) $ 18,132,806 ============ ============ ============ ============
F - 20 RTIN HOLDINGS, INC. NOTES TO THE PRO FORMA BALANCE SHEET DECEMBER 31, 2001 (UNAUDITED) (A) Records the goodwill generated upon the acquisition by RTIN of Medex and Pegasus. RTIN issued 3,521,127 shares of its post reverse split common stock for Medex and Pegasus (3,521,127 at $4.00 (market value on December 18, 2001) equals) $14,084,508 Cash capital contributions made to Medex and Pegasus before acquisition 396,490 Negative net book value of Medex and Pegasus on December 31, 2001 23,581 Net goodwill acquired $14,504,579 (B) Eliminates RTIN's investment in Medex and Pegasus against Medex's and Pegasus's capital accounts. (C) Eliminates advances made by RTIN to Medex and Pegasus, which are carried as a receivable by RTIN and as a payable by Medex and Pegasus. (D) Eliminates advances made by RTIN to Medex and Pegasus, which were recorded as capital contributions by Medex and Pegasus. (E) Eliminates the accumulated depreciation of Medex's and Pegasus's against the cost basis of the assets on the date of acquisition since the fair market value of the assets approximates their net book value. F - 21
RTIN HOLDINGS, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 (UNAUDITED) Medex and Pro Forma Pro Forma RTIN Pegasus Adjustments Total ----------- ----------- ----------- ----------- REVENUES Restaurant Sales $ 1,502,139 $ -- $ -- $ 1,502,139 Rental Income 312,912 -- -- 312,912 Pharmacy Sales -- 921,403 -- 921,403 ----------- ----------- ----------- ----------- TOTAL REVENUES 1,815,051 921,403 -- 2,736,454 ----------- ----------- ----------- ----------- OPERATING COSTS AND EXPENSES Cost of Sales 1,315,671 696,162 -- 2,011,833 General and Administrative Expenses 1,345,145 1,883,380 -- 3,228,525 Depreciation and Amortization 310,361 123,577 -- 433,938 Research and Development -- 106,376 -- 106,376 Impairment of Assets 80,000 -- -- 80,000 ----------- ----------- ----------- ----------- TOTAL OPERATING COST AND EXPENSES 3,051,177 2,809,495 -- 5,860,672 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS ----------- (1,236,126) (1,888,092) -- (3,124,218) ----------- ----------- ----------- ----------- NON-OPERATING INCOME AND (EXPENSES) Interest (Expense) (900,520) (78,613) 6,505(A) (972,628) Interest Income 6,505 -- (6,505)(A) -- Loss on Foreclosure of Restaurant Building (119,483) -- -- (119,483) Gain on Sale of Assets 105,823 -- -- 105,823 ----------- ----------- ----------- ----------- TOTAL NON-OPERATING INCOME AND EXPENSES (907,675) (78,613) -- (986,288) ----------- ----------- ----------- ----------- LOSS BEFORE INCOME TAXES (2,143,801) (1,966,705) -- (4,110,506) INCOME TAXES -- -- -- -- ----------- ----------- ----------- ----------- NET LOSS $(2,143,801) $(1,966,705) $ -- $(4,110,506) =========== =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (B) 718,969 3,521,127 4,240,096 =========== =========== =========== LOSS PER COMMON SHARE $ (2.98) $ (0.56) $ (0.97) =========== =========== ===========
F - 22
RTIN HOLDINGS, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 (UNAUDITED) Medex and Pro Forma Pro Forma RTIN Pegasus Adjustments Total ----------- ----------- ------------- ----------- REVENUES Restaurant Sales $ 5,072,079 $ -- $ -- $ 5,072,079 Rental Income 284,218 -- -- 284,218 ----------- ----------- ------------- ----------- TOTAL REVENUES 5,356,297 -- -- 5,356,297 ----------- ----------- ------------- ----------- OPERATING COSTS AND EXPENSES Cost of Sales 5,168,719 -- -- 5,168,719 General and Administrative Expenses 909,365 159,807 -- 1,069,172 Depreciation and Amortization 390,942 1,040 -- 391,982 Research and Development -- 53,484 -- 53,484 Impairment of Assets 301,431 -- -- 301,431 ----------- ----------- ------------- ----------- ----------- TOTAL OPERATING COST AND EXPENSES 6,770,457 214,331 -- 6,984,788 ----------- ----------- ------------- ----------- LOSS FROM OPERATIONS (1,414,160) (214,331) -- (1,628,491) ----------- ----------- ------------- ----------- NON-OPERATING INCOME AND (EXPENSES) Interest (1,015,481) (529) -- (1,016,010) Loss on Foreclosure of Restaurant Building (557,363) -- -- (557,363) Loss on Abandonment of Fat Burger Acquisition (4,156,632) -- -- (4,156,632) Loss on Foreclosure of Corporate Building (1,286,155) -- -- (1,286,155) Loss on RSI Acquisition (1,269,043) -- -- (1,269,043) Gain on Sale of Assets 100,268 -- -- 100,268 ----------- ----------- ------------- ----------- TOTAL NON-OPERATING INCOME AND EXPENSES (8,184,406) (529) -- (8,184,935) ----------- ----------- ------------- ----------- LOSS BEFORE INCOME TAXES (9,598,566) (214,860) -- (9,813,426) INCOME TAXES -- -- -- -- ----------- ----------- ------------- ----------- NET LOSS $(9,598,566) $ (214,860) $ -- $(9,813,426) =========== =========== ============= =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (B) 281,303 2,479,259 2,760,562 =========== ============= =========== LOSS PER COMMON SHARE $ (34.12) $ (.09) $ (3.55) =========== ============= ===========
F - 23
RTIN HOLDINGS, INC. NOTES TO THE PRO FORMA STATEMENT OF OPERATIONS DECEMBER 31, 2001 AND 2000 (UNAUDITED) (A) Eliminates intercompany interest income and expense between RTIN and Medex and Pegasus. (B) The following is a summary of shares on a pro forma basis: 2001 2000 ---------- ---------- Weighted Average Shares Outstanding 35,948,442 14,065,163 The Effect of a 50 to 1 Reverse Stock Split Effected December 16, 2001 /50 /50 ---------- ---------- Shares Outstanding After Reverse Stock Split 718,969 281,303 Issuance of 3,521,127 Shares In Acquisition of Medex and Pegasus (Shares Outstanding Since April 18, 2000, 257 Out of 365 Days in 2000) 3,521,127 2,479,259 ---------- ---------- Weighted Average Shares Outstanding After Reverse Split 4,240,096 2,760,562 ========== ==========
F - 24 30 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 hereto duly authorized. RTIN HOLDINGS, INC. Date: By: /s/ Curtis A. Swanson ---------------------- ---------------------------- Curtis A. Swanson, President EXHIBIT INDEX 2.1 Stock Purchase Agreement by and among Restaurant Teams International, Inc., MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow and Ann E. Rau, dated as of December 6, 2001. EX-2.1 3 rtin8kaex21120501.txt STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT By and Among RESTAURANT TEAMS INTERNATIONAL, INC., MEDEX SYSTEMS, INC., PEGASUS PHARMACY, INC., LAURENCE SOLOW, and ANN E. RAU Dated as of December 6, 2001 THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of December 6, 2001, by and among RESTAURANT TEAMS INTERNATIONAL, INC., a Texas corporation ("Buyer") and MEDEX SYSTEMS, INC., a Louisiana corporation ("MedEx"), PEGASUS PHARMACY, INC., a Louisiana corporation ("Pegasus"), LAURENCE SOLOW, a resident of Louisiana ("Mr. Solow"), and ANN E. RAU, a resident of Louisiana ("Ms. Rau"). Mr. Solow and Ms. Rau, collectively, are sometimes referred to herein as the "Founders." MedEx, Pegasus and the Founders, collectively, are sometimes referred to herein as the "Sellers." A G R E E M E N T ----------------- The parties, intending to be legally bound, agree as follows: ARTICLE 1 REFERENCES; DEFINITIONS 1.1 REFERENCES All references in this Agreement to "Articles," "Sections," "Schedules" or "Exhibits" shall be deemed to refer to articles, sections, schedules or exhibits, as applicable, of this Agreement unless otherwise provided herein. Capitalized terms used in this Agreement shall have the meanings set forth in Section 1.2 unless otherwise defined herein in this Agreement. 1.2 DEFINITIONS For purposes of this Agreement and all Schedules and Exhibits thereto, the following terms shall have the meanings specified or referred to in this Section 1.2: (a) "Accounts Receivable" shall mean all accounts and notes receivable of the designated Acquired Company. (b) "Acquired Company" shall mean either MedEx or Pegasus, which may be collectively referred to as the "Acquired Companies." (c) "Best Knowledge" shall mean those facts that are actually known by the person making the representation. (d) "Closing" shall have the meaning ascribed thereto in Section 2.4. 2 (e) "Damages" shall mean all expenses, claims, losses, damages, obligations and liabilities, including any of the foregoing incurred in settlement of any litigation. (f) "Employee Benefit Plan" shall have the meaning ascribed thereto in Section 3.9. (g) "Financial Statements" shall mean the unaudited statements of income for the ten-month period ended October 31, 2001 and the financial projections of the Acquired Companies attached hereto in Schedule 3.6. (h) "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with the Financial Statements. (i) "Indemnified Party" shall mean any person entitled to indemnification pursuant to Section 6.1. (j) "Indemnifying Party" shall mean any person required to indemnify another person pursuant to Section 6.1. (k) "Letter Agreement" shall mean that certain Letter Agreement, entered into by and between the Buyer and Sellers, dated November 8, 2001, including all addenda and documents ancillary thereto. (l) "Liens" shall mean all liens, pledges, mortgages, security interests, claims, covenants, or other such encumbrances or restrictions of any kind. (m) "MedEx Stock" shall mean all of the issued and outstanding capital stock of MedEx. (n) "Pegasus Stock" shall mean all of the issued and outstanding capital stock of Pegasus. (o) "Proprietary Rights" shall mean (i) all trademarks, tradenames, service marks and other trade designations, including common law rights, registrations and applications therefor, (ii) all patents, copyrights and applications currently owned, in whole or in part, by an Acquired Company with respect to its business, (iii) all licenses, royalties, assignments and other similar agreements relating to the foregoing to which an Acquired Company is a party and (iv) all agreements relating to technology, know-how or processes that an Acquired Company is licensed or authorized to use by others or that it licenses or authorizes others to use. (p) "Purchase Price" shall have the meaning ascribed in Section 2.2. (q) "RTIN Common Stock" shall mean the common stock of Buyer, par value of $0.01 per share, after the effective date of the Split. (r) "Securities Act" shall mean the Securities Act of 1933, as amended. 