Document:

EX-10.1

Exhibit
10.1

MASTER EXCHANGE AGREEMENT

          This Master Exchange Agreement (this “Agreement”) is entered into as of March 25, 2009, (the
“Effective Date”) among

          Arcadia Resources, Inc., a corporation organized and existing under the laws of
the State of Nevada (USA), whose principal place of business is located at 9229
Delegates Row, Suite 260, Indianapolis, IN 46240 (“Arcadia”)

and

          JANA Master Fund, Ltd., an exempted company organized and existing under the
laws of the Cayman Islands, whose principal place of business is located at 767
Fifth Avenue, 8th Floor, New York, NY 10153 (“JANA”)

and

          Vicis Capital Master Fund, a trust organized and existing under the laws of the
Cayman Islands, whose principal place of business is located at 445 Park Avenue,
16th Floor, New York, NY 10022 (“Vicis”)

and

          LSP Partners, LP, a limited partnership organized and existing under the laws
of the State of Florida, whose principal place of business is located at 10398 Gold
Leaf Drive, Boynton Beach, FL 33437 (“LSP”).

RECITALS

          A. Arcadia has issued unsecured promissory notes and warrants to purchase common stock to JANA
and Vicis. In addition, certain subsidiaries of Arcadia are indebted to JANA under a secured line
of credit.

          B. Arcadia, JANA and Vicis have agreed to increase, extend and restructure the indebtedness
represented by the notes and line of credit, and to exchange and exercise certain of the warrants,
all on the terms and subject to the conditions set forth herein.

          C. LSP has agreed to extend a new loan to Arcadia on the terms and subject to the conditions
set forth herein.

AGREEMENT

          In consideration of the mutual covenants set forth in this Agreement, the Parties hereby agree
as follows:

 

 

ARTICLE 1

Definitions

          In addition to the terms defined elsewhere in this Agreement, the following definitions shall
apply for purposes of this Agreement:

          “Assignment and Assumption Agreement” means the Assignment and Assumption Agreement, dated as
of the Effective Date, among the Borrowers, Arcadia and JANA, pursuant to which, among other
things, (i) the Borrowers assign to Arcadia (with full recourse), and Arcadia assumes, the JANA
Debt (Secured) and (ii) JANA consents to such assignment and covenants, under specified conditions,
to release its security interests in all collateral securing the JANA Debt (Secured) and to
cooperate with and assist the Borrowers and Arcadia in terminating all financing statements and any
other instruments perfecting or evidencing such security interests.

          “Borrowers” means the subsidiaries of Arcadia that are the obligors on the JANA Debt
(Secured).

          “Common Stock” means Arcadia’s Common Stock, par value $0.001 per share.

          “Exchange Shares” means the shares of Common Stock issued pursuant to Section 2.3.

          “JANA Debt” means all indebtedness (including accrued unpaid interest) of Arcadia and/or the
Borrowers to JANA, which may be any of the following, as specified in the particular instance:

          (a) The “JANA Debt (Initial)” consists of the combination of:

          (i) all indebtedness of the Borrowers to JANA under the Revolving Line of Credit and
Security Agreement, dated as of March 31, 2008, by and among JANA and certain subsidiaries
of Arcadia, and under the related Promissory Note in the original principal amount of
$5,000,000 (the “JANA Debt (Secured)”) (the amount of which is $5,510,210 as of the
Effective Date); and

          (ii) all indebtedness of Arcadia to JANA under the Second Amended and Restated
Promissory Note in the original principal amount of $12,000,000, dated March 31, 2008,
issued by Arcadia to JANA (the “JANA Debt (Unsecured)”) (the amount of which is $12,525,157
immediately prior to the transactions contemplated by Section 2.1).

          (b) The “JANA Debt (Adjusted)” is the JANA Debt (Initial) as adjusted for the transactions
contemplated by Section 2.1. The amount of the JANA Debt (Adjusted) is $18,035,367 as of the
Effective Date.

          “JANA Notes” means the promissory notes and other agreements and instruments evidencing the
JANA Debt, which may be either of the following, as specified in the particular instance:

-2-

 

          (a) the “JANA Notes (Initial)” are all of the promissory notes, agreements and instruments
evidencing the JANA Debt (Initial); and

          (b) the “JANA Note (Adjusted)” is the promissory note in the principal amount of the JANA Debt
(Adjusted) to be issued by Arcadia to JANA in the Note Exchange.

          “JANA Warrants” means any of the following held by JANA or one of its affiliates:

          (a) the Series A Common Stock Purchase Warrant to purchase up to 1,572,000 shares of Common
Stock, dated May 4, 2004, issued by Arcadia to JANA (the “JANA Warrant (Series A)”);

          (b) the Series B-1 Common Stock Purchase Warrant to purchase up to 4,444,444 shares of Common
Stock, dated September 28, 2005, issued by Arcadia to JANA (the “JANA Warrant (Series B-1)”); or

          (c) the Series B-2 Common Stock Purchase Warrant to purchase up to 1,555,555 shares of Common
Stock, dated September 28, 2005, issued by Arcadia to JANA (the “JANA Warrant (Series B-2)”).

          “LSP Note” means the promissory note to be issued to LSP pursuant to Section 2.1(d).

          “May 2007 Warrants” means the Common Stock Purchase Warrants to purchase an aggregate of up to
2,754,726 shares of Common Stock, issued by Arcadia in May 2007 to various investors.

          “New Notes” means, collectively, the JANA Note (Adjusted), the LSP Note and the Vicis Note
(Adjusted).

          “Note Exchange” means the exchanges of notes contemplated by Section 2.2.

          “Note Indebtedness Purchase Agreement” means the Note Indebtedness Purchase Agreement, dated
as of the Effective Date, between JANA and Vicis pursuant to which Vicis purchases from JANA
$2,000,000 principal amount of the JANA Debt (Unsecured).

          “Party” means Arcadia, JANA, Vicis and/or LSP, as the context requires.

          “Related Agreements” means the Assignment and Assumption Agreement, the Note Indebtedness
Purchase Agreement, the JANA Note (Adjusted), the Vicis Note (Adjusted) and the LSP Note.

          “Shares” means the shares of Common Stock issued by Arcadia to JANA and Vicis pursuant to
Articles 2 and 3.

          “Vicis Debt” means all indebtedness (including accrued unpaid interest) of Arcadia to Vicis,
which may be either of the following, as specified in the particular instance:

-3-

 

          (a) The “Vicis Debt (Initial)” is all indebtedness of Arcadia to Vicis under and pursuant to
the Promissory Note in the original principal amount of $5,000,000, dated March 31, 2008, issued by
Arcadia to Vicis, as amended by the First Amendment thereto, dated March 31, 2008. The amount of
the Vicis Debt (Initial) is $5,882,407.

          (b) The “Vicis Debt (Adjusted)” is the Vicis Debt (Initial) as adjusted for the transaction
contemplated by the Note Purchase Agreement. The amount of the Vicis Debt (Adjusted) is $7,882,407
as of the Effective Date.

          “Vicis Notes” means the promissory notes and other agreements and instruments evidencing the
Vicis Debt, which may be either of the following, as specified in the particular instance:

          (a) the “Vicis Notes (Initial)” is all of the promissory notes, agreements and instruments
evidencing the Vicis Debt (Initial); and

          (b) the “Vicis Note (Adjusted)” is the promissory note in the principal amount of the Vicis
Debt (Adjusted) to be issued by Arcadia to Vicis in the Note Exchange.

