ex4-1.htm


     

    Exhibit
4.1


     

    THIS
NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO
THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (AS AMENDED,
RESTATED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
“SUBORDINATION AGREEMENT”) DATED AS OF JULY 10, 2008 AMONG MRU HOLDINGS, INC., A
DELAWARE CORPORATION, MERRILL LYNCH MORTGAGE CAPITAL INC. AND VIKING ASSET
MANAGEMENT L.L.C., A CALIFORNIA LIMITED LIABILITY COMPANY, TO THE SENIOR
INDEBTEDNESS (AS DEFINED IN THE SUBORDINATION AGREEMENT); AND EACH HOLDER OF
THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE
SUBORDINATION AGREEMENT.

    


    THIS
CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES ISSUABLE ON THE CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED (I) IN THE ABSENCE OF: (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SUCH ACT OR APPLICABLE STATE
SECURITIES LAWS OR (B) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED
WITH RESPECT TO SUCH OFFER, SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION; OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

    


    


    MRU
HOLDINGS, INC.

    


    CONVERTIBLE
PROMISSORY NOTE

     

     

    
      	$7,750,000 	
              July 10,
      2008 

            


    

      


    Subject to the terms and conditions of
this Convertible Promissory Note (this “Note”), for value received,
the undersigned, MRU Holdings, Inc., a Delaware corporation (the “Company”), whose address is
590 Madison Avenue, 13th Floor,
New York 10022, hereby promises to pay to Merrill Lynch Mortgage Capital Inc. or
permitted assigns (the “Holder”) the principal amount
of Seven Million Seven Hundred
Fifty Thousand Dollars ($7,750,000), together with
interest thereon at the rate(s) set forth below.  Principal of, and
accrued interest on, this Note shall be due


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    and
payable as hereinafter provided on the Maturity Date (as defined below) or such
other dates as provided herein.

    


    The following is a statement of the
rights of the Holder of this Note and the terms and conditions to which this
Note is subject, and to which the Holder, by acceptance of this Note,
agrees:

    


    1.           Interest.  Interest
shall accrue on the unpaid principal amount of this Note from the date hereof
until such principal amount is repaid in full, at a simple annual interest rate
equal to nine percent (9%) per annum; provided, however, that, if
the Note is not repaid in full by 5:30 p.m. on September 26, 2008 (the “Alternate Interest Rate
Date”), then the interest rate on the Note shall increase to a simple
annual interest rate equal to twelve percent (12%) per annum beginning September
27, 2008.  All computations of the interest rate hereunder shall be
made on the basis of a year of 365 days based on the actual number of days
(including the first day but excluding the last day) any such principal amount
is outstanding.  No interest hereunder shall be due prior to the
Maturity Date (as defined below); provided, however, that after
the Senior Indebtedness (as defined in the Subordination Agreement) has been
paid in full, interest on the Note shall be payable on the 15th day of each
January, April, July and October (or if any such day is not a business day, the
next business day).

     

    2.           Maturity
Date.  Unless earlier converted as provided in Section 4 below
or repaid, the principal amount of this Note and interest accrued thereon shall
be due and payable on October 31, 2010 (the “Maturity Date”), subject to
any limitation contained in the Subordination Agreement.

    


    3.           Mandatory Prepayment Under
Certain Circumstances.  If the Company issues and sells equity
securities (the “Equity
Securities”) pursuant to an equity financing (including the issuance of
Equity Securities upon the conversion or exchange of debt securities (the “Automatically Converting Debt
Securities”) issued after the date hereof in connection with such equity
financing) in which the Company closes a total commitment of at least Seventy
Five Million Dollars ($75,000,000) (inclusive of the consideration received for
the issuance and sale of the Company’s Series B-2 Convertible Preferred Stock
and any other security that is converted into Equity Securities) in gross
proceeds and 60% of such gross proceeds (at least $45,000,000) is attributable
to one investor or a group of related investors, then:

    


    (a)           upon
the issuance of the Automatically Converting Debt Securities, if any, the
Company shall, exclusively with net proceeds received from the sale of the
Automatically Converting Debt Securities (“Debt Proceeds”),

    


    (i)           first, redeem Five
Million Six Hundred Thousand Dollars ($5,600,000) in principal amount of the
Note (as defined in the Subordination Agreement) pursuant to the terms of the
Note (as defined in the Subordination Agreement) (the “Required Redemption”),
and

    



    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    (ii)           second, to the extent
there remain Debt Proceeds therefor, pay the Holder and any other holders of
promissory notes of the Company issued on even date herewith (the “Other Promissory Notes”) the
outstanding principal amount of this Note and the Other Promissory Notes
together with accrued but unpaid interest thereon, pro rata based on the
outstanding principal amount of each such note;

    


    (b)           upon
the issuance of the Equity Securities and after consummation of the Required
Redemption (to the extent the Required Redemption was not consummated pursuant
to Section 3(a) hereof), the outstanding principal amount of this Note, together
with accrued but unpaid interest thereon, shall, to the extent not paid pursuant
to Section 3(a) hereof, be repaid in full.

