Document:

EX-10.2 SECURED PROMISSORY NOTE DATED JULY 27,2006

 

Exhibit
10.2

THIS SECURED PROMISSORY NOTE (THIS “NOTE’) WAS ACQUIRED FOR INVESTMENT ONLY AND NOT FOR
RESALE. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW (COLLECTIVELY, THE “SECURITIES LAWS”).

THIS NOTE IS NON-NEGOTIABLE AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR HYPOTHECATED (A)
WITHOUT MAKER’S (AS HEREINAFTER DEFINED) PRIOR WRITTEN CONSENT, AND (B) UNLESS (1) LENDER (AS
HEREINAFTER DEFINED) FIRST REGISTERS THIS NOTE UNDER THE SECURITIES LAWS, OR (2) MAKER SHALL HAVE
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT REGISTRATION UNDER THE SECURITIES LAWS IS
NOT REQUIRED.

SECURED PROMISSORY NOTE

			
	$2,837,087.67
	 	July 27, 2006

          FOR VALUE RECEIVED, Standard Management Corporation, an Indiana corporation (“Maker”),
hereby promises to pay to Michael G. Browning (“Lender”), on or before the Maturity Date,
the principal sum of Two Million Eight Hundred Thirty-seven Thousand Eighty-seven and 67/100
Dollars ($2,837,087.67), together with interest on the portion thereof from time to time
outstanding at the rate of twelve percent (12%) per annum from the date hereof until maturity
(whether by acceleration or otherwise) and at the rate of 20% per annum from and after maturity
(whether by acceleration or otherwise) and until paid in full. Maker shall pay these amounts
without relief from valuation and appraisal laws.

ARTICLE I.

TERMS OF PAYMENT

SECTION 1.01 Prepayment During Term.

          Maker may prepay this Note in whole or in part at any time and from time to time without
premium, penalty or other charge or cost. All payments and prepayments shall be applied (a) first,
to amounts due and payable to Lender under the Fee Letter dated July 26, 2006, from Maker to Lender
(the “Fee Letter”), (b) second, to all accrued costs and expenses that Maker is obligated
to pay or for which Maker is obligated to reimburse Lender hereunder; (c) third, to accrued and
unpaid interest; and (c) fourth, to the reduction of principal.

SECTION 1.02 Payments and Computations.

          (a) Maker shall make payment under this Note in lawful money of the United States to
Lender at Lender’s address stated in Section 3.06 or to such other address as Lender may from time
to time designate to Maker in writing.

          (b) Interest on the principal sum of the Note shall accrue on the basis of the
actual number of days elapsed over a year consisting of 365 or 366 days, as appropriate.

          (c) Whenever any payment to be made hereunder is stated to be due on a day other
than a Business Day (as hereinafter defined), such payment shall be made on the next succeeding

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Business Day, and such extension of time shall be included in the computation of interest.
“Business Day” means a day other than a Saturday or Sunday or a government or bank holiday on which
banks generally are closed in the State of Indiana.

ARTICLE II.

SECURITY

          This Note and Maker’s obligations hereunder are secured by (i) a Guaranty of even date
herewith executed by Rainier Home Health Care Pharmacy, a Washington corporation
(“Rainer”), Precision Healthcare, Inc., a Tennessee corporation (“Precision”), Long
Term Rx, Inc., an Indiana corporation (“Long Term Rx”), Home Med Channel, Inc., an Indiana
corporation (“Home Med”), Holland Compounding Pharmacy, Inc., a Washington corporation
(“Holland CP”), and Holland Drug Store, Inc., a Washington corporation (“Holland,”
and together with Rainier, Precision, Long Term Rx, Home Med, and Holland CP, the
“Guarantors”) in favor of Lender, (ii) a Security Agreement of even date herewith
encumbering certain personal property of the Guarantors as described therein (the “Security
Agreement”), and (ii) Pledge Agreements of even date herewith pledging the securities of the
Guarantors (the “Pledge Agreements” and together with this Note, the Fee Letter, the
Guaranty, and the Security Agreement, the “Loan Documents”).

ARTICLE III.

GENERAL PROVISIONS

SECTION 3.01 Maturity Date.

          The indebtedness evidenced by this Note shall mature and shall be due and payable in full on
the earliest to occur of the following (the “Maturity Date”):

          (a) September 15, 2006;

          (b) the date of consummation of the sale of the assets of Rainier to Omnicare, Inc. pursuant
to the terms of the proposed Asset Purchase Agreement dated July 28, 2006, among Rainier, Maker,
and Omnicare, Inc. (the “APA”);

          (c) August 3, 2006, if the APA has not been executed by, and became fully enforceable against
each of the parties thereto by that date; and

          (d) the date of termination of the APA.