3 (s) "Split" shall mean the 50 for 1 reverse stock split of RTIN Common Stock, which shall occur on or before December 21, 2001. (t) "Transfer Agent" shall mean Buyer's appointed stock transfer agent and registrar. ARTICLE 2 SALE AND TRANSFER OF SHARES; CLOSING 2.1 SHARES Subject to the terms and conditions of this Agreement, at the Closing, the Founders will sell, convey and transfer the MedEx Stock and the Pegasus Stock and deliver to Buyer certificates representing such stock, and the Buyer shall purchase from the Founders all of the MedEx Stock and all of the Pegasus Stock in consideration of the Purchase Price set forth in Section 2.2 of this Agreement. The certificates representing the MedEx Stock and the Pegasus Stock shall be duly endorsed for transfer. 2.2 PURCHASE PRICE The Purchase Price for the MedEx Stock and the Pegasus Stock shall be, in the aggregate, 3,521,127 shares of RTIN Common Stock, following the Split, which shall be issued at the Closing to Mr. Solow, Ms. Rau and their designees as follows: (a) 2,066,634 shares of RTIN Common Stock to Mr. Solow; (b) 1,103,287 shares of RTIN Common Stock to Ms. Rau; (c) 140,845 shares of RTIN Common Stock to [Jack Stolier]; (d) 105,634 shares of RTIN Common Stock to Threnody, L.L.C., a Nevada limited liability company; (e) 46,620 shares of RTIN Common Stock to Alan Katz; (f) 14,085 shares of RTIN Common Stock to Louis Rosen; (g) 14,085 shares of RTIN Common Stock to Trina Skoller; (h) 14,085 shares of RTIN Common Stock to Rod Solow; (i) 8,310 shares of RTIN Common Stock to Bob Richey; (j) 7,042 shares of RTIN Common Stock to Jason Parker; and (k) 500 shares of RTIN Common Stock to Anita Carbol. 4 2.3 DELIVERY UPON EXECUTION Upon the execution of this Agreement, Buyer shall deliver to its Transfer Agent an irrevocable letter, instructing the Transfer Agent to deliver such shares of RTIN Common Stock to Mr. Solow and Ms. Rau as set forth in Section 2.2 upon the Closing. 2.4 CLOSING The closing of the purchase of the MedEx Stock and Pegasus Stock by Buyer as provided for in this Agreement (the "Closing") shall take place at the offices of Sellers' counsel at Locke Liddell & Sapp LLP, 601 Poydras St., Suite 2400, New Orleans, Louisiana at 10:00 a.m., CST, on December 21, 2001 or at such other time as the parties may mutually agree. Subject to the provisions of Section 7.1, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.4 shall not result in the termination of this Agreement and shall not relieve any party of any obligation under this Agreement. 2.5 DELIVERIES AT CLOSING At the Closing: (a) Sellers will deliver to Buyer: (i) Employment Agreements, as set forth in Exhibit A and B executed by Mr. Solow and Ms. Rau, respectively; (ii) certificates representing the MedEx Stock and the Pegasus Stock, including the shares pledged to Buyer as security for the Bridge Loans, as defined in Section 5.1(b), which certificates shall be endorsed in favor of Buyer; (iii) certificates evidencing all necessary director and shareholder consents from the Acquired Companies; (iv) certified copies of the Articles of Incorporation and bylaws, including any amendments thereto, of each Acquired Company; (v) certificates of good standing for each Acquired Company from Louisiana and all other jurisdictions in which each Acquired Company conducts business; and (vi) a certificate executed by Sellers representing and warranting to Buyer that each of the Sellers' representations and warranties in Article 3 were accurate in all material respects as of the date of the Closing as if made on such date. 5 (b) Buyer will deliver to Founders: (i) certificates issued in the names of Mr. Solow, Ms. Rau and their designees representing shares of RTIN Common Stock in the amounts set forth in Section 2.2; (ii) certificates evidencing all necessary director and shareholder consents from the Buyer; (iii) certified copies of the Articles of Incorporation and bylaws, including any amendments thereto, of Buyer; (iv) certificates of good standing for Buyer from Texas and all other jurisdictions in which Buyer conducts business; and (v) a certificate executed by Buyer representing and warranting to Founders that each of the Buyer's representations and warranties in Article 4 were accurate in all material respects as of the date of the Closing as if made on such date. (c) Buyer will deliver to the Acquired Companies: (i) the promissory notes evidencing the Bridge Loans, as defined in Section 5.1(b), in partial satisfaction of its Required Capital Contribution as set forth and defined in Section 5.1(a). ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS 3.1 CORPORATE STATUS AND POWER Each Acquired Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana. The charter documents and the bylaws of each Acquired Company that have been delivered to Buyer as of the date hereof are effective under Louisiana law and are current, correct and complete. To the Best Knowledge of each Acquired Company and the Founders, each Acquired Company has all required corporate power and authority to (i) conduct its business as it is now being conducted, (ii) own or use the properties and assets that it purports to own or use, (iii) execute and deliver this Agreement and (iv) carry out the transactions contemplated by this Agreement. 6 3.2 GOVERNMENTAL AUTHORIZATIONS To the Best Knowledge of Sellers, except as described in Schedule 3.2, no approval, consent, exemption, authorization or other action by, or notice to, or filing with, any governmental authority is necessary or required in connection with the execution, delivery, performance or enforcement against the Acquired Companies or the Founders of this Agreement, or any other documents executed pursuant to this Agreement, except for federal and state securities filings, if any, which have been or will be timely filed in accordance with applicable law. The minute books of the Acquired Companies contain accurate and complete records of all meetings and other actions taken or authorized by the shareholders, directors or committees of the Acquired Companies. 3.3 AUTHORIZATION This Agreement and all of the documents executed pursuant to this Agreement are valid and binding obligations of each Founder and each Acquired Company, enforceable according to their terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other similar laws of general application relating to or affecting the enforcement of creditor rights, (ii) the availability of specific performance or other equitable remedies and (iii) with respect to any indemnification provisions set forth herein or therein, principles of public policy. All necessary shareholder and/or director consents to enter into this Agreement have been obtained. 3.4 CAPITALIZATION The authorized and issued capital stock of each Acquired Company and the names and ownership interests of the shareholders of each Acquired Company are as set forth in Schedule 3.4. All of the presently outstanding shares of capital stock of each Acquired Company (i) have been validly authorized and issued and (ii) are fully paid and nonassessable, free of all Liens, except restrictions on transfer imposed by applicable securities law and this Agreement. Except as disclosed in Schedule 3.4, the Acquired Companies have not issued any other shares of their capital stock, and there are no outstanding options, warrants, calls, commitments, subscriptions, agreements or other rights of any character (including conversion, redemption or preemptive rights) relating to the acquisition of any issued or unissued capital stock of either Acquired Company. No dividends are accrued but unpaid on any capital stock of either Acquired Company. 3.5 RIGHTS OF FIRST REFUSAL; REGISTRATION RIGHTS There are no rights of first refusal affecting the issuance or sale of the capital stock of either Acquired Company. Neither Acquired Company is under any contractual obligation to register (in compliance with the filing requirements and being deemed effective under the Securities Act) any of its presently outstanding capital stock or any of its capital stock that may hereafter be issued. 