          “Vicis Warrants” means either of the following:

          (a) the Series B-1 Common Stock Purchase Warrant to purchase up to 8,888,889 shares of Common
Stock, dated September 26, 2005, issued by Arcadia to Royal Bank of Canada, as sold and assigned to
Vicis on December 28, 2006, and exercised by Vicis as to 4,787,500 shares on January 29, 2007,
leaving a remaining balance of 4,101,389 warrant shares (the “Vicis Warrant (Series B-1)”); or

          (b) the Series B-2 Common Stock Purchase Warrant to purchase up to 3,111,111 shares of Common
Stock, dated September 26, 2005, issued by Arcadia to Royal Bank of Canada, as sold and assigned to
Vicis on December 28, 2006, and amended by Amendment No. 1 thereto dated March 31, 2008 (the “Vicis
Warrant (Series B-2)”).

          “Warrant Exchange Agreement” means a letter agreement between Arcadia and a holder of May 2007
Warrants pursuant to which such holder agrees to exchange his May 2007 Warrant for either (a) one
share of Common Stock for each share of Warrant Stock (without regard to any adjustment
contemplated by or provided for therein) subject to such May 2007 Warrant, or (b) a new Common
Stock Purchase Warrant to purchase up to double the number of shares of Warrant Stock (without
regard to any adjustment contemplated by or provided for therein) subject to such May 2007 Warrant,
and substantially in the form of the existing May 2007 Warrants, except that (i) the exercise price
shall be reduced to $0.50 per share; (ii) the anti-dilution adjustment shall be calculated on a
weighted average basis; and (iii) the exercise period shall be approximately five years from the
Effective Date.

-4-

 

ARTICLE 2

Debt Transactions

          Section 2.1. Debt Adjustments.

          Subject to Section 2.4, immediately upon execution of this Agreement:

          (a) Vicis Purchase of JANA Debt (Unsecured). Vicis and JANA shall execute, deliver and
perform the Note Indebtedness Purchase Agreement. Notice of such transaction is hereby deemed to
be given to Arcadia.

          (b) JANA Advance. JANA shall advance to Arcadia an additional loan in the principal amount of
$2,000,000.

          (c) Assignment/Assumption of JANA Debt (Secured). Arcadia, the Borrowers and JANA shall
execute, deliver and perform the Assignment and Assumption Agreement.

          (d) LSP Advance. LSP shall advance to Arcadia a loan in the principal amount of $1,000,000,
and Arcadia shall issue to LSP a promissory note in respect thereof.

          Section 2.2. Note Exchange.

          Subject to Section 2.4, immediately following consummation of the transactions contemplated by
Section 2.1:

          (a) Exchange of JANA Notes. Arcadia shall issue to JANA the JANA Note (Adjusted) in exchange
for the JANA Notes (Initial). Upon such exchange, the JANA Note (Adjusted) shall supersede and
replace the JANA Notes (Initial) in all respects and shall evidence the JANA Debt (Adjusted) for
all purposes. JANA shall cancel and surrender to Arcadia all of the JANA Notes (Initial).

          (b) Exchange of Vicis Notes. Arcadia shall issue to Vicis the Vicis Note (Adjusted) in
exchange for the Vicis Notes (Initial). Upon such exchange, the Vicis Note (Adjusted) shall
supersede and replace the Vicis Notes (Initial) in all respects and shall evidence the Vicis Debt
(Adjusted) for all purposes. Vicis shall cancel and surrender to Arcadia all of the Vicis Notes
(Initial).

          Section 2.3. Exchange Shares.

          In consideration for the transactions contemplated by Article 2, Arcadia shall issue 4,057,958
shares of Common Stock to JANA, 1,773,542 shares of Common Stock to Vicis, and 225,000 shares of
Common Stock to LSP. Such shares shall be issued as soon as practicable upon compliance with
applicable stock exchange listing requirements.

-5-

 

          Section 2.4. Condition Precedent.

          As a condition precedent to the transactions contemplated by Sections 2.1 and 2.2, Arcadia
shall enter into a Warrant Exchange Agreement with each holder of May 2007 Warrants.

ARTICLE 3

Warrant Transactions

          Concurrently with the Note Exchange:

          Section 3.1. JANA Warrants.

          (a) Series A. JANA shall cancel and surrender to Arcadia the JANA Warrant (Series A) in
exchange for 1,572,000 shares of Common Stock, which shares shall be issued as soon as practicable.

          (b) Series B-1. JANA shall exercise in full the JANA Warrant (Series B-1).

          (c) Series B-2. JANA shall cancel and surrender to Arcadia the JANA Warrant (Series B-2)
without the issuance of any shares of Common Stock in respect thereof.

          Section 3.2. Vicis Warrants.

          (a) Series B-1. Vicis shall exercise in full the Vicis Warrant (Series B-1).

          (b) Series B-2. Vicis shall cancel and surrender to Arcadia the Vicis Warrant (Series B-2) in
exchange for 4,044,444 shares of Common stock, which shares shall be issued as soon as practicable.

ARTICLE 4

Additional Covenants

          Section 4.1. Post-Closing Grants of Security Interests.

          (a) Documentation and Perfection of Existing Security Interests. The Assignment and
Assumption Agreement provides that Arcadia and each of its operating subsidiaries which are party
to the Assignment and Assumption Agreement (collectively, the “HHE Subsidiaries”) grants to each of
JANA, Vicis and LSP (referred to in this Section 4.1 individually as a “Secured Party” and
collectively as the “Secured Parties”) a security interest in the Collateral (as such term is used
in the Assignment and Assumption Agreement; hereinafter, the “Collateral”). After the Effective
Date, Arcadia and each of the HHE Subsidiaries will cooperate with the Secured Parties to execute
and deliver any and all documents necessary or appropriate to establish on a more comprehensive
basis the terms of the

-6-

 

security interest in the Collateral and the obligations of Arcadia and the HHE Subsidiaries
with respect thereto, together with any and all Uniform Commercial Code financing statements
necessary to perfect the security interests in the Collateral. Arcadia and the HHE Subsidiaries
agree to execute any and all necessary and appropriate documents to effectuate the foregoing
(collectively, the “Security Interest Documents”) within five (5) business days of receipt.

          (b) Grant, Documentation and Perfection of Additional Security Interests. After the Effective
Date:

     (i) Subject to clause (iii) below, Arcadia will, and will cause its subsidiary,
PrairieStone Pharmacy, LLC (“PrairieStone”) and PrairieStone’s wholly-owned subsidiaries to,
grant to the Secured Parties (A) the pledge of the capital stock of PrairieStone; and (B) a
blanket lien and security interest in and to all the assets of PrairieStone and its
wholly-owned subsidiaries. Arcadia, PrairieStone and PrairieStone’s wholly-owned
subsidiaries agree to execute and deliver to the Secured Parties any and all documents and
resolutions necessary to evidence, confirm and establish the liens and security interests
described in the preceding sentence; provided, however, that, in addition to any additional
requirements arising under subsection 4.1(b)(iii), the liens and security interests granted
pursuant to this subsection 4.1(b)(i) will be subordinate and junior in all respects to the
prior liens and security interests of AmerisourceBergen Drug Company (“ABDC”), and a
condition precedent to the effectiveness of any grant or security interest in favor of the
Secured Parties will be the execution of such lien subordination instruments as may be
required by ABDC.