SECTION 3.02 Event of Default.

          The occurrence of any of the following events shall constitute an “Event of Default”
hereunder:

          (a) Maker, any Guarantor, or U.S. Health Services Corp. files a petition in
bankruptcy (or has an involuntary bankruptcy petition filed against it), make an assignment for the
benefit of creditors, is adjudged a bankrupt, or seeks, agrees or has appointed a receiver or other
custodian under applicable insolvency law.

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          (b) The occurrence of any “Event of Default” as such term is defined in the
Guaranty, the Security Agreement, or either of the Pledge Agreements.

          (c) Any Guarantor pays, or Maker or U.S. Health Services Corp. accepts, any dividend
or distribution on the capital stock of any Guarantor, or any Guarantor shall redeem, repurchase,
or otherwise acquire or retire any of its capital stock without the prior written consent of
Lender.

SECTION 3.03 Acceleration on Default.

          During the continuance of an Event of Default, the entire outstanding principal balance
hereof, all accrued but unpaid interest hereunder and all other amounts owing hereunder but unpaid
shall, at the option of Lender, become immediately due and payable. Failure by Lender to exercise
such option shall not be a waiver of the right to do so at any future time for the certain default
giving rise to Lender’s right to accelerate or for any other default.

SECTION 3.04 Waiver of Notice, Etc.

          Maker and all other persons, partnerships, corporations or other legal entities liable now or
at any time for the payment of the indebtedness evidenced hereby expressly waive all notice, demand
for payment, presentment for payment, protest and notice of protest, notice of intent to
accelerate, notice of acceleration and diligence in collection, and agree that the time of said
payment or any part thereof may be extended by Lender, and further agree that the real or
collateral security or any part thereof may be released by Lender without in any way modifying,
altering, releasing, affecting or limiting any liens or security interests arising under the
Security Agreement or Pledge Agreements. The failure of Lender to exercise any of his rights under
this Note in any particular instance shall not constitute a waiver of such rights in that or in any
subsequent instances.

SECTION 3.05 Compliance with Usury Laws.

          The provisions of this Note are hereby limited so that in no contingency or event shall the
amount paid or agreed to be paid by Maker for the use, forbearance or detention of the sums
evidenced by this Note exceed the maximum amount permissible under applicable law. If the
performance or fulfillment of any provision of this Note, or of any other agreement between Maker
and Lender, should involve or purport to require any payment in excess of the limit prescribed by
law, then the obligation to be performed or fulfilled is hereby reduced to the limit of such
validity, and if Lender should ever receive as interest an amount that would exceed the highest
lawful rate, then the amount that would be excessive interest shall be applied to the reduction of
principal and shall not be counted as interest.

SECTION 3.06 Notices.

          All notices and other communications hereunder shall be in writing, addressed to the intended
recipient as set forth below:

	 	 	 	 	 
	 

	 	If to Lender:
	 	Mr. Michael G. Browning
	 

	 	 	 	c/o Browning Investments, Inc.
	 

	 	 	 	6100 West 96th Street
	 

	 	 	 	Suite 250
	 

	 	 	 	Indianapolis, IN 46278

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	 	and copy to:
	 	Baker & Daniels LLP
	 

	 	 	 	300 North Meridian Street, Suite 2700
	 

	 	 	 	Indianapolis, IN 46204
	 

	 	 	 	Facsimile No.: 317-237-1000
	 

	 	 	 	Attention: James M. Carr
	 
	 	 	 	 
	 

	 	If to Maker:
	 	Standard Management Corporation
	 

	 	 	 	10689 N. Pennsylvania St.
	 

	 	 	 	Indianapolis, IN 46280
	 

	 	 	 	Attention: Ronald D. Hunter
	 

	 	 	 	Facsimile No.: 317-574-6227
	 
	 	 	 	 
	 

	 	and copy to:
	 	Sommer Barnard
	 

	 	 	 	One Indiana Square, Suite 3500
	 

	 	 	 	Indianapolis, IN 46204
	 

	 	 	 	Attention: Robert J. Hicks
	 

	 	 	 	Facsimile No.: 317-713-3699

Notices will be deemed given when delivered by registered or certified United States mail, postage
prepaid, to the appropriate party at its address shown above, or when delivered in person, by
commercial courier, overnight delivery service, or confirmed facsimile transmission, or when
delivery by any method is properly tendered but refused. Either party may change such party’s
address for notices by giving notice to the other party in accordance with this section, but no
such change of address will be effective as against any person without actual knowledge of the
change.

SECTION 3.07 Governing Law.

          The validity and effect of this Note shall be governed by the laws of the State of Indiana,
without regard to its conflicts of law principles.