7 3.6 FINANCIAL STATEMENTS Schedule 3.6 contains true, correct and complete copies of the Financial Statements of each Acquired Company. Except as described in Schedule 3.6, the Financial Statements (i) are in accordance with the books and records of the Acquired Companies, (ii) have been prepared according to GAAP, subject to normal recurring year-end adjustments, none of which, individually or in the aggregate, will be materially adverse and (iii) present fairly, in all material respects, the financial position of the Acquired Companies on the dates of such statements and the results of operations for the periods covered. 3.7 LIABILITIES AND OBLIGATIONS To Sellers' Best Knowledge, except as disclosed in either Schedule 3.6 or Schedule 3.7, the Acquired Companies have no material liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) other than current liabilities incurred in the ordinary course of business since the respective dates of the Financial Statements. Except as set forth in Schedule 3.7, the Acquired Companies are not liable upon or with respect to, or obligated in any other way to provide funds in respect of or to guarantee or assume in any manner, any material debt, obligation or dividend of any person, corporation, association, partnership, joint venture, trust or other entity, and to Sellers' Best Knowledge, there is no basis for the assertion of any other claims or liabilities of any nature or in any amount. 3.8 EMPLOYEE MATTERS (a) Schedule 3.8 contains a complete and accurate list of the following information for each employee or director of the Acquired Companies, including each employee on leave of absence or layoff status: employer; name; job title; current compensation paid or payable; vacation accrued; and service credited for purposes of vesting and eligibility to participate under any Acquired Company's Employee Benefit Plan, as hereinafter defined, including, without limitation, any pension retirement, profit-sharing, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership, severance pay, insurance, medical, welfare or vacation plan. (b) Neither Acquired Company is a party to, involved in or, to Sellers' Best Knowledge, threatened by any labor dispute or unfair labor practice charge. In addition, neither Acquired Company is a party to or currently negotiating any collective bargaining agreement, and there is no pending application for certification of a collective bargaining agent. (c) To Sellers' Best Knowledge, no director, officer or other key employee, as the same is identified in Schedule 3.8, of any Acquired Company intends to terminate his employment with such Acquired Company. 8 3.9 EMPLOYEE BENEFIT PLANS Schedule 3.9 identifies each salary, bonus, deferred compensation, incentive compensation, stock purchase, stock option, disability, sick pay, severance pay, termination pay, hospitalization, medical or dental, insurance, supplemental unemployment benefits, profit sharing, pension or retirement plan (each, an "Employee Benefit Plan" and collectively, the "Employee Benefit Plans") sponsored, maintained, contributed to or required to be contributed to by any of the Acquired Companies for the benefit of any current or former employees thereof. Except as set forth in Schedule 3.9, all Employee Benefit Plans conform, in all material respects, to and are being administered and operated in material compliance with all applicable laws, rules and regulations. No pending or, to the Best Knowledge of Sellers, threatened, claims, suits or other proceedings exist with respect to any Employee Benefit Plan of the Acquired Companies, other than normal benefit claims filed by participants or beneficiaries. Except as set forth in Schedule 3.9, neither the execution, delivery or performance of this Agreement, nor any of the transactions contemplated by this Agreement, will materially increase the benefits payable under any Employee Benefit Plan or result in any acceleration of the time of payment or vesting of any such benefits. 3.10 ABSENCE OF CERTAIN CHANGES Except as set forth in Schedule 3.10, since the date of the Financial Statements, the Acquired Companies have conducted their businesses only in the ordinary course of business, and neither Acquired Company has: (a) suffered any material adverse change, whether or not caused by any deliberate act or omission of the Acquired Company, or any of its shareholders, in its condition (financial or otherwise), operations, assets, liabilities, business or prospects; (b) contracted for the purchase of any capital assets having a cost in excess of $25,000 or made any capital expenditures in excess of $25,000; (c) incurred any indebtedness for borrowed money or issued or sold any debt securities; (d) incurred or discharged any liabilities or obligations except in the ordinary course of business; (e) paid any amount on any indebtedness prior to the due date, or forgiven or canceled any debts; (f) mortgaged, pledged or subjected to any security interest, lien, lease or other charge or encumbrance any of its properties or assets; (g) suffered any damage or destruction to or loss of any assets (whether or not covered by insurance) that has adversely affected, or could adversely affect, its business; (h) acquired or disposed of any assets except in the ordinary course of business; 9 (i) written up or written down the carrying value of any of its assets; (j) changed any accounting principles, methods or practices previously followed or changed the costing system or depreciation methods of accounting for its assets; (k) waived any material rights or forgiven any material claims; (l) lost, terminated or experienced any change in the relationship with any employee, customer or supplier, which termination or change has materially and adversely affected, or could materially and adversely affect, its business or assets; (m) increased the compensation of any director or officer; (n) increased the compensation of any employee except in the ordinary course of business; (o) redeemed, purchased or otherwise acquired, or sold, granted or otherwise disposed of, directly or indirectly, any of its capital stock or securities or any rights to acquire such capital stock or securities, or agreed to change the terms and conditions of any such rights or paid any dividends or made any distribution to the holders of its capital stock; (p) entered into any agreement with any person or group, or modified or amended in any material respect the terms of any such existing agreement except in the ordinary course of business; (q) entered into, adopted or amended any Employee Benefit Plan; (r) entered into any other commitment or transaction or experienced any other event that is material to this Agreement, or to any of the other agreements and documents executed or to be executed pursuant to this Agreement, or to the transactions contemplated hereby or thereby, or that has materially and adversely affected, or could materially and adversely affect, the condition (financial or otherwise), operations, assets, liabilities, business or prospects of either Acquired Company; (s) made any forward purchase commitments, except for purchase commitments in the ordinary course of business consistent with past practice; or (t) amended or restated its Articles of Incorporation or bylaws, or adopted any amendments thereto, or taken any action in connection with the amendment or restatement of its Articles of Incorporation or bylaws. 3.11 PATENTS, TRADEMARKS, SERVICE MARKS AND COPYRIGHTS 10 (a) Ownership. To the Best Knowledge of Sellers, the Acquired Companies either own or possess adequate licenses or other rights, if any, for all patents, trademarks, service marks and copyrights, if any, necessary to conduct their respective businesses, without conflict with the rights of others. Set forth in Schedule 3.11 is a true and correct description of all Proprietary Rights. (b) Conflicting Rights of Third Parties. To the Best Knowledge of Sellers, the Acquired Companies have the right to use the Proprietary Rights without infringing or violating the rights of any third parties. No claim has been asserted against either Acquired Company that (i) relates to the validity or enforcement of any patent, trademark, copyright or trade secret infringement, (ii) relates to the ownership of or right to use any Proprietary Right or (iii) challenges or questions the validity or effectiveness of any license or agreement that constitutes a part of any Proprietary Right, and to the Best Knowledge of Sellers, there is no valid basis for any such claim. 