     (ii) Subject to clause (iii) below, Arcadia will use commercially reasonable efforts to
cause its subsidiary, Arcadia Services, Inc., and its wholly-owned subsidiaries
(collectively, “ASI”), to grant junior security interests in the assets of ASI to the
Secured Parties and to complete any and all necessary documentation to effectuate, confirm
and establish such security interests on or before June 30, 2009. In addition, Arcadia
shall cause ASI to grant to the Secured Parties a first and prior security interest in such
of the assets of ASI as are or become unencumbered at any time from and after the Effective
Date.

     (iii) The covenants and undertakings set forth in subsections 4.1(b)(i) and (ii) are
subject to the prior condition that neither Arcadia nor any of its subsidiaries shall be
required to grant any liens, or take any other actions, to the extent that the same would
materially and adversely affect any of its agreements or relationships with senior secured
creditors of PrairieStone (or any of its subsidiaries) or ASI. Each of the Secured Parties
agrees to execute and deliver any and all intercreditor and subordination documents and
instruments that may be required by any senior secured lender as a precondition to the
granting of any junior or senior lien or security interest with respect to any of the assets
of PraireStone (or any of its subsidiaries) or ASI.

          (c) Execution and Delivery of Guaranties by HHE Subsidiaries. After the Effective Date,
Arcadia will cause each of the HHE Subsidiaries to execute and deliver to each Secured Party an
unconditional and continuing guaranty of any and all indebtedness and other obligations owed by
Arcadia to such Secured Party (collectively, the “HHE Subsidiaries Guaranties”). The HHE
Subsidiaries Guaranties will be executed simultaneously with the

-7-

 

Security Interest Documents, and the Security Interest Documents will provide that the
obligations secured thereby include the obligations arising under the HHE Subsidiaries Guaranties.

          Section 4.2. Voting of Shares.

          Each of JANA and Vicis shall vote or cause to be voted all of its Beneficially Owned Shares in
favor of the Option Plan Amendment and the Bonus Plan Proposal in connection with any vote or
consent taken or solicited thereon. For purposes hereof, (a) “Beneficially Owned Shares” means all
shares of Common Stock over which the stockholder has voting power in respect of a specified
proposal as of the time any vote or consent is taken or solicited thereon; (b) the “Option Plan
Amendment” means an amendment to the Company’s 2006 Equity Incentive Plan to increase the number of
shares of Common Stock reserved for awards thereunder to 5% of the total number of authorized
shares of Common Stock; and (c) the “Bonus Plan Proposal” means the payment of bonuses approved at
any time by the Compensation Committee of the Company’s Board of Directors pursuant to the
Company’s 2008 Performance Based Compensation Plan.

          Section 4.3. Share Listing.

          Arcadia shall secure the listing of all of the Shares upon each national securities exchange
and automated quotation system, if any, upon which the Common Stock is listed (subject to official
notice of issuance) and shall maintain such listing of all Shares. Arcadia shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4.3.

          Section 4.4. Holding Periods.

          For purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (“Rule
144”), Arcadia acknowledges that the holding period of (i) the Exchange Shares may be tacked onto
the holding period of the JANA Notes (Initial) and Vicis Notes (Initial), as applicable, and (ii)
the Shares issued pursuant to Sections 3.1(a) and 3.2(b) may be tacked onto the holding period of
the warrants for which they are exchanged. Arcadia shall not take any position contrary to this
Section 4.4.

ARTICLE 5
Registration of Shares

          Section 5.1. Registration Procedures and Expenses.

          The Company shall:

          (a) as soon as practicable, but in no event later than July 31, 2009 (the “Filing
Deadline”), prepare and file with the Securities and Exchange Commission (“the
Commission”) a registration statement on Form S-3 (the “Registration Statement”)
relating to the resale by JANA or Vicis, as applicable (the “Shareholders”) of any of the
Shares issued to them hereunder that have not previously been registered (the “Registrable
Shares”);

-8-

 

          (b) use its best efforts, subject to receipt of necessary information from the Shareholders,
to cause the Commission to declare the Registration Statement effective within 60 days after the
Filing Deadline in the event that the Registration Statement is not selected for review by the
Commission or (ii) within 90 days after the Filing Deadline in the event that the Registration
Statement is selected for review by the Commission (each of (i) and (ii), the “Effective
Deadline”);

          (c) permit the Shareholders to review and comment upon those sections in the Registration
Statement entitled “Selling Stockholders” and “Plan of Distribution” at least two business days
prior to the filing of the Registration Statement with the Commission;

          (d) by 9:30 a.m. on the business day following the effective date of the Registration
Statement, file with the Commission in accordance with Rule 424 under the Securities Act of 1933,
as amended (the “Securities Act”) the final prospectus to be used in connection with sales
pursuant to the Registration Statement;

          (e) promptly prepare and file with the Commission such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be necessary to keep
the Registration Statement effective until the earliest of (i) such time as all of the Registrable
Shares have been sold pursuant to the Registration Statement, or (ii) such time as the Registrable
Shares become eligible for resale without restriction pursuant to Rule 144 or any other rule of
similar effect (each of (i) and (ii), the “Registration Period”);

          (f) furnish to the Shareholders with respect to the Registrable Shares registered under the
Registration Statement (and to each underwriter, if any, of such Registrable Shares) such number of
copies of prospectuses and such other documents as the Shareholders may reasonably request, in
order to facilitate the public sale or other disposition of all or any of the Registrable Shares by
the Shareholders;

          (g) bear all expenses in connection with the procedures in paragraphs (a) through (f) of this
Section 5.1 and the registration of the Registrable Shares pursuant to the Registration Statement,
other than fees and expenses, if any, of counsel or other advisers to the Shareholders or
underwriting discounts, brokerage fees and commissions incurred by the Shareholders, if any in
connection with the offering of the Registrable Shares pursuant to the Registration Statement;

          (h) in order to enable the Shareholders to sell the Registrable Shares under Rule 144, use its
commercially reasonable efforts to comply with the requirements of Rule 144, including without
limitation, use its commercially reasonable efforts to comply with the requirements of Rule 144(c)
with respect to public information about the Company and to timely file all reports required to be
filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”);

          (i) not, and shall cause its subsidiaries and affiliates not to, identify any Shareholders as
an underwriter in any public disclosure or filing with the Commission or any securities exchange or
trading market;

-9-

 

          (j) notify the Shareholders in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or and necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, nonpublic information);

          (k) notify the Shareholders of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of the Registrable Shares for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its receipt of notice of
the initiation or threatening of any proceeding for such purpose;

          (l) furnish to the Shareholders, without charge, copies of any correspondence from the
Commission or the staff of the Commission to the Company or its representatives relating to the
Registration Statement; and

          (m) if requested by a Shareholder, (i) as soon as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the Shareholders reasonably requests to
be included therein relating to the sale and distribution of Registrable Shares, including, without
limitation, information with respect to the number of Registrable Shares being offered or sold, the
purchase price being paid therefor and any other terms of the offering of the Registrable Shares to
be sold in such offering; (ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment; and (iii) as soon as practicable,
supplement or make amendments to the Registration Statement if reasonably requested by the
Shareholders.

          Section 5.2. Indemnification.

          For the purpose of this Section 5.2, the term “Shareholder/Affiliate” shall mean any
affiliates of a Shareholder, including a transferee who is an affiliate of a Shareholder, and any
person who controls the Shareholder or any affiliate of the Shareholder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act; and (ii) the term “Registration
Statement” shall include any preliminary prospectus, final prospectus, exhibit, supplement or
amendment included in or relating to, and any document incorporated by reference in, the
Registration Statement referred to Section 5.1.