SECTION 3.08 Costs of Enforcement.

          On demand, Maker shall pay or reimburse Lenders for the payment of any reasonable costs or
expenses (including reasonable outside attorneys’ fees and disbursements) actually expended by
Lenders in connection with or incidental to (a) any Event of Default hereunder, or (b) the
collection of the indebtedness evidenced by this Note or the Fee Letter, and exercise or
enforcement by or on behalf of Lender of any of his rights or remedies, or of Maker’s or
Guarantor’s obligations, under this Note or any of the other Loan Documents.

SECTION 3.09 Time of Essence.

          Time shall be of the essence in the payment and performance by Maker of all of its obligations
under this Note.

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SECTION 3.10 No Oral Modification.

          This Note may not be amended, cancelled, discharged, extended or modified except in a writing
executed by the party against whom enforcement of any waiver, change, modification or discharge is
sought.

          IN WITNESS WHEREOF, Maker has executed this Secured Promissory Note as of the date first above
written.

	 	 	 	 	 
	 	“MAKER”

Standard Management Corporation

 	 
	 	By:  	/s/ Ronald D. Hunter
 	 
	 	Name:  Ronald D. Hunter 	 
	 	Title:    Chairman,
President and Chief Executive 

Officer 
	 

- 5 -EX-10.3 GUARANTY DATED JULY 27,2006

 

Exhibit
10.3

GUARANTY

          THIS GUARANTY is made on the 27th day of July, 2006, by Rainier Home Health Care
Pharmacy, Inc., a Washington corporation (“Rainier”), Precision Healthcare, Inc., a
Tennessee corporation (“Precision”), Long Term Rx, Inc., an Indiana corporation (“Long
Term Rx”), Home Med Channel, Inc., an Indiana corporation (“Home Med”), Holland Compounding
Pharmacy, Inc., a Washington corporation (“Holland CP”), and Holland Drug Store, Inc. a
Washington corporation (“Holland”, and collectively with Rainier, Precision, Long Term Rx, Home
Med, and Holland CP, “Guarantors”), in favor of Michael G. Browning (“Lender”).

RECITALS

          A. Guarantors are indirect subsidiaries of Standard Management Corporation, an Indiana
corporation (“Borrower”).

          B. Borrower intends to obtain from Lender a bridge loan to be evidenced by a Secured
Promissory Note of even date herewith, in the original principal amount of $2,837,087.67 (such
promissory note, as amended, modified, renewed, or extended from time to time, the “Note”).

          C. Lender has advised Borrower and Guarantors that Lender will not extend the bridge loan
unless all of Borrower’s obligations under the Note and the Fee Letter are guaranteed by
Guarantors.

          D. Guarantors are willing and have agreed to guarantee all such obligations of Borrower, as
hereinafter provided.

AGREEMENT

          NOW, THEREFORE, in consideration of and as an inducement to Lender to extend credit to
Borrower upon the terms and conditions set forth in the Note, and in consideration of the premises
and for other good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, Guarantors agree as follows:

          1. The Guaranty. Guarantors, jointly and severally, unconditionally and irrevocably
guarantee: (a) the due and punctual payment in full by Borrower when due of the indebtedness of
Borrower to Lender evidenced by or arising under the Note and under the Fee Letter dated July 26,
2006, by Borrower to Lender (the “Fee Letter”), and all extensions, renewals, and
modifications thereof, and (b) the due and punctual performance and observance by Borrower of all
of the other terms, covenants, representations, warranties, and conditions agreed to by Borrower in
the Note and the Fee Letter.

          2. Certain Lender Discretions. Guarantors expressly agree that Lender may, in
Lender’s sole and absolute discretion, without notice to or further assent of Guarantors, and
without in any way releasing, affecting or impairing the obligations and liabilities of any
Guarantor hereunder: (a) waive compliance with, or default under, or grant any other indulgences
with respect to, the Note or the Loan Documents (as defined in the Note), (b) agree to modify,
amend, or change any provisions of the Note or the Loan Documents, (c) grant extensions or renewals
of or with respect to the obligations and covenants of Borrower and Guarantors under the Note or
the Loan Documents (and/or effect any release, compromise or settlement in connection therewith),
and (d) deal in all respects with Borrower, each Guarantor, and all collateral for the obligations
of Borrower and each Guarantor, as if this Guaranty were not in effect.