3.12 TAX MATTERS Except as set forth in Schedule 3.12, to the Best Knowledge of each Acquired Company and of the Founders, (i) all required federal, state, local and other tax returns, notices and reports (including, without limitation, income, property, sales, use, franchise, capital stock, excise, added value, employees' income withholding, social security and unemployment tax returns) of each respective Acquired Company have been accurately prepared in all material respects and duly and timely filed and (ii) all such taxes, along with any accrued interest or penalties, required to be paid with respect to the periods covered by such returns have been paid. 3.13 TITLE TO ASSETS; CONDITION OF ASSETS The Acquired Companies each have good and marketable title to the assets and properties reflected on their Financial Statements and all of the assets purchased or acquired since the date of the Financial Statements, free and clear of all Liens, except for (i) Liens for taxes not yet due and payable, (ii) encumbrances that are incidental to the conduct of the respective Acquired Company's business or ownership of property, which were not incurred in connection with the borrowing of money or the obtaining of credit and which do not, in the aggregate, materially detract from the value of the assets affected or materially impair their use by the respective Acquired Company and (iii) Liens granted hereunder or under the Letter Agreement or any document ancillary hereto or thereto. All facilities, machinery, equipment, fixtures, vehicles and other properties that are now owned, leased or used, or will be owned, leased or used by the Acquired Companies immediately following the Closing are or will be (A) in good operating condition and repair, normal wear and tear excepted, (B) reasonably fit and usable for the purposes for which they are being used, (C) not require a major overhaul or repair in the foreseeable future, (D) adequate and sufficient for the Acquired Companies' respective businesses and (E) conform in all material aspects with all applicable ordinances, regulations and laws. 11 3.14 LITIGATION Except as set forth in Schedule 3.14, there is no litigation, arbitration or governmental proceeding pending or, to the Best Knowledge of Sellers, threatened (i) against either Acquired Company, (ii) affecting any of the properties or assets of either Acquired Company, (iii) that questions the validity of this Agreement, or the right of the Acquired Companies or the Founders to enter into this Agreement or consummate the transactions contemplated hereby or those to be consummated in connection with the Closing or (iv) against any officer, director, shareholder or employee of either Acquired Company, in such capacity or relating to his prior employment relationships. Except as set forth in Schedule 3.14, the Sellers are not aware of any fact that is likely to form the basis of any such litigation, arbitration or proceeding. 3.15 LEGAL COMPLIANCE Except as set forth in Schedule 3.15, each Acquired Company (i) has all franchises, permits, licenses and other rights and privileges necessary to permit it to conduct its business, (ii) is in compliance with all, and has not violated in any respect, such permits, licenses, rights and privileges, (iii) has no proceedings pending or, to the Best Knowledge of Sellers, threatened that could reasonably be expected to result in the revocation, cancellation, modification or suspension thereof, (iv) has conducted its business and operations in all material respects in accordance with all applicable laws, rules and regulations and (v) is not in violation of any judgment, order or decree. 3.16 BROKERAGE Except as set forth in Schedule 3.16, there are no claims for brokerage commissions, finder's fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by the Sellers. 3.17 GOVERNMENT INQUIRIES Except as set forth in Schedule 3.17, there have been no material inspection reports, questionnaires, inquiries, demands or requests for information received by either Acquired Company from the federal government, any federal administrative agency, any state securities administrator or any state or local taxing authority relating to the business of either Acquired Company. 3.18 REAL PROPERTY (a) Schedule 3.18 sets forth a list of (i) all locations of the facilities from which each Acquired Company conducts its business and (ii) all leases, subleases, licenses, easements, rights of way and other similar agreements under which one or more of the Acquired Companies uses, occupies or has the right to use or occupy, now or in the future, any real property and all amendments and modifications thereto (collectively, the "Sellers Real Property Leases"). Except as set forth in Schedule 3.18, the respective Acquired Company 12 (A) has good and valid title to the leasehold estate created under each Sellers Real Property Lease free and clear of all Liens, (B) has the right to quiet enjoyment of all property held under the Sellers Real Property Leases, (C) has not been in default under any Sellers Real Property Lease which default has not been cured and (D) has paid all rent and other sums and charges currently due or payable under each of the Sellers Real Property Leases in full when due. (b) The Acquired Companies have never owned any real property. 3.19 INVENTORY All inventory of each Acquired Company (i) was acquired and has been maintained in accordance with its ordinary business practices, (ii) consists of items of a quality and quantity usable in the ordinary course of its business consistent with past practice and (iii) is valued in conformity with GAAP applied on a consistent basis, except as set forth in Schedule 3.19. No significant amount of such inventory is obsolete or in excess of its current needs. 3.20 ACCOUNTS RECEIVABLE The Accounts Receivable of each Acquired Company (i) represent sales actually made in the ordinary course of business, (ii) are not subject to any defense or offset and (iii) are current and collectible. 3.21 BOOKS AND RECORDS To the Best Knowledge of Sellers, each Acquired Company maintains its books, records and accounts in accordance with good business practice and in sufficient detail to reflect accurately and fairly the transactions and the condition of its business. 3.22 DISCLOSURE None of (i) the representations or warranties of either Acquired Company or the Founders contained herein; (ii) the information contained in the schedules referred to in this Article 3 or (ii) the other information furnished to Buyer by either Acquired Company or the Founders pursuant to the terms of this Agreement, is false or misleading in any material respect or omits to state a fact herein or therein required to be stated or necessary to make the statements herein or therein not misleading in any material respect. 3.23 INVESTMENT PURPOSE The Founders acknowledge that they must bear the economic risk of ownership of the RTIN Common Stock for an indefinite period of time because it has not been registered under the Securities Act. Mr. Solow and Ms. Rau are each acquiring the RTIN Common Stock for their own account, for investment, and not with a view to any "distribution" within the meaning of the Securities Act. Neither Mr. Solow nor Ms. Rau has any present intention to make any transfer of the RTIN Common Stock. The Founders agree that the RTIN Common Stock will not be sold without registration under the Securities Act and any applicable state securities laws or an exemption therefrom. 13 3.24 RESTRICTIONS ON TRANSFERABILITY Mr. Solow and Ms. Rau each understand that because the RTIN Common Stock has not been registered under the Securities Act, they cannot dispose of any or all of the RTIN Common Stock unless such shares are subsequently registered under the Securities Act or exemptions from registration are available. Mr. Solow and Ms. Rau each acknowledge and understand that they have no registration rights. By reason of these restrictions, Mr. Solow and Ms. Rau each understand that they may be required to hold the RTIN Common Stock for an indefinite period of time. Mr. Solow and Ms. Rau each agree that in no event will they make a transfer or disposition of any of the RTIN Common Stock unless and until, if requested by Buyer, at the expense of Mr. Solow, Ms. Rau or the transferee, as the case may be, they shall have furnished to the Buyer an opinion of counsel or other evidence, reasonably satisfactory to Buyer to the effect that such transfer may be made without registration under the Securities Act. Mr. Solow and Ms. Rau each understand that each certificate representing the RTIN Common Stock will bear the following legend substantially as follows: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER 4.1 CORPORATE STATUS AND POWER Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The charter documents and the bylaws of Buyer that have been delivered to Sellers as of the date hereof are effective under Texas law and are current, correct and complete. To the Best Knowledge of Buyer, Buyer has all required corporate power and authority to (i) conduct its business as it is now being conducted, (ii) own or use the properties and assets that its purports to own or use, (iii) execute and deliver this Agreement and (iv) carry out the transactions contemplated by this Agreement. 