          (a) The Company agrees to indemnify and hold harmless the Shareholders and each
Shareholder/Affiliate against any losses, claims, damages, liabilities or expenses, joint or
several, to which the Shareholders or Shareholder/Affiliate may become subject, under the
Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such settlement is effected
with the prior written consent of the Company, which consent shall not be unreasonably withheld or
delayed), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement, including the
Prospectus, financial statements and schedules, and all other documents filed as a part thereof, as

-10-

 

amended at the time of effectiveness of the Registration Statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to Rules 430A, 430B or 430C of
the Rules and Regulations of the Securities Act, or the Prospectus, in the form first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations of the Securities Act, or filed
as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is
required (the “Prospectus”) or any subsequent amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state in any of them a material fact required to
be stated therein or necessary to make the statements in the Registration Statement or any
amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement
thereto not misleading in light of the circumstances under which they were made, or arise out of or
are based in whole or in part on any inaccuracy in the representations or warranties of the Company
contained in this Agreement, or in any writing delivered pursuant to this Agreement, or any failure
of the Company to perform its obligations hereunder or under law, and will promptly reimburse the
Shareholders and each Shareholder/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by the Shareholders or such Shareholder/Affiliate in connection with
investigating, defending or preparing to defend, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Shareholder expressly for use therein, (ii) the inaccuracy of any
representation or warranty made by any Shareholder herein, or (iii) any statement or omission in
any Prospectus that is corrected in any subsequent Prospectus that was delivered to the
Shareholders prior to the pertinent sale or sales by the Shareholders.

          (b) Each Shareholder will severally, but not jointly, indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the
Company, each of its directors, each of its officers who signed the Registration Statement or
controlling person may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, but only if such settlement is effected with the prior written
consent of such Shareholders) insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements in the Registration Statement or any amendment or supplement thereto not
misleading or in the Prospectus or any amendment or supplement thereto not misleading in light of
the circumstances under which they were made, in each case to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the Registration Statement,
the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Investor expressly for use
therein, and will reimburse the Company, each of its directors, each of its officers who signed the
Registration Statement or

-11-

 

controlling person of the Company for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration Statement or
controlling person in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however, that an Investor
shall be liable under this Section 5.2 for only that amount as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Shares pursuant to such Registration
Statement.

          (c) Promptly after receipt by an indemnified party under this Section 5.2 of notice of the
threat or commencement of any action, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party under this Section 5.2, promptly notify the indemnifying
party in writing thereof; but the omission to notify the indemnifying party will not relieve it
from any liability that it may have to any indemnified party for contribution or otherwise under
the indemnity agreement contained in this Section 5.2 to the extent it is not prejudiced as a
result of such failure. In case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish, jointly with all
other indemnifying parties similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the indemnifying party and the
indemnified party, based upon the advice of such indemnified party’s counsel, shall have reasonably
concluded that there may be a conflict of interest between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise participate in the defense
of such action on behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 5.2 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the indemnified party
shall have employed such counsel in connection with the assumption of legal defenses in accordance
with the proviso to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel, reasonably
satisfactory to such indemnifying party, representing all of the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of action, in each of which cases the reasonable fees and expenses of
counsel shall be at the expense of the indemnifying party. The indemnifying party shall not be
liable for any settlement of any action without its written consent; provided that such consent
shall not be unreasonably withheld or delayed.

          (d) To the extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 5.2 to the fullest extent permitted by law;
provided, however, that: (i) no person involved in the sale of the Registrable Shares, which
person is guilty of fraudulent misrepresentation (within the meaning of Section

-12-

 

11(f) of the Securities Act) in connection with such sale, shall be entitled to contribution
from any person who was not guilty of fraudulent misrepresentation; and (ii) contribution by any
seller of Registrable Shares shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Shares pursuant to such Registration Statement.

ARTICLE 6

Representations and Warranties

          Section 6.1. General Corporate Matters.

          Each Party hereby represents and warrants to each of the other Parties that:

          (a) Organization and Power. It is a corporation, limited liability company or other entity
duly organized, validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. It has all requisite power and authority to conduct its business
and engage in the transactions provided for in this Agreement and each of the Related Agreements to
which it is a party (as applicable to any Party, the “Applicable Agreements”).

          (b) Authorization and Validity of Agreements. The execution, delivery and performance by it
of the Applicable Agreements, and the consummation by it of the transactions contemplated thereby,
have been duly authorized and approved by all necessary corporate or equivalent action on its part.
The Applicable Agreements have been duly executed and delivered by it and constitute its legal,
valid and binding obligations, enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or other laws relating to or
affecting creditors’ rights generally and by general equity principles.

          (c) Absence of Conflicts. The execution, delivery and performance by it of the Applicable
Agreements, and the consummation by it of the transactions contemplated thereby, do not and will
not: (i) violate any applicable laws or regulations; (ii) conflict with, or result in the breach
of any provision of, its certificate or articles of incorporation, bylaws or equivalent
organizational documents; or (iii) violate, conflict with, result in the breach or termination of,
or constitute a default under (or event which, with notice, lapse of time or both, would constitute
a default under), any contract or agreement to which it is a party or by which any of its
properties or businesses are bound.

          (d) Consents. No authorization, consent or approval of, or notice to or filing with, any
governmental authority (or, with respect to Arcadia, any regulatory or self-regulatory agency or
the stockholders of Arcadia) is required for the execution, delivery and performance by it of the
Applicable Agreements (including the issuance of the Shares), except such as may be required
pursuant to applicable federal and state securities laws and stock exchange listing requirements.

-13-

 

          Section 6.2. Arcadia Representations and Warranties.

          Arcadia hereby represents and warrants to JANA, Vicis and LSP (each, an “Investor”) as
follows:

          (a) Valid Issuance of Shares. Upon issuance in accordance with the terms of this Agreement,
the Shares shall be validly issued, fully paid and nonassessable, free from all taxes, liens and
charges with respect to the issuance thereof.

          (b) Securities Law Compliance. Assuming the accuracy of the representations and warranties of
Investors contained in Section 6.3, the issuance of the Shares and the New Notes (collectively, the
“Securities”) is exempt from the registration requirements of the Securities Act and applicable
state securities laws.

          (c) No Conflicts. The execution and delivery of this Agreement, the New Notes, the Assignment
and Assumption Agreement, and each of the warrants and other agreements contemplated hereby and
thereby, and the granting of the liens and the performance of the other obligations hereunder and
thereunder, do not violate or conflict with or constitute a default under any material agreement to
which Arcadia or any of its subsidiaries is bound.

          (d) Rule 16b-3. In connection with the approval of the transactions set forth herein, the
Board of Directors of Arcadia has passed a resolution substantially in the following form:

     “RESOLVED, that the securities to be exchanged with and issued to JANA Master
Fund, Ltd. and Vicis Capital Master Fund pursuant to and as described in the Master
Exchange Agreement shall be made in accordance with, and shall be subject to the
exemptions contained in, Rule 16b-3 of the Exchange Act.”

          Section 6.3. Investor Representations and Warranties.