    


    4.           Conversion.

    


    4.1           Optional
Conversion.  Subject to Section 4.2, if this Note is not repaid
in full by the Alternate Interest Rate Date, the Holder may elect, at any time
after the Alternate Interest Rate Date, to convert all or a portion of this Note
into shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”) by
dividing (A) aggregate principal and accrued and unpaid interest to be so
converted by (B) $2.25; provided, however, that, unless the Company’s
stockholders approve any change in control (as defined in NASDAQ Rule
4350(i)(1)(B)) that would result from the conversion of the Note into Common
Stock, this Note may not be converted into Common Stock to the extent the
issuance of such Common Stock would result in the Holder and its affiliates
beneficially owning more than 19.99% of the voting power of the Company (the
“Issuance
Limitation”).  For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the Holder and
its affiliates shall include the shares of Common Stock issuable upon conversion
of this Note, subject in all cases to the Issuance Limitation.  Upon
the written request of the Holder, the Company shall promptly, but in no event
later than two (2) business days following the delivery of such request, confirm
in writing to the Holder the number of shares of Common Stock then
outstanding.

    


    4.2           Mechanics of
Conversion.  Before any Holder shall be entitled to convert
this Note into full shares of Common Stock and to receive certificates (or a
direct registration statement) therefor pursuant to Section 4.1 hereof, such
Holder shall surrender the original copy of this Note at the Company’s principal
executive offices and give written notice substantially in the form attached
hereto as Exhibit A (the “Conversion Notice”) specifying
the portion of this Note to be converted into Common Stock (the “Converting
Portion”).  The Company shall, as soon as practicable
thereafter, issue and deliver a certificate or certificates (or make a book
entry if the Common Stock is to be issued through a direct registration system)
for the number of shares of Common Stock to which the Holder shall be entitled
as aforesaid and a check payable to the Holder in the amount of any cash amounts
payable as a result of a conversion into fractional shares of Common
Stock.  Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of this Note to be
converted with a properly completed Conversion Notice (the “Surrender Date”), and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Surrender
Date.  Interest on the Converting Portion of this Note shall cease to
accrue on the


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    Surrender
Date and all rights with respect to such Converting Portion shall forthwith
after the Surrender Date terminate.  To the extent the Holder only
converts a portion of this Note pursuant to this Section 4, the Company will
issue the Holder a new note for the unconverted portion of this Note on the same
terms as this Note.

    


    4.2           Cash in Lieu of Fractional
Shares.  No fractional shares of the Company’s Common Stock
shall be issued upon conversion of this Note.  In lieu of any
fractional share to which the Holder would otherwise be entitled, the Company
shall pay to the Holder, in cash, the amount of the unconverted principal and
interest balance of this Note that would otherwise constitute such fractional
share.

    


    4.3           Taxes.  The
Company shall pay any and all issue and other taxes that may be payable in
respect of any issuance or delivery of shares of Common Stock upon conversion of
this Note pursuant to this Section 4.  The Company shall not, however,
be required to pay any tax that may be payable in respect of any transfer
involving the issuance and delivery of shares of Common Stock in a name other
than that of the Holder, and no such issuance or delivery shall be made unless
and until the person or entity requesting such issuance has paid to the Company
the amount of any tax or has established, to the satisfaction of the Company,
that such tax has been paid.

    


    4.4           Required
Documentation.  Upon conversion of this Note pursuant to this Section
4, the Holder shall execute all appropriate documentation necessary to effect
such conversion.

