EXHIBIT 10.3
PLEDGE AGREEMENT
This Pledge Agreement ("Agreement") dated as of January 30, 2002, 2002 is made
between Metropolitan Health Network, Inc. ("Pledgor") and McKesson Corporation
("McKesson").
Pledgor and McKesson hereby agree as follows:
1. Pledgor acknowledges that it has executed a guaranty in favor of McKesson
(the "Guaranty") guaranteeing payment to McKesson of all amounts due and
owing to McKesson from time to time by Metcare Rx, Inc., Metcare Rx, Inc.
(MD), and Xxx-Xxx Pharmacy Services, Inc. (collectively "Debtors"), each
of which is a wholly owned subsidiary of Pledgor, such guaranteed payment
obligations to include obligations to pay for products or services
purchased from McKesson by the Debtors and obligations to pay the
principal and interest of any promissory notes executed by the Debtors in
favor of McKesson, together with any related fees, charges or other sums
that are due and payable to McKesson (collectively, the "Obligations").
2. As security for the Guaranty and for payment of the Obligations, Pledgor
hereby pledges to McKesson and grants McKesson a first priority security
interest in 1.5 million shares of Pledgor's stock (the "Pledged Shares").
The Pledged Shares will be duly and validly issued and outstanding,
registered and subject to no restrictions on trading no later than March
31, 2002.
3. Pledgor agrees to deliver to McKesson certificates representing the
Pledged Shares which shall be issued in the name of McKesson Corporation
as shareholder and which shall be held in McKesson's custody during the
term of this Agreement or until McKesson exercises its security interest
pursuant to Paragraph 8.
4. Pledgor agrees that this Agreement shall create a continuing security
interest in and pledge of the Pledged Shares, which shall remain in effect
until terminated in accordance with the terms of this Agreement
5. Pledgor shall execute and deliver to McKesson such further financing
statements or other documents as McKesson may reasonably request to effect
a transfer of a perfected first priority security interest in and pledge
of the Pledged Shares pursuant to the Uniform Commercial Code, and to
accomplish the purposes of this Agreement.
6. Pledgor represents and warrants that no later than March 31, 2002, all of
the Pledged Shares will have been duly and validly issued and will be
fully paid and non-assessable; Pledgor will be the legal owner thereof;
there will be no restrictions on the transferability of the Pledged
Shares; there will be no shareholder agreements or other agreements that
relate to the voting or giving of written consents with respect to the
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Pledged Shares; and there will be no other liens against the Pledged
Shares or other claims that could be made by anyone to any ownership
interest in or rights to the Pledged Shares.
7. Pledgor will not permit the creation of any other liens against the
Pledged Shares; will not enter into any shareholders' or other agreement
with respect to the Pledged Shares; and will maintain and preserve its
corporate existence as long as any Obligations remain outstanding.
8. Upon the occurrence of any default in payment to McKesson of the
Obligations or any default under the Guaranty, Pledgor shall have ten (10)
days to cure the default. Because it is the sole shareholder of the
Debtors and the Guarantor, Pledgor shall be deemed to have notice of the
occurrence of such default without receiving any notice of default or
demand for payment from McKesson. If Pledgor fails to cure the default
within ten days of its occurrence, McKesson may, at its option, exercise
its security interest in, and sell, as many of the Pledged Shares as
necessary to obtain net proceeds of such sale equal to the amount
necessary to cure the default, without notice to Pledgor, and may continue
to hold the remainder in custody pursuant to this Agreement. In such
event, McKesson may execute such documents and take such actions as
McKesson shall deem appropriate to effect the sale of the Pledged Shares.
For this purpose, Pledgor hereby constitutes McKesson its attorney-in-fact
with full power and authority to do all things necessary to enforce
McKesson's security interest in and rights to the Pledged Shares, and to
effect their sale. In the event of such a default as specified in this
paragraph, McKesson may elect to exercise its security interest in, and
sell, only a portion of the number of Pledged Shares it would be entitled
to sell at that time, and may continue to hold the remainder in custody
pursuant to this Agreement.
9. McKesson shall exercise reasonable care to assure the safe custody of the
Pledged Shares while held by McKesson. In consideration for the pledge of
shares pursuant to this Agreement McKesson will permit the Debtors to
purchase products and services from McKesson with an outstanding aggregate
amount of Obligations for all of the Debtors (a) not to exceed $ 900,000
commencing on the date on which McKesson receives custody of the Pledged
Shares, and (b) not to exceed $1.5 million commencing on the date on which
Pledgor provides evidence satisfactory to McKesson that the Pledged Shares
are duly and validly issued and outstanding, registered and not subject to
any restrictions on trading (in each case, the "Credit Limit") at such
prices and on such payment terms as may be mutually agreed between
McKesson and the Debtors; provided, however, that in the event the market
value of the Pledged Shares shall decrease at any time either (a) because
McKesson has exercised its right to sell some of the Pledged Shares or (b)
because the market price per share of the Pledged Shares has gone down,
McKesson may reduce the Credit Limit accordingly; and provided, further,
that if on March 31, 2002 (i) the Pledged Shares are not duly and validly
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issued and outstanding, registered and not subject to any restrictions on
trading, (ii) all of the representations and warranties in Paragraph 6 of
this Agreement are not true and correct, or (iii) the Pledgor is in breach
of any of its obligations under this Agreement or any other agreement
between the Pledgor and McKesson (including without limitation the
Guaranty), then McKesson will set such credit limits for the Debtors as
McKesson deems appropriate, in its sole discretion, which may be any
amount equal to or greater than zero. Pledgor hereby acknowledges that
Pledgor will benefit directly and/or indirectly as sole shareholder from
McKesson's extension of credit and sale of products and services to the
Debtors.
10. This Agreement shall remain in effect, and the Pledged Shares shall remain
in McKesson's custody, as long as the Debtors have any outstanding
Obligations to McKesson. McKesson retains the right at any time to cease
extending credit terms to any one or more of the Debtors and to require
payment in advance of the delivery of any products to any one or more of
the Debtors. In the event McKesson ceases to extend credit terms to one or
more of the Debtors, the Credit Limit shall be reduced proportionately by
the Debtors' average monthly sales volume. The number of Pledged Shares
will be reduced proportionately and the excess Pledged Shares returned to
Pledgor, and McKesson shall release its security interest in the Pledged
Shares to be returned, promptly upon payment in full of the Obligations.
11. Pledgor agrees to reimburse McKesson for any costs and expenses incurred
by McKesson, including but not limited to reasonable attorneys' fees and
costs, in enforcing its rights under this Agreement or selling the Pledged
Shares.
12. This Agreement, together with the Guaranty, constitutes the entire
agreement between the parties with regard to the subject matter hereof,
and supersedes any prior written or oral understandings. This Agreement
may not be amended except in writing signed by both parties, and will be
governed by and construed in accordance with the laws of the State of
California, without regard to that state's law concerning conflicts of
laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
below by their duly authorized representatives, as of the date first noted
above.
PLEDGOR:
METROPOLITAN HEALTH NETWORK, INC.
By: /s/ XXXXX X. XXXXXXX
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Printed Name: XXXXX X. XXXXXXX
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Title: C.F.O.
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MCKESSON:
MCKESSON CORPORATION
By:
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Printed Name:
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Title:
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