          Each Investor acknowledges that the Securities have not been registered under the Securities
Act and are being issued pursuant to an exemption from such registration based in part upon the
representations and warranties set forth in this Section 6.3. Each Investor hereby represents and
warrants, severally and not jointly, to Arcadia as follows:

          (a) Investor Bears Economic Risk. Investor acknowledges that (i) it must bear the economic
risk of its investment in the Securities indefinitely unless the sale or disposition of the
Securities is registered under the Securities Act or an exemption from registration is available;
(ii) upon issuance, the Securities will be restricted against transfer in violation of federal and
state securities laws, and the certificates representing the Securities will bear a legend with
respect to such restrictions; and (iii) there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such exemption may not
allow Investor to sell or dispose of the Securities under the circumstances, in the amounts or at
the times Investor might propose.

          (b) Acquisition for Own Account. Investor is acquiring the Securities for its own account for
investment only, and not with a view to the resale or other distribution thereof.

-14-

 

          (c) Investor Can Protect its Interest. Investor has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar to Arcadia so that
it is capable of evaluating the merits and risks of its investment in Arcadia. By reason of such
experience and its additional business and financial experience, Investor has the capacity to
protect its own interests in connection with the transactions contemplated by this Agreement and
the Related Agreements.

          (d) Accredited Investor. Investor is an accredited investor within the meaning of Regulation
D under the Securities Act.

          (e) Company Information. Investor has access to Arcadia’s public filings and has had the
opportunity to discuss Arcadia’s business, management and financial affairs with Arcadia’s
management.

          (f) Rule 144. Investor acknowledges that, upon issuance, the Securities will be “restricted
securities” as defined in Rule 144. Investor is aware of the provisions of Rule 144, which permits
limited resale of shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current public information
about Arcadia, the resale occurring following the required holding period under Rule 144 and the
number of shares being sold during any three-month period not exceeding specified limitations in
certain circumstances.

          (g) Legal Residence. The office of Investor in which its investment decision was made is
located at the address of Investor set forth in the opening paragraph of this Agreement.

          (h) Foreign Investors. If Investor is not a United States person (as defined by Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended), then Investor has satisfied itself
with respect to compliance with the laws of its jurisdiction in connection with the transactions
contemplated by the Applicable Agreements, including (i) the legal requirements for the acquisition
of the Securities, (ii) any foreign exchange restrictions applicable to such acquisition, (iii) any
required governmental or other consents, and (iv) the tax consequences of the acquisition and/or
subsequent disposition of the Securities. Neither Arcadia’s issuance nor Investor’s ownership of
the Securities will violate any applicable securities or other laws of Investor’s jurisdiction.

ARTICLE 7

Miscellaneous

          Section 7.1. Third Party Rights.

          This Agreement is not intended to confer any benefits upon, or create any rights in favor of,
any Person other than the Parties and their affiliates.

-15-

 

          Section 7.2. Amendments.

          This Agreement shall not be released, discharged, amended or modified in any manner except by
a written instrument signed by duly authorized officers or representatives of each of the Parties.

          Section 7.3. Governing Law.

          Any claim or controversy relating in any way to this Agreement shall be governed by and
interpreted exclusively in accordance with the laws of the State of New York and the laws of the
United States, without regard to the conflicts of law principles thereof.

          Section 7.4. Waiver of Compliance.

          No provision of this Agreement shall be waived by any act, omission or knowledge of a Party or
its agents or employees, except by an instrument in writing expressly waiving such provision and
signed by a duly authorized officer of the waiving Party, which waiver shall be effective only with
respect to the specific obligation and instance described therein.

          Section 7.5. Notices.

          All notices and other communications in connection with this Agreement shall be in writing and
shall be sent to the respective Parties at the following addresses, or to such other addresses as
may be designated by the Parties in writing from time to time in accordance with this Section, by
registered or certified mail, postage prepaid, or by express courier service, service fee prepaid,
or by facsimile with a hard copy to follow via mail or express courier service in accordance with
this Section.

			
	To JANA:	 	c/o JANA Partners LLC

767 Fifth Avenue, 8th Floor

New York, New York 10153

Attn: Marc Lehmann, Partner

Fax No. (212) 455-0901

			
	To Vicis:	 	445 Park Avenue, 16th Floor

New York, New York 10022

Attn: Keith Hughes

Fax No. (212) 909-4601

			
	To LSP:	 	10398 Gold Leaf Drive

Boynton Beach, Florida 33437

Attn: Aaron Lehmann

Fax No. _________

-16-

 

			
	To Arcadia:	 	Arcadia Resources, Inc.

9229 Delegates Row, Suite 260

Indianapolis, IN 46240

Attention: Chief Executive Officer

Fax No. (317) 575-6195

			
	 	 	with copies to:

			
	 	 	Arcadia Resources, Inc.

9229 Delegates Row, Suite 260

Indianapolis, IN 46240

Attention: Chief Legal Officer

Fax No. (317) 575-6195

			
	 	 	            and

			
	 	 	Daniel L. Boeglin, Esq.

Baker & Daniels LLP

600 East 96th Street, Suite 600

Indianapolis, IN 46240

Fax No.: (317) 569-4800

All notices shall be deemed given and received (i) if delivered by hand, immediately, (ii) if sent
by mail, three business days after posting, (iii) if delivered by express courier service, the next
business day in the jurisdiction of the recipient, or (iv) if sent by fax, at the time shown in the
confirmed electronic receipt, or on the first business day thereafter if the notice is sent on
other than a business day.

          Section 7.6. Counterparts; Form of Signatures.

          This Agreement may be executed in counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same instrument. Any such
counterpart delivered by facsimile or electronically shall be valid and have the same force and
effect as an original.

          Section 7.7. Further Assurances.

          From time to time, as and when requested by any Party, the other Parties shall execute and
deliver, or cause to be executed and delivered, all such documents and instruments and shall take,
or cause to be taken, all such further actions as such other Parties may reasonably deem necessary
or desirable to carry out the intentions of the Parties embodied in this Agreement.

          Section 7.8. Construction.

          The language in all parts of this Agreement shall be construed, in all cases, according to its
fair meaning. The parties acknowledge that each party and its counsel have reviewed and revised
this Agreement and that any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the

-17-

 

interpretation of this Agreement. Words of one gender shall be deemed to include the other
gender as the context requires. Standard variations on defined terms (such as the plural form of a
term defined in the singular form, and the past tense of a term defined in the present tense) shall
be deemed to have meanings that correlate to the meanings of the defined terms. The terms
“hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including the Exhibits and Schedules hereto, if
any) and not to any particular provision of this Agreement. Article, Section, Exhibit and Schedule
references are to the Articles, Sections, Exhibits and Schedules to this Agreement unless otherwise
specified. Unless otherwise stated, all references to any agreement shall be deemed to include the
exhibits, schedules and annexes to such agreement. The word “including” and words of similar
import when used in this Agreement shall mean “including, without limitation,” unless the context
otherwise requires or unless otherwise specified. The word “or” shall not be exclusive. Unless
otherwise specified in a particular case, the word “days” refers to calendar days. References
herein to this Agreement shall be deemed to refer to this Agreement as of the date of such
agreement and as it may be amended thereafter, unless otherwise specified. All references to
“dollars” or “$” shall be deemed references to the lawful money of the United States of America.
Article, Section and other headings contained in this Agreement are for reference purposes only and
are not intended to describe, interpret, define or limit the scope, extent or intent of any
provision of this Agreement.

          Section 7.9. Survival.

          The representations, warranties, covenants and agreements made herein shall survive the
closing of the transactions contemplated hereby.

