THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ ACT ”) . NO INTEREST IN THIS NOTE
MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE
UNDER THE ACT), OR (iii) AN EXEMPTION FROM REGISTRATION UNDER
THE ACT WHERE THE HOLDER HAS FURNISHED TO THE PAYOR AN ACCEPTABLE
OPINION OF ITS COUNSEL THAT AN EXEMPTION PROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
ARCADIA RESOURCES, INC.
PROMISSORY NOTE
FOR VALUE
RECEIVED, the undersigned, Arcadia Resources, Inc., a Nevada
corporation (“ Payor ”), having its executive
office and principal place of business at 9229 Delegates Row,
Suite 260, Indianapolis, IN 46240, hereby promises to pay to
Vicis Capital Master Fund (“ Payee ”), having an
address at 445 Park Avenue, 16 th Floor, New York, NY 10022, at Payee’s
address set forth above (or at such other place as Payee may from
time to-time hereafter direct by notice in writing to Payor), the
principal sum of SEVEN MILLION EIGHT HUNDRED EIGHTY-TWO THOUSAND
FOUR HUNDRED AND SEVEN DOLLARS ($7,882,407), in such coin or
currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts in
accordance with the terms hereof.
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1.
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Payment of Principal and
Interest .
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1.1
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The
principal amount of this Note outstanding from time to time shall
bear simple interest at a rate per annum equal to (i) from and
after the date hereof until the Maturity Date (as hereinafter
defined), ten percent (10%) and (ii) after the Maturity Date,
until paid in full, twelve percent (12%) (the “ Note
Rate ”).
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1.2
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The
unpaid principal balance of this Note and all accrued unpaid
interest shall be due and payable on April 1, 2012 (the
“ Maturity Date ”). Accrued unpaid interest on
the unpaid principal balance due under this Note shall be due and
payable on the following dates each year until the Maturity Date:
September 30; December 31; March 31; and
June 30 (each, an “ Interest Payment Date
”); provided , however , on each Interest
Payment Date, the Payor may, at its option and in its sole
discretion, in lieu of the payment of the cash interest due on the
Note, issue an additional promissory note (in substantially the
same form as this Note) in the aggregate principal amount equal to
such amount of interest that would otherwise be payable with
respect to the Note on such Interest Payment Date. All remaining
unpaid accrued interest shall be due and payable on the Maturity
Date. The first Interest Payment Date shall be June 30,
2009.
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1.3
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All
payments (including prepayments) made by the Payor on this Note
shall be applied first to the payment of accrued unpaid interest on
this Note and then to the reduction of the unpaid principal balance
of this Note.
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1.4
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In
the event that the date for the payment of any amount payable under
this Note falls due on a Saturday, Sunday or public holiday under
the laws of the State of New York, the time for payment of such
amount shall be extended to the next succeeding business day and
interest at the Note Rate shall continue to accrue on any principal
amount so effected until the payment thereof on such extended due
date.
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Page 1 of 9
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2.1
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In
the event that this Note is mutilated, destroyed, lost or stolen,
Payor shall, at its sole expense, execute, register and deliver a
new note, in exchange and substitution for this Note, if mutilated,
or in lieu of and substitution for this Note, if destroyed, lost or
stolen. In the case of destruction, loss or theft, Payee shall
furnish to Payor indemnity reasonably satisfactory to Payor, and in
any such case, and in the case of mutilation, Payee shall also
furnish to Payor evidence to its reasonable satisfaction of the
mutilation, destruction, loss or theft of this Note and of the
ownership thereof. Any replacement note so issued shall be in the
same outstanding principal amount as this Note and dated the date
to which interest shall have been paid on this Note or, if no
interest shall have yet been paid, dated the date of this
Note.
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2.2
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Every note issued pursuant to the
provisions of Section 2.1 above in substitution for
this Note shall constitute an additional contractual obligation of
the Payor, whether or not this Note shall be found at any time or
be enforceable by anyone.
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3.
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Indebtedness Evidenced
Hereby .
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3.1
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This Note is executed and delivered
by Payor to Payee pursuant to that certain Master Exchange
Agreement of even date (the “Master Exchange
Agreement”) among Payor, Payee, LSP Partners, LP (“LSP)
and JANA Master Fund, Ltd. (“JANA”). Capitalized terms
used in this Note and not otherwise defined herein shall have the
same meaning herein as are ascribed to them in the Master Exchange
Agreement. The indebtedness evidenced by this Note is a
consolidation of the following indebtedness owed by Payor to
Payee:
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(i)
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all
amounts owed by Payor to Payee arising under that certain Second
Amended and Restated Promissory note dated March 31, 2008
(“Second A&R Note”), executed and delivered by
Payor to JANA, in the original principal amount of Twelve Million
Dollars ($12,000,000), which, as of the date hereof, totaled
$2,000,000 (which amount was purchased by Payee pursuant to that
certain Note Indebtedness Purchase Agreement of even date) (the
“Payee Portion of the Second A&R Note
Indebtedness”); provided , that the remainder of the
balance of unpaid principal and accrued, unpaid interest evidenced
by the Second A&R Note is owed by Payor to JANA, as more
particularly set forth in the Note Indebtedness Purchase Agreement
of even date; plus
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(ii)
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all
amounts owed by Payor to Payee arising under that certain
Promissory Note dated March 31, 2008, as amended by First Amendment
dated March 31, 2008 (the “Original Vicis Note”),
in the original principal amount of Five Million Dollars
($5,000,000), which, as of the date hereof, totaled $5,882,407
comprised of principal in the amount of $5,337,734 and accrued,
unpaid interest in the amount of $544,673.