    


    5.           Events of
Default.  The entire outstanding
principal amount of, and all accrued unpaid interest on, this Note shall become
forthwith due and payable, without presentment, demand, protest, or notice of
any kind, upon the happening of any of the following events (each, an
“Event of
Default”):

    


    (a)        if default shall be made in the due and punctual payment
of the principal on this Note or on any other indebtedness of the Company in
excess of $500,000, when and as the same shall become due and payable, whether
at the maturity of any installment thereof, by acceleration, or otherwise, or
default shall be made for thirty (30) days in the payment when due of interest
on this Note or on any other indebtedness of the Company;

    


    (b)        if the Company or any Subsidiary (as defined below)
shall

    


    (1)           admit in writing its inability to pay its debts
generally as they become due,

    


    (2)           file a petition in bankruptcy or a petition to take
advantage of any insolvency act,

    


    (3)           make an assignment for the benefit of its
creditors,


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    (4)           consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property,

    


    (5)           on a petition in bankruptcy filed against it, be
adjudicated a bankrupt, or

    


    (6)           file a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state
thereof;

     

    (c)          
if a court of competent jurisdiction shall enter
an order, judgment or decree appointing, without the consent of the Company or
any “significant
subsidiary” within the meaning of
Regulation S-X under the Securities Act of 1934, as amended (each a
“Subsidiary”), a receiver of the Company or any Subsidiary or of
the whole or any substantial part of its property, or approving a petition filed
against it seeking reorganization or arrangement of the Company or any
Subsidiary under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof;

    


    (d)           if, under the provisions of any other law for the relief
or aid of the Company, any court of competent jurisdiction shall assume custody
or control of the Company or any Subsidiary or of the whole or any substantial
part of its property and such custody or control shall not be terminated or
stayed within thirty (30) days from the date of assumption of such custody or
control;

    


    (e)           if the Company enters into a merger, consolidation,
liquidation, dissolution, sale of all or substantially all of its assets, or
similar transaction; or

    


    (f)           if the Company shall have breached or not performed any
material representation, warranty or covenant in this Note or in any other document or instrument
executed and delivered in connection therewith for thirty (30) days or more
after written notice to the Company by the Holder of such breach or
nonperformance.

    


                          Upon the occurrence of any Event of Default, the Holder
may take all actions available to it, at law or in equity, to collect and
otherwise enforce this Note.

     

    
      6.           Costs and Expenses of Enforcement and
Collection.  Upon receipt of
written evidence reasonably satisfactory to the Company, the Company agrees to
pay on demand all costs and expenses, including reasonable attorneys’ fees,
incurred or paid by the Holder in enforcing or collecting any of the obligations
of the Company hereunder.


    

    7.           Mutilated, Destroyed, Lost
or Stolen Notes.  In case any Note shall become mutilated or
defaced, or be destroyed, lost or stolen, the Company shall execute and deliver
a new note of like principal amount in exchange and substitution for the
mutilated or defaced Note, or in lieu of and in substitution for the destroyed,
lost or stolen Note.  In the case of a mutilated


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    or
defaced Note, the Holder shall surrender such Note to the Company.  In
the case of any destroyed, lost or stolen Note, the Holder shall furnish to the
Company (a) evidence to its satisfaction of the destruction, loss or theft of
such Note and (b) such security or indemnity as may be reasonably required by
the Company to hold the Company harmless.

    


    8.           Payment of Interest and
Principal.  All payments with respect to this Note shall be
made in lawful money of the United States of America at such place as the Holder
hereof may designate in writing to the Company.  Payment shall be
credited first to the accrued interest then due and payable and the remainder
applied to principal.  Subject to the limitations imposed by the
Subordination Agreement, the Company may, at its option, on ten (10) days
written notice to the Holder, repay the outstanding principal amount of this
Note without penalty or premium, in whole or in part, together with interest on
the principal amount so repaid accrued to the repayment date.

    


    9.           Assignment.  The
rights and obligations of the Company and the Holder of this Note shall be
binding upon, and inure to the benefit of, the permitted successors, assigns,
heirs, administrators and transferees of the parties hereto.  Interest
and principal are payable only to the registered Holder of this
Note.

    


    10.           Waiver and
Amendment.  Any provision of this Note, including, without
limitation, the due date hereof, and the observance of any term hereof, may be
amended, waived or modified (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and the Holder.

    


    11.           Notices.  Any
notice or demand which is required or provided to be given under this Note shall
be deemed to have been sufficiently given and received for all purposes (i) when
delivered in person, or (ii) one business day after being sent by a recognized
overnight courier service or (iii) when transmitted by facsimile, email or other
electronic means, provided that the sender receives confirmation of receipt, to
the following addresses:

    


    if to the
Company:

    


    MRU Holdings, Inc.

    590 Madison Avenue, 13th
Floor

    New York, New York 10022

    Attention: General Counsel

    Fax:  (212)
836-4195

    E-mail:
ykatz@mruholdings.com

    


    with a copy to:

    


    Paul, Hastings, Janofsky & Walker
LLP

    75 East 55th Street

    New York, NY 10022

    Attention: Keith D. Pisani,
Esq.

    Fax:  (212)
318-6906


    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    E-mail:
keithpisani@paulhastings.com

    


    if to the
Holder, to:

    


    Merrill Lynch Mortgage Capital
Inc.