          Section 7.10. Successors and Assigns.

          Except as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the Parties and their respective successors and assigns.

          Section 7.11. Consent.

          JANA and Vicis hereby approve and consent to the transactions contemplated by this Agreement
to the extent such approval and/or consent is required or necessary to avoid a breach or default
(or any other adverse consequence) under any contract, agreement, document or instrument between
JANA or Vicis (or any of their respective affiliates), on the one hand, and Arcadia and/or any of
its affiliates, on the other hand.

[REMAINDER OF PAGE INTENTIONALLY BLANK;

SIGNATURE PAGE FOLLOWS]

-18-

 

[Signature Page to Master Exchange Agreement]

          The Parties have executed this Agreement as of the Effective Date to evidence their agreement
to the terms and provisions set forth herein.

	 	 	 	 	 	 	 	 	 	 	 
	Arcadia Resources, Inc.	 	 	 	JANA Master Fund, Ltd.	 	 
	 

	 	 	 	 	 	By:
	 	JANA Partners LLC, its Investment

Manager
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Marvin R. Richardson
	 	 	 	By:
	 	/s/ Marc Lehmann	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name: Marvin R. Richardson
	 	 	 	 	 	Name: Marc Lehmann	 	 
	 

	 	Title:   President & CEO
	 	 	 	 	 	Title:   Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Vicis Capital Master Fund	 	 	 	LSP Partners, LP	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Keith W. Hughes
	 	 	 	By:
	 	/s/ Aaron Lehmann, GP	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name: Keith W. Hughes
	 	 	 	 	 	Name: LSP Partners, LP	 	 
	 

	 	Title:   Chief Financial Officer
	 	 	 	 	 	Title:   General PartnerEX-10.2

Exhibit
10.2

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

			
	 	 	 
	$18,035,367
	 	March 25, 2009

     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 JANA Master Fund, Ltd.
(“Payee”), having an address at 767 Fifth Avenue, 8th Floor, New York, NY 10153,
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 EIGHTEEN MILLION THIRTY FIVE THOUSAND
THREE HUNDRED AND SIXTY SEVEN DOLLARS ($18,035,367), 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.

	1.	 	Payment of Principal and Interest.

	 	1.1	 	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”).
	 
	 	1.2	 	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.
	 
	 	1.3	 	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.
	 
	 	1.4	 	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,

Page 1 of 10

 

	 	 	 	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.

	2.	 	Replacement of Note.

	 	2.1	 	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.
	 
	 	2.2	 	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.

	3.	 	Indebtedness Evidenced Hereby.

	 	3.1	 	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 Vicis Capital Master Fund (“Vicis”). 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:

	 	(i)	 	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”), in the original principal amount of
Twelve Million Dollars ($12,000,000), which, as of the date hereof, totaled $10,525,158 comprised
of principal in the amount of $9,365,409 (an amount which excludes the Two Million Dollars
($2,000,000) of principal of the Second A&R Note purchased by Vicis pursuant to that certain Note
Indebtedness Purchase Agreement of even date) and accrued, unpaid interest in the amount of
$1,159,749 (the “JANA Portion of the Second A&R Note Indebtedness”); plus
	 
	 	(ii)	 	all amounts owed by Payor to Payee arising under that certain Assigned and Assumed
Subsidiaries Note (as such term is defined below), which, as of the date hereof, totaled
$5,510,210 comprised of principal in the amount of $5,000,000 and accrued, unpaid interest in the
amount of $510,210; plus
	 
	 	(iii)	 	new loan indebtedness in the principal amount of Two Million Dollars ($2,000,000) extended
by Payee to Payor on the date hereof (the “New JANA Loan”).

Page 2 of 10

 

	 	 	 	As used herein, the term Assigned and Assumed Subsidiaries Note means that certain Promissory
Note dated March 31, 2008, in the original principal amount of Five Million Dollars ($5,000,000),
payable to the order of Payee, and executed and delivered to Payee by Arcadia Products, Inc., a
Delaware corporation, Arcadia Home Health Products, Inc., a Delaware corporation, O2 Plus, a
California corporation, Lovell Medical Supply, Inc., a North Carolina corporation, Arcadia Home
Mideast, Inc., a Delaware corporation, Beacon Respiratory Services of Alabama, Inc., a Delaware
corporation, Beacon Respiratory Services of Georgia, Inc., a Delaware corporation, American
Oxygen and Medical Equipment, Inc., an Illinois corporation, Arcadia Home Oxygen and Medical
Equipment, Inc., a Michigan corporation, and Trinity Healthcare of Winston-Salem, Inc., a Georgia
corporation (referred to collectively as the “Arcadia Subsidiaries”). The Assigned and Assumed
Subsidiaries Note was assigned to Payor by the Arcadia Subsidiaries on the date hereof pursuant
to the Assignment and Assumption Agreement.

	4.	 	Covenants of Payor.
	 
	 	 	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:

	 	4.1	 	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:

	 	(i)	 	liens and security interests in favor of Comerica Bank or any successor
senior lender;
	 
	 	(ii)	 	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;
	 
	 	(iii)	 	liens in favor of AmerisourceBergen Drug Corporation; and;
	 
	 	(iv)	 	liens and security interests in favor of Payee, Vicis and LSP securing
indebtedness permitted by Section 4.7 hereof; and
	 
	 	(v)	 	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”).

	 	 	As used in this Section 4.1, the term “material” shall mean having an aggregate value of $25,000 or more.

	 	4.2	 	Payor shall, upon Payee’s request, furnish Payee with monthly financial updates;
	 
	 	4.3	 	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;
	 
	 	4.4	 	Payor and its subsidiaries will not engage in sale/leaseback transactions wherein real or

Page 3 of 10

 

	 	 	 	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);

	 	4.5	 	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;
	 
	 	4.6	 	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;
	 
	 	4.7	 	Except with respect to,

	 	(i)	 	any debt owing to Payee or;
	 
	 	(ii)	 	the refinancing of any existing debt of Payor
and/or its subsidiaries owing to Payee,
AmerisourceBergen Drug Corporation, LSP,
Vicis 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
	 
	 	(iii)	 	the Small Loan Basket,

	 	 	 	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;
	 
	 	4.8	 	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 Vicis pursuant to Section 8 hereof for any of: (i) additional capital expenditures, (ii)
payment of any debt which is senior to the debt under this Note, or (iii) the payment of debt
arising under this Note;
	 
	 	4.9	 	Payor and its subsidiaries will not issue any form of equity or other security (other than debt)
in a public or private placement capital raise without Payee’s consent; provided, however, that
Payor may issue shares of restricted stock, stock options or stock appreciation rights pursuant
to the 2006 Equity Incentive Plan so long as the total 

Page 4 of 10

 

	 	 	 	number of shares covered thereby does not
exceed Five Percent (5.0%) of the number of authorized shares of Payor’s common stock;

	 	4.10	 	Payor and its subsidiaries will at all times maintain, preserve, protect and keep each of their
property used or useful in the conduct of business in good repair, working order and condition
(except for the effects of reasonable wear and tear in the ordinary course of business) and will
from time to time, make all necessary and proper repairs, renewals, replacements, betterments and
improvements thereto;
	 
	 	4.11	 	Payor and its subsidiaries will keep adequately insured, by financially sound reputable insurers,
all property of a character usually insured by similar corporations and carry such other
insurance as is usually carried by similar corporations and, with respect to the Collateral (as
such term is defined in the Assignment and Assumption Agreement), cause Payee to be named at all
times as an additional insured and loss payee on such insurance policies;
	 
	 	4.12	 	Payor will, promptly following the occurrence of an Event of Default or of any condition or event
which, with the giving of notice or the lapse of time or both, would constitute an Event of
Default, furnish a statement of Payor’s Chief Executive Officer or Chief Financial Officer to
Payee setting forth the details of such Event of Default or condition or event and the action
which Payor intends to take with respect thereto; and

	 
	 	4.13	 	
Payor will, and will cause each of its subsidiaries to, at all times maintain books of account in
which all of its financial transactions are duly recorded in conformance with generally accepted
 accounting principles.