14 4.2 GOVERNMENTAL AUTHORIZATIONS To the Best Knowledge of Buyer, except as described in Schedule 4.2, no approval, consent, exemption, authorization or other action by, or notice to, or filing with, any governmental authority is necessary or required in connection with the execution, delivery, performance or enforcement against Buyer of this Agreement, or any other documents executed pursuant to this Agreement, except for federal and state securities filings, if any, which have been or will be timely filed in accordance with applicable law. 4.3 AUTHORIZATION This Agreement and all of the documents executed pursuant to this Agreement are valid and binding obligations of Buyer, enforceable according to their terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other similar laws of general application relating to or affecting the enforcement of creditor rights, (ii) the availability of specific performance or other equitable remedies and (iii) with respect to any indemnification provisions set forth herein or therein, principles of public policy. All necessary shareholder and/or director consents to enter into this Agreement have been obtained. 4.4 CAPITALIZATION As of the date hereof, the authorized capital stock of Buyer consists of fifty million (50,000,000) shares of common stock, fifty million (50,000,000) shares of which are issued and outstanding and ten million (10,000,000) shares of preferred stock, seven and one-half million (7,500,000) shares of which are issued and outstanding. Following, the anticipated reverse stock split on or about December 18, 2001, the authorized capital stock of Buyer shall consist of twenty-five million (25,000,000) shares of common stock and ten million (10,000,000) shares of preferred stock. All of the presently outstanding shares of capital stock of Buyer (i) have been validly authorized and issued and (ii) are fully paid and nonassessable. Except as disclosed in Schedule 4.4, Buyer has not issued any other shares of its capital stock, and there are no outstanding options, warrants, calls, commitments, subscriptions, agreements or other rights of any character (including conversion, redemption or preemptive rights) relating to the acquisition of any issued or unissued capital stock of Buyer. No dividends are accrued but unpaid on any capital stock of Buyer. 4.5 VALID ISSUANCE OF RTIN COMMON STOCK The RTIN Common Stock, representing the Purchase Price for the Acquired Companies, that Buyer will issue to Mr. Solow and Ms. Rau in accordance with Section 2.2 at the Closing shall be duly and validly issued, fully paid and nonassessable, free of preemptive rights or Liens and free of restrictions on transfer other than under applicable federal and state securities laws. 15 4.6 SEC DOCUMENTS; FINANCIAL STATEMENTS Except as disclosed in Schedule 4.6, Buyer has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and has filed all registration statements and other documents required to be filed by it with the SEC pursuant to the Securities Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, collectively, the "SEC Documents"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Any statements made in any such SEC Documents that are or were required to be updated or amended under applicable law have been so updated or amended. As of their respective dates, the financial statements of Buyer included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC applicable with respect thereto. Such financial statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of Buyer as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments that are not material). 4.7 ABSENCE OF CERTAIN CHANGES Except as set forth in Schedule 4.7, since September 30, 2001, Buyer has conducted its business only in the ordinary course of business and has not: (a) suffered any material adverse change, whether or not caused by any deliberate act or omission of Buyer or any of its shareholders, in its condition (financial or otherwise), operations, assets, liabilities, business or prospects; (b) contracted for the purchase of any capital assets having a cost in excess of $25,000 or made any capital expenditures in excess of $25,000; (c) incurred any indebtedness for borrowed money or issued or sold any debt securities; (d) incurred or discharged any liabilities or obligations except in the ordinary course of business; 16 (e) paid any amount on any indebtedness prior to the due date, or forgiven or canceled any debts; (f) mortgaged, pledged or subjected to any security interest, lien, lease or other charge or encumbrance any of its properties or assets; (g) suffered any damage or destruction to or loss of any assets (whether or not covered by insurance) that has adversely affected, or could adversely affect, its business; (h) acquired or disposed of any assets except in the ordinary course of business; (i) written up or written down the carrying value of any of its assets; (j) changed any accounting principles, methods or practices previously followed or changed the costing system or depreciation methods of accounting for its assets; (k) waived any material rights or forgiven any material claims; (l) lost, terminated or experienced any change in the relationship with any employee, customer or supplier, which termination or change has materially and adversely affected, or could materially and adversely affect, its business or assets; (m) increased the compensation of any director or officer; (n) increased the compensation of any employee except in the ordinary course of business; (o) redeemed, purchased or otherwise acquired, or sold, granted or otherwise disposed of, directly or indirectly, any of its capital stock or securities or any rights to acquire such capital stock or securities, or agreed to change the terms and conditions of any such rights or paid any dividends or made any distribution to the holders of its capital stock; (p) entered into any agreement with any person or group, or modified or amended in any material respect the terms of any such existing agreement except in the ordinary course of business; (q) entered into, adopted or amended any Employee Benefit Plan; (r) entered into any other commitment or transaction or experienced any other event that is material to this Agreement, or to any of the other agreements and documents executed or to be executed pursuant to this Agreement, or to the transactions contemplated hereby or thereby, or that has materially and adversely affected, or could materially and adversely affect, the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Buyer; or 17 (s) made any forward purchase commitments, except for purchase commitments in the ordinary course of business consistent with past practice. 4.8 TAX MATTERS To the Best Knowledge of Buyer, (i) all required federal, state, local and other tax returns, notices and reports (including, without limitation, income, property, sales, use, franchise, capital stock, excise, added value, employees' income withholding, social security and unemployment tax returns) of Buyer has been accurately prepared in all material respects and duly and timely filed and (ii) all such taxes, along with any accrued interest or penalties, required to be paid with respect to the periods covered by such returns have been paid, except as set forth in Schedule 4.8. 4.9 LITIGATION Except as set forth in Schedule 4.9, there is no litigation, arbitration or governmental proceeding pending or, to the Best Knowledge of Buyer, threatened (i) against Buyer, (ii) affecting any of the properties or assets of Buyer, (iii) that questions the validity of this Agreement, or the right of Buyer to enter into this Agreement or consummate the transactions contemplated hereby or those to be consummated in connection with the Closing or (iv) against any officer, director, shareholder or employee of Buyer, in such capacity or relating to his prior employment relationships. Except as set forth in Schedule 4.9, Buyer is not aware of any fact that is likely to form the basis of any such litigation, arbitration or proceeding. 4.10 LEGAL COMPLIANCE Except as set forth in Schedule 4.10, Buyer (i) has all franchises, permits, licenses and other rights and privileges necessary to permit it to conduct its business, (ii) is in compliance with all, and has not violated in any respect, such permits, licenses, rights and privileges, (iii) has no proceedings pending or, to the Best Knowledge of Buyer, threatened that could reasonably be expected to result in the revocation, cancellation, modification or suspension thereof, (iv) has conducted its business and operations in all material respects in accordance with all applicable, laws, rules and regulations and (v) is not in violation of any judgment, order or decree. 4.11 RIGHTS OF FIRST REFUSAL; REGISTRATION RIGHTS There are no rights of first refusal affecting the issuance or sale of the capital stock of Buyer. Buyer is not under any contractual obligation to register (in compliance with the filing requirements and being deemed effective under the Securities Act) any of its presently outstanding capital stock or any of its capital stock that may hereafter be issued. 4.12 LIABILITIES AND OBLIGATIONS 18 To Buyer's Best Knowledge, except as disclosed in either Buyer's Form 10-Q for the period ending September 30, 2001 or Schedule 4.12, Buyer has no material liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) other than current liabilities incurred in the ordinary course of business since September 30, 2001. Except as set forth in Schedule 4.12, Buyer is not liable upon or with respect to, or obligated in any other way to provide funds in respect of or to guarantee or assume in any manner, any material debt, obligation or dividend of any person, corporation, association, partnership, joint venture, trust or other entity, and to Buyer's Best Knowledge, there is no basis for the assertion of any other claims or liabilities of any nature or in any amount. 