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4.
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Covenants of Payor
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Payor, on behalf of itself and its
subsidiaries, covenants and agrees that, so long as this Note
remains outstanding and unpaid, in whole, or in part:
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Page 2 of 9
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4.1
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Payor and its subsidiaries will not
sell, transfer or dispose of, nor permit or suffer the placement of
any lien (statutory or other), priority, security interest,
encumbrance or any other preferential arrangement upon, any of
their material assets (including but not limited to real property
and Payor’s equity interests in such subsidiaries) without
obtaining Payee’s written consent, other than inventory in
the ordinary course of business excepting only:
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(i)
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liens and security interests in
favor of Comerica Bank or any successor senior lender;
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(ii)
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any
Business Line Sales (as such term is defined in
Section 8.1 ), so long as the Net Proceeds (as such
term is defined in Section 8.2 ) paid in connection
therewith are applied in accordance with Section 8.2
;
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(iii)
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liens in favor of AmerisourceBergen
Drug Corporation;
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(iv)
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liens and security interests in
favor of Payee, JANA and LSP securing indebtedness permitted by
Section 4.7 hereof; and
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(v)
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liens and security interests in
connection with capital leases, auto loans or equipment loans or
leases which total no more than $500,000 in the aggregate
(collectively, the “Small Loan Basket”).
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As
used in this Section 4.1 , the term
“material” shall mean having an aggregate value of
$25,000 or more.
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4.2
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Payor shall, upon Payee’s
request furnish Payee with monthly financial updates;
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4.3
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Payor and its subsidiaries will not
pay any type of bonus to senior executive officers unless (i) made
pursuant to and in accordance with the 2008 Executive Performance
Based Compensation Plan, as amended from time to time, and such
payments are approved and authorized by the Compensation Committee
of the Board of Directors of Payor; or (ii) Payee otherwise
consents in writing to the payment of such bonuses;
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4.4
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Payor and its subsidiaries will not
engage in sale/leaseback transactions wherein real or personal
property of Payor or its subsidiaries is sold and then reacquired
in any type of lease transaction if the aggregate amount of all
such transactions would exceed Five Million Dollars
($5,000,000);
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4.5
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Payor and its subsidiaries will
promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon any of them, their
income and profits, or any of their property, before the same shall
become in default, as well as all lawful claims for labor,
materials and supplies which, if unpaid, might become a lien or
charge upon such properties or any part thereof; provided, however,
that Payor or such subsidiary shall not be required to pay and
discharge any such tax, assessment, charge, levy or claim so long
as the validity thereof shall be contested in good faith by
appropriate proceedings and Payor or such subsidiary, as the case
may be, shall set aside on its books adequate reserves with respect
to any such tax, assessment, charge, levy or claim so
contested;
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4.6
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Payor and its subsidiaries will do
or cause to be done all things necessary to preserve and keep in
full force and effect each of their corporate existence, rights and
franchises and substantially comply with all laws applicable to
them as their counsel may advise;
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4.7
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Except with respect to,
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(i)
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any
debt owing to Payee or;
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(ii)
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the
refinancing of any existing debt of Payor and/or its subsidiaries
owing to
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Page 3 of 9
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Payee, AmerisourceBergen Drug
Corporation, JANA, LSP or Comerica Bank, so long as such
refinancing does not result in an increase of the principal balance
of such existing debt (except to the extent of capitalized
interest); or
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(iii)
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the
Small Loan Basket,
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Payor and its subsidiaries will not:
(A) incur any obligation for borrowed money, any obligation
evidenced by bonds, notes or similar instruments (including any
obligations incurred in the acquisition of property, assets or
business), any reimbursement obligation, any deferred purchase
price obligation, any guarantees of any such obligations, or any
similar obligations (collectively, “debt”) which is
senior or pari passu to the debt under this Note, or to which the
debt under this Note would be structurally subordinate, if such
debt would exceed, any aggregate, One Million Dollars ($1,000,000),
without Payee’s consent or (B) incur debt junior to the
debt under this Note in an aggregate amount which exceeds Twenty
Five Million Dollars ($25,000,000), other than to the extent such
junior debt is issued to finance acquisitions in the ordinary
course of Payor or its subsidiaries’ business, without
Payee’s consent, and so long as any such junior debt is
expressly and structurally subordinate in all respects to this Note
upon terms reasonably satisfactory to Payee;
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4.8
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Payor and its subsidiaries will
utilize the Net Proceeds (as such term is defined in
Section 8.2 ) of any sale of any of real or personal
property not otherwise required to be paid to Payee, LSP or JANA
pursuant to Section 8 hereof for any of:
(i) additional capital expenditures, (ii) payment
of
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