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          3. Nature of Guaranty. The liability of Guarantors under this Guaranty shall be
primary, direct and immediate and not conditional or contingent upon pursuit by Lender of any
remedies it may have against Borrower or any Guarantor with respect to the Note or any of the Loan
Documents. No exercise or non-exercise by Lender of any right given to it hereunder or under the
Note or any Loan Document shall affect any of Guarantors’ obligations hereunder or give Guarantors
any recourse against Lender. Without limiting the generality of the foregoing, Lender shall not be
required to make any demand on Borrower, or otherwise pursue or exhaust its remedies against
Borrower or any collateral security for the obligations of Borrower or any Guarantor before,
simultaneously with or after, enforcing its rights and remedies hereunder against Guarantors. Any
one or more successive and/or concurrent actions may be brought hereon against Guarantors either in
the same action, if any, brought against Borrower, or in separate actions, as often as Lender, in
his sole discretion, may deem advisable. The obligations of Guarantors under this Guaranty shall be
unconditional irrespective of failure of genuineness, validity, regularity or enforceability of the
Note resulting from action or inaction on the part of Borrower or any other circumstances which
might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Guarantors
hereby expressly waive acceptance hereof, and any notice or demand to which they would otherwise be
entitled hereunder solely by reason of the fact that its position is one of suretyship, including
without limitation notice of non-performance of Borrower under the Note or of any Guarantor under
any Loan Documents and presentment for payment, protest, or notice of protest for any obligation
created under the Note.

          4. Certain Rights of Lender. All rights and remedies afforded to Lender by reason of
this Guaranty, or by law, are separate and cumulative and the exercise of one shall not in any way
limit or prejudice the exercise of any other such rights or remedies. No delay or omission by
Lender in exercising any such right or remedy shall operate as a waiver thereof. No waiver of any
rights and remedies hereunder shall be deemed made by Lender unless in writing and duly executed.
No modification or amendment hereof shall be deemed made except in writing duly executed by Lender
and Guarantors. Any such written waiver shall apply only to the particular instance specified
therein and shall not impair the further exercise of such right or remedy or of any other right or
remedy of Lender, and no single or partial exercise of any right or remedy hereunder shall preclude
further exercise of any other right or remedy.

          5. No Impairment. The obligation of Guarantors to make payment for or perform the
obligations of Borrower in accordance with the terms of this Guaranty shall not be impaired,
modified, changed, released or limited in any manner whatsoever by any impairment, modification,
change, release or limitation of the liability of Borrower or its estate in bankruptcy or
reorganization resulting from the operation of any present or future provision of the United States
Bankruptcy Code or other similar laws or statutes affecting the enforcement of creditors’ rights.

          6. General Provisions. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Indiana, without regard to such jurisdiction’s conflict of
laws principles. In case any one or more of the provisions contained herein shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Guaranty, but this Guaranty shall be
construed as if such invalid, illegal or unenforceable provision or provisions had never been
contained herein. Titles and headings to articles and sections herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning or interpretation
of this Guaranty. Lender shall be entitled, in addition to such other relief as it may be entitled,
to collect from Guarantors, or any of them, all of Lender’s reasonable costs and expenses
(including, without limitation, reasonable attorneys’ fees and costs) incurred in enforcing the
terms of this Guaranty.

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          7. Covenant of Guarantors. Each Guarantor agrees that it will not declare or pay any
dividend or distribution on its capital stock, or redeem, repurchase, or otherwise acquire or
retire any of its capital stock without the prior written consent of Lender.

[Signature Page Follows]

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          IN WITNESS WHEREOF, Guarantors have caused this Guaranty to be executed as of the day and year
first above written.

	 	 	 	 	 
	 	Rainier Home Health Care

Pharmacy, Inc.

 	 
	 	By:  	/s/ Michael B. Berry
 	 
	 	Printed: Michael B. Berry 	 
	 	Title:  Treasurer 	 
	 
	 	Precision Healthcare, Inc.

 	 
	 	By:  	/s/ Michael B. Berry
 	 
	 	Printed: Michael B. Berry 	 
	 	Title:  Treasurer 	 
	 
	 	

Long Term Rx, Inc.

 	 
	 	By:  	/s/ Michael B. Berry
 	 
	 	Printed: Michael B. Berry 	 
	 	Title:  Treasurer 	 
	 
	 	Home Med Channel, Inc.

 	 
	 	By:  	/s/ Michael B. Berry
 	 
	 	Printed: Michael B. Berry 	 
	 	Title:  Treasurer 	 
	 
	 	Holland Compounding Pharmacy, Inc.

 	 
	 	By:  	/s/ Michael B. Berry
 	 
	 	Printed: Michael B. Berry  	 
	 	Title:  Treasurer 	 
	 
	 	Holland Drug Store, Inc.

 	 
	 	By:  	/s/ Michael B. Berry
 	 
	 	Printed: Michael B. Berry 	 
	 	Title:  Treasurer 	 

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