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 00000 Xxxxxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000,
hereby promises to pay to Xxxx Master Fund, Ltd. ("Payee"), having an address at
000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, at Xxxxx'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.
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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;
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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 corporations;
4.7 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 Xxxxx'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
4.8 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
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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 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 defaults in the due observance or performance of any covenant,
condition or agreement on the part of Payor 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.
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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
an acquiescence in any default, nor shall any 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 Xxxxx and Xxxxx.
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. CONVERSION RIGHTS. At any time in which principal is outstanding under this
Note, the Payee shall have the unconditional right upon irrevocable written
notice to Payor to convert all of the outstanding principal, accrued, but unpaid
interest and any other amounts owing under this Note into shares of common stock
of the Payor (the "Conversion Shares") at a rate of one (1) share of common
stock per $2.25 of the amount outstanding under this Note.
9. REGISTRATION RIGHTS. The Company shall include the maximum amount of
Conversion Shares issuable as of the date hereof in the pending S-1 Registration
Statement which is subject to review and approval by the SEC.
10. RESTRICTION ON TRANSFER. This Note has been acquired for investment, and
neither this Note nor any of the Conversion Shares issuable pursuant to a
conversion pursuant to Section 8 herein have been registered under the
securities laws of the United States of America or any state thereof.
Accordingly, no interest in this Note may be offered for sale, sold or
transferred in the absence of registration and qualification of this Note or the
Conversion Shares, as the case may be, under applicable federal and state
securities laws or an opinion of counsel of Payee reasonably satisfactory to
Payor that such registration and qualification are not required.
11. MISCELLANEOUS.
11.1 The headings of the various paragraphs of this Note are for
convenience of
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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.
ARCADIA RESOURCES, INC.
By: /S/ XXXX X. XXXXXXX, III
---------------------------------
Xxxx X. Xxxxxxx, III
Its: Chief Executive Officer
Accepted and Agreed to:
XXXX MASTER FUND LTD.
By: /S/ XXXX XXXXXXX
----------------------
Its:_____________________
Title: Partner
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