4.13 EMPLOYEE MATTERS (a) Schedule 4.13 contains a complete and accurate list of the following information for each full-time employee or director of Buyer, including each employee on leave of absence or layoff status: employer; name; job title; current compensation paid or payable; vacation accrued; and service credited for purposes of vesting and eligibility to participate under any employee benefit plan, including, without limitation, any pension retirement, profit-sharing, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership, severance pay, insurance, medical, welfare or vacation plan. (b) Buyer is not a party to, involved in or, to Buyer's Best Knowledge, threatened by any labor dispute or unfair labor practice charge. In addition, Buyer is not a party to or currently negotiating any collective bargaining agreement. (c) To Buyer's Best Knowledge, no director, officer or other key employee, as the same is identified in Schedule 4.13, of Buyer intends to terminate his employment with Buyer. 4.14 EMPLOYEE BENEFIT PLANS Schedule 4.14 identifies Employee Benefit Plan sponsored, maintained, contributed to or required to be contributed to by Buyer for the benefit of any current or former employees thereof. Except as set forth in Schedule 4.14, all Employee Benefit Plans conform, in all material respects, to and are being administered and operated in material compliance with all applicable laws, rules and regulations. No pending or, to the Best Knowledge of Buyer, threatened, claims, suits or other proceedings exist with respect to any Employee Benefit Plan of Buyer, other than normal benefit claims filed by participants or beneficiaries. Except as set forth in Schedule 4.14, neither the execution, delivery or performance of this Agreement, nor any of the transactions contemplated by this Agreement, will materially increase the benefits payable under any Employee Benefit Plan or result in any acceleration of the time of payment or vesting of any such benefits. 4.15 TITLE TO ASSETS; CONDITION OF ASSETS Buyer has good and marketable title to their assets, free and clear of all Liens, except for (i) Liens for taxes not yet due and payable and (ii) encumbrances that are incidental to the conduct of Buyer's business or ownership of property, which were not incurred in connection with the borrowing of money or the obtaining of credit and which do not, in the aggregate, materially 19 detract from the value of the assets affected or materially impair their use Buyer. All facilities, machinery, equipment, fixtures, vehicles and other properties that will be owned, leased or used by Buyer immediately following the Closing (A) are in good operating condition and repair, normal wear and tear excepted, (B) are reasonably fit and usable for the purposes for which they are being used, (C) will not likely require a major overhaul or repair in the foreseeable future, (D) are adequate and sufficient for Buyer's business and (E) conform in all material aspects with all applicable ordinances, regulations and laws. 4.16 BROKERAGE Except as set forth in Schedule 4.16, there are no claims for brokerage commissions, finder's fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made Buyer. 4.17 GOVERNMENT INQUIRIES Except as set forth in Schedule 4.17, there have been no material inspection reports, questionnaires, inquiries, demands or requests for information received by Buyer from the federal government, any federal administrative agency, any state securities administrator or any state or local taxing authority relating to the business of Buyer. 4.18 REAL PROPERTY Schedule 4.18 sets forth a list of (i) all locations of the facilities from which Buyer conducts its business and (ii) all leases, subleases, licenses, easements, rights of way and other similar agreements under which Buyer uses, occupies or has the right to use or occupy, now or in the future, any real property and all amendments and modifications thereto (collectively, the "Buyer Real Property Leases"). Except as set forth in Schedule 4.18, Buyer (A) has good and valid title to the leasehold estate created under each Buyer Real Property Lease free and clear of all Liens, (B) has the right to quiet enjoyment of all property held under the Buyer Real Property Leases, (C) has not been in default under any Buyer Real Property Lease which default has not been cured and (D) has paid all rent and other sums and charges currently due or payable under each of the Buyer Real Property Leases in full when due. 4.19 ACCOUNTS RECEIVABLE The Accounts Receivable of Buyer (i) represent sales actually made in the ordinary course of business, (ii) are not subject to any defense or offset and (iii) are current and collectible. 4.20 INVESTMENT PURPOSE Buyer is acquiring the MedEx Stock and the Pegasus Stock for its own account, for investment, and not with a view to any "distribution" within the meaning of the Securities Act. Buyer has no present intention to make any transfer of the MedEx Stock or the Pegasus Stock. 20 4.21 RESTRICTIONS ON TRANSFERABILITY Buyer understands that because the MedEx Stock and the Pegasus Stock have not been registered under the Securities Act, it cannot dispose of any or all of the MedEx Stock or Pegasus Stock unless such shares are subsequently registered under the Securities Act or exemptions from registration are available. Buyer understands that no public market now exists for the MedEx Stock or the Pegasus Stock and that there is no assurance that a public market will ever exist for such securities. Buyer acknowledges and understands that it has no registration rights. By reason of these restrictions, Buyer understands that it may be required to hold the MedEx Stock and the Pegasus Stock for an indefinite period of time. Buyer agrees that in no event will it make a transfer or disposition of any of the MedEx Stock or the Pegasus Stock unless and until, if requested by the applicable Acquired Company, at the expense of Buyer or transferee, it shall have furnished to the applicable Acquired Company an opinion of counsel or other evidence, reasonably satisfactory to such Acquired Company, to the effect that such transfer may be made without registration under the Securities Act. Buyer understands that each certificate representing the MedEx Stock and the Pegasus Stock will bear the following legend substantially as follows: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE MORTGAGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. 4.22 STATUS OF BUYER Buyer is knowledgeable and experienced in making investment decisions and is able to bear the economic risk of loss of its investment in the Acquired Companies. 4.23 OWN ACCOUNT Buyer is acting on its own behalf in connection with the investigation and examination of the Acquired Companies and its decision to execute these documents. 4.24 BOOKS AND RECORDS Buyer maintains its books, records and accounts in accordance with good business practice and in sufficient detail to reflect accurately and fairly the transactions and the condition of its business. 21 4.25 OTC BB LISTING Buyer's common stock is traded on the over-the-counter bulletin board (OTC-BB). No circumstances exist that could reasonably be expected to result in Buyer's being ineligible for trading on the OTC-BB as of the Closing. 4.26 DISCLOSURE None of (i) the representations or warranties of Buyer contained herein; (ii) the information contained in the schedules referred to in this Article 4 or (ii) the other information furnished to Sellers by Buyer pursuant to the terms of this Agreement, is false or misleading in any material respect or omits to state a fact herein or therein required to be stated or necessary to make the statements herein or therein not misleading in any material respect. ARTICLE 5 COVENANTS OF THE PARTIES 5.1 REQUIRED CAPITAL CONTRIBUTION (a) Buyer shall make a capital contribution in the amount of Six Hundred Thousand Dollars and No/100 ($600,000.00), in the aggregate, to the Acquired Companies (the "Required Capital Contribution") in accordance with the timetable set forth in Schedule 5.1. At Closing, Buyer shall receive a credit against the Required Capital Contribution due equal to the amount of principal and accrued interest due under the Capital Notes as of the date of the Closing. (b) At Closing, Buyer shall contribute the principal and accrued interests under the October 13th Capital Note, the October 16th Capital Note, the October 25th Capital Note, the November 9th Capital Note, the November 12th Capital Note, the November 26th Capital Note, the November 27th Capital Note and the December 3rd Capital Note (collectively, the "Capital Notes") and the October 25th Pharmaceuticals Note, as such notes are defined in Section A(1) of the Letter Agreement and the first, second and third addenda thereto (the Capital Notes and the October 25th Pharmaceutical Note, collectively, the "Bridge Loans") as a capital contribution to the Acquired Companies and the Required Capital Contribution shall be reduced by the amount of the principal and accrued interest under the Bridge Loans. The principal amount and accrued interests as of the Closing under the Bridge Loans shall, for all purposes, be accounted for and reflected on the books and records of the Acquired Companies as additional paid-in capital by Buyer, which accounting shall effect a release from all obligations under such Bridge Loans of Mr. Solow and Ms. Rau as co-makers of the Bridge Loans. (c) The use of the proceeds received by the Acquired Companies from the Required Capital Contribution shall be restricted to the payment of their operational expenses in the ordinary course of business as approved by each Acquired Company's Board of Directors. It is stipulated that all amounts received by the Acquired Companies prior to the execution of this Agreement through the Capital Notes has been used to pay necessary operational expenses of the Acquired Companies. 