	5.	 	Events of Default. The following events each constitute an “Event of Default”:

	 	5.1	 	The dissolution of Payor or any vote in favor thereof by the board of directors and shareholders
of Payor; or
	 
	 	5.2	 	Payor makes an assignment for the benefit of creditors, or files with a court of competent
jurisdiction an application for appointment of a receiver or similar official with respect to it
or any substantial part of its assets, or Payor files a petition seeking relief under any
provision of the Federal Bankruptcy Code or any other federal or state statute now or hereafter
in effect affording relief to debtors, or any such application or petition is filed against
Payor, which application or petition is not dismissed or withdrawn within sixty (60) days from
the date of its filing; or
	 
	 	5.3	 	Payor fails to pay the principal amount, or interest on, or any other amount payable under this
Note within five (5) days of when the same becomes due and payable; or
	 
	 	5.4	 	Payor admits in writing its inability to pay its debts as they mature; or
	 
	 	5.5	 	Payor sells all or substantially all of its assets or merges or is consolidated with or into
another corporation other than a transaction whose primary purpose is to re-domicile the Payor ;
or
	 
	 	5.6	 	A proceeding is commenced to foreclose a security interest or lien in any property or assets of
Payor as a result of a default in the payment or performance of any debt (in excess of $350,000
and secured by such property or assets) of Payor or of any subsidiary of Payor; or
	 
	 	5.7	 	A final judgment for the payment of money in excess of $350,000 is entered against Payor by a
court of competent jurisdiction, and such judgment is not discharged (nor the

Page 5 of 10

 

	 	 	 	discharge thereof
duly provided for) in accordance with its terms, nor a stay of execution thereof procured, within
sixty (60) days after the date such judgment is entered, and, within such period (or such longer
period during which execution of such judgment is effectively stayed), an appeal therefrom has
not been prosecuted and the execution thereof caused to be stayed during such appeal; or
	 	5.8	 	An attachment or garnishment is levied against the assets or properties of Payor or any
subsidiary of Payor involving an amount in excess of $350,000 and such levy is not vacated,
bonded or otherwise terminated within sixty (60) days after the date of its effectiveness; or
	 
	 	5.9	 	Payor or any subsidiary defaults in the due observance or performance of any covenant, condition
or agreement to be observed or performed pursuant to the terms of this Note (other than the
default specified in Section 5.3 above) and such default continues uncured for a period of thirty
(30) days from the date Payor receives written notice from the Payee.

	 
	 	
Upon the occurrence of any such Event of Default and at any time thereafter, the holder of this Note shall have the right (at such
holder’s option) to declare the principal of, accrued unpaid interest on, and all other amounts payable under this Note to be forthwith
due and payable, whereupon all such amounts shall be immediately due and payable to the holder of this Note, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived; provided.

	6.	 	Suits for Enforcement and Remedies.

	 	6.1	 	If any one or more Events of Default shall occur and be continuing, the Payee may proceed to (1)
protect and enforce Payee’s rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained in this Note or in
any agreement or document referred to herein or in aid of the exercise of any power granted in
this Note or in any agreement or document referred to herein, (ii) enforce the payment of this
Note, or (iii) enforce any other legal or equitable right of the holder of this Note. No right or
remedy herein or in any other agreement or instrument conferred upon the holder of this Note is
intended to be exclusive of any other right or remedy, and each and every such right or remedy
shall be cumulative and shall be in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise.

	7.	 	Unconditional Obligation; Fees, Waivers, Other.

	 	7.1	 	The obligation to make the payments provided for in this Note are absolute and unconditional and
are not subject to any defense, set-off, counterclaim, rescission, recoupment or adjustment
whatsoever.
	 
	 	7.2	 	If, following the occurrence of an Event of Default, Payee shall seek to enforce the collection
of any amount of principal of and/or interest on this Note, there shall be immediately due and
payable from Payor, in addition to the then unpaid principal of, and accrued unpaid interest on,
this Note, all reasonable costs and expenses incurred by Payee in connection therewith,
including, without limitation, reasonable attorneys’ fees and disbursements.
	 
	 	7.3	 	No forbearance, indulgence, delay or failure to exercise any right or remedy with respect to this
Note shall operate as a waiver or as acquiescence in any default, nor shall any

Page 6 of 10

 

	 	 	 	single or partial
exercise of any right or remedy preclude any other or further exercise thereof or the exercise of
any other right or remedy.

	 	7.4	 	This Note may not be modified or discharged (other than by payment) except by a writing duly
executed by Payor and Payee.
	 
	 	7.5	 	Payor hereby expressly waives demand and presentment for payment, notice of nonpayment, notice of
dishonor, protest, notice of protest, bringing of suit, and diligence in taking any action to
collect amounts called for hereunder, and shall be directly and primarily liable for the payment
of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or
omission with respect to the collection of any amount called for hereunder or in connection with
any right, lien, interest or property at any and all times which Payee had or is existing as
security for any amount called for hereunder.

	8.	 	Application of Net Proceeds From Certain Sales.

	 	8.1	 	Payor has advised Payee that it intends to sell to third parties all or substantially all of the assets and/or
business operations of certain of its operating subsidiaries (any such transaction being referred to herein as a
“Business Line Sale” and collectively as “Business Line Sales”).
	 
	 	8.2	 	Any Net Proceeds paid to or received by Payor in connection with any Business Line Sale or other sale of assets
outside of the ordinary course of business shall be applied as follows:

	 	(i)	 	the first Two
Million Dollars
($2,000,000) of Net
Proceeds shall be
paid to and
retained by Payor;
	 
	 	(ii)	 	all Net Proceeds
paid after Payor
has received the
amount specified in
subsection 8.2 (i)
shall be paid as
follows: (A)
one-third of such
Net Proceeds shall
be paid to Payee as
a prepayment
against this Note,
until Payee has
received an amount
equal to the Payee
Prepayment (as such
term is hereinafter
defined); and (B)
two-thirds of such
Net Proceeds shall
be paid to Vicis,
to be applied as a
prepayment of that
certain Promissory
Note of even date
executed and
delivered by Payor
to Vicis in the
principal amount of
$7,882,407 (the
“Vicis Note”) until
Vicis has received
an amount equal to
the Vicis
Prepayment (as such
term is hereinafter
defined);
	 
	 	(iii)	 	all Net Proceeds
paid after the
amounts set forth
in subsections
8.2(i)-(ii) have
been paid in full,
shall be paid to
Payee, to be
applied as a
prepayment against
this Note, until
such time as Payee
has been paid, in
addition to the
Payee Prepayment
paid pursuant to
subsection 8.2(ii),
Two Million Dollars
($2,000,000);
	 
	 	(iv)	 	all Net Proceeds
paid in excess of
the amounts paid
pursuant to
subsections 8.2
(i)-(iii), above,
shall be applied as
follows:

