<PAGE>
EXHIBIT 4.2
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.
12% CONVERTIBLE PROMISSORY NOTE
$5,000,000.00
APRIL 27, 2005
FOR VALUE
RECEIVED, the undersigned, Arcadia Resources, Inc., a Nevada
corporation (`Payor"), having its executive
office and principal place of
business at 26777 Central Park Boulevard,
Suite 200, Southfield, Michigan 48076,
hereby promises to pay to Jana Master Fund,
Ltd. ("Payee"), having an address at
200 Park Avenue, Suite 3900, New York, NY
10166, 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 FIVE MILLION DOLLARS
($5,000,000.00), 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 the annual rate (the "Note Rate")
of
twelve percent (12%) from the date hereof until the entire
principal
balance due under this Note has been paid in full.
1.2
The unpaid
principal balance shall be due and payable on May 1, 2006
("Maturity Date"). Accrued unpaid interest on the unpaid
principal
balance due under this
Note at the Note Rate shall be due and
payable on the following dates: July 31, 2005; October 31,
2005;
January 31, 2006; and the Maturity Date.
1.3
Payor shall not
have the right to prepay any portion of the
principal amount due under this Note until June 27, 2005
("Permitted
Prepayment Date"). At any time and from time to time after the
Permitted Prepayment Date, Payor may prepay this Note in whole or
in
part,
together with (i) the unpaid interest thereon accrued through
the date of prepayment, and (ii) a prepayment fee equal to 2.5%
of
the portion of then outstanding principal balance that is being
prepaid.
1.4
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.
Page 1 of 6
<PAGE>
1.5
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.
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. INTENTIONALLY
OMITTED
4. COVENANTS OF
PAYOR.
Payor
covenants and agrees that, so long as this Note remains
outstanding
and
unpaid, in whole, or in part:
4.1
Payor will not
sell, transfer or dispose of a material part of its
assets without obtaining Payee's written consent, other than
inventory in its ordinary course of business;
4.2
Intentionally
Omitted
4.3 Payor will promptly pay and
discharge all lawful taxes, assessments
and governmental charges or levies imposed upon it, its income
and
profits, or any of its 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;
Page 2 of 6
<PAGE>
4.4
Payor will do or
cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence,
rights
and franchises and substantially comply with all laws applicable
to
Payor as its counsel may advise;
4.5
Payor will at
all times maintain, preserve, protect and keep its
property used or useful in the conduct of its 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;
4.6
Payor 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 corporatio