22 5.2 REQUIRED INTER-COMPANY LOAN (a) Buyer shall make a loan in the amount of Five Hundred Thousand Dollars and No/100 ($500,000.00), in the aggregate, to the Acquired Companies (the "Required Inter-Company Loan") in accordance with the timetable set forth in Schedule 5.2. The Inter-Company Loan shall bear interest at the rate of six percent (6%). (b) The use at least Four Hundred Thousand Dollars and No/100 ($400,000.00) of the proceeds received by the Acquired Companies from the Required Inter-Company Loan shall be restricted to the payment of outstanding debts of the Acquired Companies accrued on or before November 8, 2001. Buyer acknowledges that it is aware that the liabilities of the Acquired Companies exceed their current assets and that the Required Inter-Company Loan will be insufficient to render the Acquired Companies solvent. 5.3 GOVERNANCE AND OPERATIONS OF ACQUIRED COMPANIES (a) For a period of three (3) years following the Closing, Mr. Solow and Ms. Rau together shall have the right to designate a majority of the Board of Directors of each Acquired Company, and Buyer shall have the right to appoint the remaining members of the Boards of Directors of each Acquired Company. During this three-year period, Buyer agrees to vote all of the shares of the Acquired Companies held by it in favor of such designees. Thereafter, Buyer and the Board of Directors of each Acquired Company shall cause the bylaws of each Acquired Company, respectively, to be amended to (i) increase the number of directors on each Board to five (5) members and (ii) provide that Mr. Solow and Ms. Rau together shall have the right to appoint two (2) directors, Buyer shall have the right to appoint two (2) directors and the four (4) appointed directors shall have the right to appoint the fifth director of each Board. (b) As long as the Buyer is the sole shareholder, the respective Board of Directors of each Acquired Company, in the exercise of its fiduciary duties shall not take any action that would jeopardize Buyer's listing on any exchange or eligibility to be traded on the OTC-BB. (c) As long as the Buyer is the sole shareholder, the unanimous approval of the respective Board of Directors of each Acquired Company shall be required to authorize a material disposition or encumbrance of the assets of the Acquired Company or to authorize the issuance of additional shares of capital stock therein. In addition, for a period of three (3) years following the Closing, Buyer shall be required to obtain the unanimous approval of the respective Board of Directors of each Acquired Company prior to (i) selling, transferring, encumbering or otherwise conveying any of the capital stock of the Acquired Company, (ii) authorizing future acquisitions by the Acquired Companies and (iii) authorizing the issuance of additional shares by the Acquired Companies. 23 (d) As long as the Buyer is the sole shareholder, each Acquired Company shall provide to Buyer, on a timely basis, monthly profit and loss statements, cash flow analysis and balance sheets prepared in accordance with GAAP and Regulation S-X. Additionally, the officers of the each Acquired Company will fully and timely cooperate with Buyer in preparation of quarterly compilations and other documents required for the SEC reporting as well as for any press releases or promotional materials needed to keep the public informed as the progress of the Acquired Companies. (e) For the twelve (12) months following the Closing, each Acquired Company shall adhere to the budget set forth in Schedule 5.3 for general, administrative and capital expenditures. Thereafter, for as long as the Buyer is the sole shareholder, the Board of Directors of each Acquired Company shall propose an annual budget to the Board of Directors of Buyer for approval. Each Acquired Company must obtain the consent of the Board of Directors of Buyer for any material deviation from the approved budget. (f) One Hundred Percent (100%) of the actual cash collections generated by Pegasus shall be remitted daily to its account at the financial institution selected by the Pegasus. Pegasus shall require said financial institution to remit Fifty-Two Percent (52%) of said gross proceeds on a daily basis to the ACH account of Pegasus maintained at said institution for the sole purpose of funding pharmaceutical payments to McKesson or such other designated pharmaceutical wholesaler. The remaining Forty-Eight Percent (48%) may be used by Buyer only after all normal and routine business expenses of both Acquired Companies have been satisfied in due course. (g) Mr. Solow and Ms. Rau shall execute the Employment Agreements set forth in Exhibits B and C, respectively. 5.4 GOVERNANCE OF BUYER (a) For as long as (i) Mr. Solow and Ms. Rau remain shareholders of Buyer and (ii) either Mr. Solow or Ms. Rau serves on the Boards of Directors of the Acquired Companies, Mr. Solow and Ms. Rau together shall have the right to appoint one director to the Board of Directors of Buyer, and Mr. Solow shall be permitted to serve as a nonvoting advisor on the Board of Directors of Buyer. In the event that either Founder divests himself or herself of all of their respective shares in Buyer, the remaining Founder shall have the right to appoint the director to the Board of Directors of Buyer. (b) Buyer agrees to take all necessary actions to amend its bylaws to require the unanimous approval of its Board of Directors to (i) approve any future acquisitions for as long as Mr. Solow and/or Ms. Rau have the right to appoint a director to the Board of Directors of Buyer, pursuant to Section 5.4(a) and (ii) amend such bylaw provision. (c) The Board of Directors of Buyer shall be prohibited from taking any action, either prior to or after Closing, that would be inconsistent with any terms and conditions set forth in this Agreement, including, without limitation, any provisions set forth in Article 5. 24 5.5 MUTUAL COOPERATION The parties shall fully and timely cooperate with each other to perform all requirements hereunder, as well as those matters that are reasonably or necessarily contemplated by this Agreement, including, without limitation, filing, audit and reporting requirements. 5.6 RELEASE OF PERSONAL GUARANTEES Buyer shall use commercially reasonable efforts to cause it to be substituted for Mr. Solow and Ms. Rau with regard to any personal guarantees that Mr. Solow, Ms. Rau or both may have executed on behalf of either Acquired Company and to obtain full releases from such personal guarantees for Mr. Solow, Ms. Rau or both, as the case may be; provided, however, that the existence of the obligation that is subject to such guaranty does not result in a default under this Agreement. ARTICLE 6 INDEMNIFICATION 6.1 INDEMNIFICATION FOR BREACHES (a) Scope of Indemnification. The Founders and the respective Acquired Company, jointly and severally, shall indemnify and hold harmless Buyer (including its officers, directors, agents, attorneys and employees), against all Damages incurred by the Indemnified Party as a result of or in connection with (i) any inaccuracy in or the breach by an Indemnifying Party of any representation or warranty contained in this Agreement; (ii) the operation of the respective Acquired Company prior to the date hereof or (iii) the breach by the respective Acquired Company of its charter documents or any covenant contained in this Agreement or in any other agreement entered into pursuant to the terms and conditions of this Agreement; provided, however, that upon the Closing, the Acquired Companies shall be released and discharged from any obligation under this Section, and the Founders shall be solely liable, jointly and severally, subject to the limitations set forth hereinbelow. Buyer shall indemnify and hold harmless the respective Acquired Company (including its officers, directors, agents, attorneys and employees) and the Founders against all Damages incurred by the respective Acquired Company or the Founders, as applicable, as a result of or in connection with any inaccuracy in or breach by Buyer of any representation, warranty or covenant of Buyer under this Agreement or any other agreement entered into pursuant to the terms and conditions of this Agreement, subject to the limitations set forth hereinbelow. (b) Limitations. (i) No claim may be asserted against any Indemnifying Party or Parties pursuant to this Article 6, unless the aggregate of indemnification claims against such Indemnifying Party or Parties exceeds the amount of $50,000.00 (the "Threshold"). Once the Threshold is exceeded as to an Indemnifying Party or Parties, jointly and severally liable, the entire amount of Damages may be claimed, subject only to the Cap, as such term is defined hereinafter. (ii) The liability of an Indemnifying Party or Parties, jointly and severally liable, arising from all breaches of representations and warranties pursuant to this Agreement is limited to the amount of $1,000,000 in the aggregate (the "Cap"). (iii) Each Founder shall have the option to remit to Buyer in lieu of a cash payment for some or all of any amounts due under this Article 6 an amount of RTIN Common Stock, valued at $7.10 per share, having a value equal to such Damages. 