	 	(a)
    an amount equal
to 50% of the Net
Proceeds shall be
paid to and
retained by Payor;
	 
	 	(b)
    an amount equal
to the Payee
Percentage (as
defined below)
times 50% of the
Net Proceeds shall
be paid to Payee
and applied as a
prepayment of this
Note;

Page 7 of 10

 

	 	(c)
    an amount equal
to the Vicis
Percentage (as
defined below)
times 50% of the
Net Proceeds shall
be paid to Vicis
and applied as a
prepayment of the
Vicis Note; and
	 
	 	(d)
    an amount equal
to the LSP
Percentage (as
defined below)
times 50% of the
Net Proceeds shall
be paid to LSP and
applied as a
prepayment of that
certain Promissory
Note dated March
25, 2009, executed
and delivered by
Payor to LSP, in
the amount of
$1,000,000 (the
“LSP Note”); and

	 	(v)	 	all Net Proceeds
paid from and after
such time as the
aggregate Net
Proceeds paid
pursuant to
subsections 8.2
(i)-(iv), above,
equal Twenty
Million Dollars
($20,000,000),
shall be applied as
follows:

	 	(a)
    an amount equal
to 25% of the Net
Proceeds shall be
paid to and
retained by Payor;
	 
	 	(b)
    an amount equal
to the Payee
Percentage (as
defined below)
times 75% of the
Net Proceeds shall
be paid to Payee
and applied as a
prepayment of this
Note;
	 
	 	(c)
    an amount equal
to the Vicis
Percentage (as
defined below)
times 75% of the
Net Proceeds shall
be paid to Vicis
and applied as a
prepayment of the
Vicis Note; and
	 
	 	(d)
    an amount equal
to the LSP
Percentage (as
defined below)
times 75% of the
Net Proceeds shall
be applied as a
prepayment of the
LSP Note.

	 	 	 	As used herein, the term: (A) “Vicis Prepayment” means an amount equal to the sum of (1) Two Million Dollars
($2,000,000) (the “Vicis Prepayment Principal”) plus (2) interest accruing at a rate per annum equal to Ten Percent
(10%) on the Vicis Prepayment Principal outstanding from time to time from and after the date hereof until paid in
full (with such Vicis Prepayment Principal being reduced by the amount of Net Proceeds applied to the Vicis
Prepayment Principal from time to time); (B) “Payee Prepayment” means an amount equal to the sum of (1) One Million
Dollars ($1,000,000) (the “Payee Prepayment Principal”) plus (2) interest accruing at a rate per annum equal to Ten
Percent (10%) on the Payee Prepayment Principal outstanding from time to time from and after the date hereof until
paid in full (with such Payee Prepayment Principal being reduced by the amount of Net Proceeds applied to the Payee
Prepayment Principal from time to time); (C) “Payee Percentage” means, at any time, the fraction that results from
(i) the denominator that is the sum of the then outstanding amount of this Note (unpaid principal plus accrued,
unpaid interest), the Vicis Note (unpaid principal plus accrued, unpaid interest), and the LSP Note (unpaid principal
plus accrued, unpaid interest), and (ii) the numerator that is the then outstanding amount of this Note (unpaid
principal plus accrued, unpaid interest); (D) “Vicis Percentage” means, at any time, the fraction that results from
(i) the denominator that is the sum of the then outstanding amount of this 

Page 8 of 10

 

	 	 	 	Note (unpaid principal plus accrued,
unpaid interest) the Vicis
Note (unpaid principal plus accrued, unpaid interest), and the LSP Note (unpaid principal
plus accrued, unpaid interest), and (ii) the numerator that is the then outstanding amount of the Vicis Note (unpaid
principal plus accrued, unpaid interest); (E) “LSP Percentage” means, at any time, the fraction that results from
(i) the denominator that is the sum of the then outstanding amount of this Note (unpaid principal plus accrued,
unpaid interest) plus the LSP Note (unpaid principal plus accrued, unpaid interest), plus the Vicis Note (unpaid
principal plus accrued, unpaid interest) and (ii) the numerator that is the then outstanding amount of the LSP Note
(unpaid principal plus accrued, unpaid interest); and (F) “Net Proceeds” means the actual cash amount collected by
Payor in consideration of any Business Line Sale or any other asset sale less any costs, expenses, taxes or other
amounts incurred by Payor as a result of the asset sale or any secured indebtedness owed in connection with such
Business Line Sale or other asset sale.

	9.	 	Cancellation and Return of Notes.

	 	9.1	 	The indebtedness evidenced by this Note includes, in addition to the New JANA Loan, the JANA Portion of the Second
A&R Note Indebtedness and the indebtedness evidenced by the Assigned and Assumed Subsidiaries Note, and this Note
amends, restates, supersedes, and replaces in all respects the Second A&R Note and the Assigned and Assumed
Subsidiaries Note, but shall not constitute a release, satisfaction or novation of any of the indebtedness evidenced
thereby Concurrently with the execution of this Note, Payee will deliver or cause to be delivered to Payor the
Second A&R Note and the Assigned and Assumed Subsidiaries Note, which, upon receipt by Payor, will be marked
“CANCELLED AND REPLACED BY PROMISSORY NOTE DATED MARCH 25, 2009.”

	10.	 	Security.
	 
	 	 	This Note is the New JANA Note referred to in the Assignment and Assumption Agreement and is secured by a security interest in the Collateral granted to Payee
pursuant to the Assignment and Assumption Agreement. In addition, the indebtedness evidenced by this Note includes the indebtedness evidenced by the Assigned
and Assumed Subsidiaries Note, which indebtedness is secured by a security interest in and to the Collateral granted to Payee pursuant to the Revolving Line
Agreement (as defined in the Assignment and Assumption Agreement).

	11.	 	Miscellaneous.

	 	11.1	 	The headings of the various paragraphs of this Note are for convenience of reference only and
shall in no way modify any of the terms or provisions of this Note.
	 
	 	11.2	 	All notices required or permitted to be given hereunder shall be in writing and shall be deemed
to have been duly given when personally delivered or sent by registered or certified mail (return
receipt requested, postage prepaid), facsimile transmission or overnight courier to the address
of the intended recipient as set forth in the preamble to this Note or at such other address as
the intended recipient shall have hereafter given to the other party hereto pursuant to the
provisions of this Note.
	 
	 	11.3	 	This Note and the obligations of Payor and the rights of Payee shall be governed by and construed
in accordance with the substantive laws of the State of New York without giving effect to the
choice of laws rules thereof.
	 
	 	11.4	 	This Note shall bind Payor and its successors and assigns.

[Signature Page Follows]

Page 9 of 10

 

     IN WITNESS WHEREOF, the undersigned have executed this Note as of the date first above
written.

	 	 	 	 	 
	 	ARCADIA RESOURCES, INC.

 	 
	 	By:  	/s/ Marvin Richardson
 	 
	 	 	Marvin Richardson, President & CEO 	 
	 	 	 	 

	 	 	 	 	 
	 	Accepted and Agreed to:

JANA MASTER FUND, LTD.

 	 
	 	By:  	Its Investment Advisor, JANA Partners LLC
 	 
	 	 	 
	 	By:  	/s/ Marc Lehmann
 	 
	 	 	Marc Lehmann, Partner 	 
	 	 	 	 
	 

Page 10 of 10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00156-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00156-of-00352.parquet"}]]