    4 World Trade Center

    11th Floor

    New York,
NY  10080

    Attention:  Theodore
Breck

    Fax:      (212)
449-2737

    Email:  ted_breck@ml.com

    


    with a copy to:

    


    Stroock & Stroock & Lavan
LLP

    180 Maiden Lane

    New York, NY 10038-4982

    Attention: Richard Fried

    Fax: (212) 806-9047

    E-mail: rfried@stroock.com

    


    Any party
hereto may by notice given as specified in this Section 11 change its address
for future notice hereunder.

    


    12.           Governing Law; Venue; Waiver
of Jury Trial.  This Note shall be governed by the laws of the
State of New York, as such laws are applied to contracts to be entered into and
performed entirely in New York by New York residents, without giving effect to
any choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdictions other than the State of New
York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in New York County for the
adjudication of any dispute hereunder or in connection herewith or therewith, or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Note and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

    



    
      
         


      

      
        7

        
          

        

      

      
         


      

    


    13.           Severability.  If
one or more provisions of this Note are held to be unenforceable under
applicable law, such provisions shall be excluded from this Note, and the
balance of this Note shall be interpreted as if such provisions were so excluded
and shall be enforceable in accordance with its terms.

    


    14.           Miscellaneous.  (a)  The Company (i) waives
presentment, demand, notice of demand, protest, notice of protest, and notice of
nonpayment and any other notice required to be given under the law to the
Company, in connection with the delivery, acceptance, performance, default or
enforcement of this Note, except for notice and presentment upon conversion or
at maturity of this Note and notice or proposed transfer of this Note in
accordance with the terms hereof; and (ii) agrees that any failure to act or
failure to exercise any right or remedy on the part of the registered Holder
shall not in any way affect or impair the obligations of the Company or be
construed as a waiver by the Holder of, or otherwise affect, any of its rights
under this Note.  Notwithstanding the foregoing, the Company does not
waive any notice required pursuant to the terms of this
Note.

    


    (b)           No act, omission or delay by the Holder or course of
dealing between the Holder and the Company shall constitute a waiver of the
rights and remedies of the Holder hereunder.  No single or partial
waiver by the Holder of any default or right or remedy which it may have shall
operate as a waiver of any other default, right or remedy or of the same
default, right or remedy on a future occasion.

    


    [Signature page follows]

    


    



    
      
         


      

      
        8

        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
Company has caused this Note to be issued as of the date first above
written.

     

    

      
        	 
      	MRU
      HOLDINGS, INC.  	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:  
      

              	/s/
      Vishal Garg  	 
      
	 
      	 
      	Vishal
      Garg, Co-President  	 
      
	 
      	 
      	 
      	 
      


      

    

     

     

     

     

     

     

     

     

     

    
      
         


      

      
        9

        
          

        

      

      
         


      

    


    Exhibit
A

    


    NOTICE OF
CONVERSION

    


    MRU
Holdings, Inc.

    590
Madison Avenue, 13th Floor

    New York,
New York 10022

    Attention:
General Counsel

    Fax:  (212)
836-4195

    E-mail:
ykatz@mruholdings.com

    


    To:  The
General Counsel MRU Holdings, Inc. (the “Company”)

    


    Reference is made to that certain
Convertible Promissory Note issued by the Company to the undersigned in the
principal amount of $7,750,000 dated as of July 10, 2008 (the “Note”).  Capitalized
terms used but not defined herein have the meanings set forth in the
Note.  Pursuant to Section 4.2 of the Note, the undersigned, being a
holder of the Note (the “Converting Holder”),
hereby elects to exercise its conversion rights as to the Note as specified
below.

    


    Dated:

    


    
      
        	
                CONVERTING
      HOLDER

              	
                OUTSTANDING
      PRINCIPAL 
AMOUNT OF AND ACCRUED 
AND UNPAID INTEREST ON 
THE
      NOTE TO BE CONVERTED 
TO COMMON STOCK*

              
	
                NAME

              	
                SIGNATURE

              	 
      
	
                 
      

                 

                 

                 

              	 
      	 
      


      

    

    


    Names and
addresses of person(s) or entity(ies) to whom such Common Stock shall be
issued:

    


    
      
        

      

    

     

     

    Denominations
in which the certificate(s) (or direct registration statement system
statement(s) evidencing the Common Stock shall be issued:

    


    
      

    

     

     

    Instructions
for delivery of certificate(s) (or direct registration statement system
statement(s)) evidencing the Common Stock issued:

    


    
      
 ____________

    *The Note
must be surrendered to the Company to be converted to Common Stock.