6.2 ASSUMPTION OF DEFENSE Any Indemnified Party hereunder will (i) give prompt notice to the Indemnifying Party of any claim with respect to which it seeks indemnification and (ii) permit such Indemnifying Party to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party; provided, however, that any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless: (A) the Indemnifying Party has agreed, in writing, to pay such fees or expenses; (B) the Indemnifying Party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Indemnified Party; or (C) based upon advice of counsel to such Indemnified Party, there shall be one or more defenses available to such Indemnified Party that are not available to the Indemnifying Party or there shall exist conflicts of interest pursuant to applicable rules of professional conduct between such Indemnified Party and the Indemnifying Party (in which case, if the Indemnified Party notifies the Indemnifying Party in writing that such Indemnified Party elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such claim on behalf of such Indemnified Party), in each of which events the fees and expenses of such counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld or delayed), but if settled with its written consent, or if there be a final judgment against the Indemnified party in any such action or proceeding, the Indemnifying Party shall indemnify and hold harmless the Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. No Indemnified Party will be required to consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 6.3 PAYMENT OF DAMAGES Any Damages for which an Indemnified Party is entitled to indemnification under this Article 6 shall be paid by the Indemnifying Party to the Indemnified Party as such Damages are incurred. 25 ARTICLE 7 TERMINATION; RESCISSION 7.1 TERMINATION Sellers shall have the right to terminate this Agreement if the Closing does not take place prior to December 21, 2001 by reason of delay on the part of Buyer. 7.2 RESCISSION In the event that Buyer, in its sole discretion, elects not to fulfill its funding obligations pursuant to Sections 5.1 and 5.2 in accordance with the timetables set forth in Schedules 5.1 and 5.2, then the Mr. Solow may elect to rescind this transaction whereby all certificates representing the RTIN Common Stock issued to Mr. Solow, Ms. Rau and their designees pursuant to Section 2.2 shall be returned to Buyer within three (3) business days of said written election or demand, and whereby Buyer shall be required to return all certificates representing the MedEx Stock and the Pegasus Stock issued to Buyer to Mr. Solow and Ms. Rau, or their designees or assigns, within three (3) business days of said written election or demand. In addition, Sellers shall be permitted retain as liquidated damages any capital contributions made by Buyer, which shall not include (i) the Inter-Company Loan or (ii) the principal and accrued interest under the October 25th Pharmaceutical Note as of the date of the Closing. In the absence of fraud, the provisions of this Section 7.2 shall be the Sellers' sole and exclusive remedy for any failure of Buyer to perform its obligations under Sections 5.1 and 5.2. ARTICLE 8 GENERAL PROVISIONS 8.1 AMENDMENTS; WAIVERS This Agreement may be modified or amended only by an instrument in writing signed by all of the parties hereto. The waiver by any party hereto of a breach by any other party of any term or provision of this Agreement shall not operate as, or be construed to be a waiver of, a subsequent breach by that party of the same or any similar or other provision of this Agreement. The delay or failure of a party to transmit any written notice hereunder shall not constitute a waiver by that party of any default hereunder or of any other or further default under this Agreement. 8.2 SURVIVAL; BINDING NATURE All representations of the parties made in this Agreement and in the certificates, exhibits, schedules or other written information delivered or furnished by one party to the other in connection with this Agreement will survive the Closing for a period equal to eighteen (18) months from the Closing. All covenants and agreements made in this Agreement will survive Closing and will bind and inure to the benefit of the parties hereto and their respective successors and assigns. 26 8.3 HEADINGS Headings have been inserted for convenience of reference only and do not constitute a part of this Agreement. 8.4 GOVERNING LAW; VENUE The parties agree and stipulate this Agreement shall be governed by and controlled by the laws of the State of Texas, without giving effect to the choice of law provisions thereof. All documents contemplated by this Agreement shall likewise be governed and controlled by the laws of the State of Texas. All actions arising out of this Agreement as well as the documents contemplated by this Agreement shall be brought in Harrison County, Texas. 8.5 NOTICES AND DEMANDS Any notice or demand that is permitted or required hereunder will be deemed to have been sufficiently received (except as otherwise provided herein) (i) upon receipt when personally delivered; (ii) or one (1) day after sent by overnight delivery or telecopy providing confirmation or receipt of delivery; or (iii) three (3) days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested to the addresses as shown on the signature pages of this Agreement or at any other address designated in writing to the other parties hereto. 8.6 SEVERABILITY If any provision of this Agreement is held invalid under applicable law, such provision will be deemed ineffective to the extent of such invalidity, and such invalid provision will be modified to the extent necessary to make it valid and enforceable. Any such invalidity will not invalidate the remainder of this Agreement. 8.7 INTERPRETATION Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Buyer or Sellers, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto. 8.8 COUNTERPARTS; TELEFACSIMILE EXECUTION This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of a manually executed counterpart of this Agreement. Any 27 party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver a manually executed counterpart of this Agreement, but the failure to deliver a manually executed counterpart shall not affect the validity, enforceability and binding effect of this Agreement. 8.9 ENTIRE AGREEMENT This Agreement and the exhibits to this Agreement constitute the entire agreement of the parties, and except as specifically provided in this Agreement, shall supersede any prior agreements, including, without limitation, the Letter Agreement. 8.10 NUMBER AND GENDER Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. 8.11 PUBLICITY No party shall make any publicity release or announcement concerning this Agreement or the transactions contemplated hereby without the prior written approval thereof by the other parties, as the case may be, except as required by applicable law, in which case the party issuing the release will so advise the other parties in writing and submit a copy of such release in advance of such issuance. 8.12 NO THIRD PARTY BENEFICIARIES Except as set forth in Section 8.13, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person, other than the parties hereto and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement. 8.13 SEPARATE COUNSEL Buyer acknowledges and agrees that with respect to the agreements contained in this Agreement, each such party is relying solely on its own legal counsel and not on any advice, statements or representations of Sellers' counsel, Locke Liddell & Sapp LLP. [Signature page follows.] 28 WHEREFORE, THE UNDERSIGNED have each executed this Agreement as of the day and year first written above. SELLERS: MEDEX SYSTEMS, INC. By: /s/ Laurence Solow By: /s/ Ann E. Rau --------------------- ------------------- Laurence Solow Ann E. Rau, Chairman of the Board Founder PEGASUS PHARMACY, INC. By: /s/ Laurence Solow By: /s/ Laurence Solow ---------------------- -------------------- Laurence Solow Laurence Solow, Chairman of the Board Founder BUYER: RESTAURANT TEAMS INTERNATIONAL, INC. By: /s/ Curtis A. Swanson ---------------------- Curtis A. Swanson President & Chief Operating Officer -----END PRIVACY-ENHANCED MESSAGE-----