Document:

ex4-4.htm

     

    Exhibit
4.4

     

    Execution
Copy

    
 

    This SUBORDINATION AGREEMENT
(this “Agreement”),
dated as of June 30, 2008 is among MRU Holdings, Inc., a Delaware
corporation (the “Company”), Battery Ventures
VII, L.P., a Delaware limited partnership (“BV7”), Battery Investment
Partners VII, LLC, a Delaware limited liability company (“BIP7” and together with BV7,
collectively, the “Subordinated
Creditors,” and
individually, each, a “Subordinated Creditor”), the
Buyers (as defined in the Purchase Agreement described below), and Viking Asset
Management, LLC, a California limited liability company, in its capacity as
collateral agent for itself and for the Buyers (including any successor agent,
hereinafter, the “Collateral
Agent”).

     

    R
E C I T A L S

     

    A.           Company
has executed and delivered to the Buyers those certain secured senior notes
dated as of October 19, 2007 (as any of the same may be amended, supplemented,
restated or modified and in effect from time to time, collectively, the “Note”).  The Note
was issued pursuant to that certain Securities Purchase Agreement dated as of
October 19, 2007 (as the same has been and hereafter may be amended, modified,
supplemented or restated, the “Purchase Agreement”) by and
among the Company and Buyers, and pursuant to which the Buyers have made certain
loans (“Loans”) to
Company.

     

    B.           Each
of Embark Corp., a Delaware corporation, Embark Online, Inc., a Delaware
corporation, Goto College Holdings Inc., a Delaware corporation, iempower, Inc.,
a Delaware corporation, MRU Originations, Inc., a Delaware corporation and MRU
Universal Guaranty Agency, Inc., each such entity, together with each other
person or entity who becomes a party to the Guaranty (as defined herein) by
execution of a joinder in the form of Exhibit A attached
thereto, is referred to individually as a “Viking Guarantor,” and collectively as the
“Viking Guarantors”)
have executed a Guaranty dated as of October 19, 2007 (as the same may be
amended, supplemented, restated or modified and in effect from time to time, the
“Guaranty”) in favor of
the Collateral Agent in respect of Company’s obligations under the Purchase
Agreement and the Note.

     

    C.           The
Company has issued to each Subordinated Creditor shares of the Company’s Series
B-2 Convertible Preferred Stock, par value $0.001 per share (the “Series B-2 Stock”), with the
relative rights and preferences set forth in the Certificate of Designation
attached hereto as Exhibit A (the “COD”) with an original issue
price of $2.25, and pursuant to which the Company has agreed that (i) the Series
B-2 Stock together with the accrued but unpaid dividends thereon shall convert
automatically into the same class of equity securities as shall be issued and
sold by the Company to new investors in the first sale of equity securities (the
“Equity Securities”)
that shall take place after the date of issuance of the Series B-2 Stock in
which the proceeds to the Company from the sale will equal or exceed $75,000,000
(inclusive of the consideration received for the Series B-2 Stock) and in which
a single investor or a group of related investors provides 60% of the total
proceeds (the “Automatic
Conversion”); or (ii) in the event the Automatic Conversion does not
occur on or before September 30, 2008, each Subordinated Creditor may elect to
convert the Series B-2 Stock and accrued but unpaid dividends thereon into
common stock of the Company (the “Optional Conversion”), in each
case in accordance with the terms of such Series B-2 Stock and the
COD.  In addition, in connection with the Series B-2 Stock, the
Company has issued to the Subordinated Creditors five

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    year
warrants to purchase in the aggregate 659,132 shares of common stock of the
Company at a per share exercise price of $2.25 (collectively, the “Warrants” and individually,
each, a “Warrant”) in
exchange for $0.125 per each share of common stock that can be purchased with
Warrants.

     

    NOW,
THEREFORE, in reliance upon this Agreement, and as required by the terms of the
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the parties hereto hereby
agree as follows:

     

    
      1.          
 Definitions.  All
capitalized terms used but not elsewhere defined in this Agreement shall have
the respective meanings ascribed to such terms in the Purchase Agreement and the
Note. The following terms shall have the following meanings in this
Agreement:

    

     

    Buyers shall mean holders of
Senior Indebtedness including, without limitation, any holder of any Senior
Indebtedness after the consummation of any Permitted Refinancing.

     

    Enforcement
Action is defined in subsection 2.7.

     

    Loan
Documents means the collective reference to the Purchase Agreement
and  the Note, the Security Agreement, the Guaranty and each of the
other agreements to which the Company or any Viking Guarantor is a party or is
bound in connection with the transactions contemplated under the Purchase
Agreement and the Note.

     

    Paid in
Full or Payment
in Full shall mean the indefeasible payment in full in cash of all Senior
Indebtedness and termination of all commitments to lend under the Loan Documents
and Permitted Refinancing Loan Documents.

    

    Permitted
Refinancing means any refinancing of the Senior
Indebtedness.

     

    Permitted
Refinancing Loan Documents means any and all agreements, documents and
instruments executed in connection with a Permitted Refinancing of Senior
Indebtedness.

     

    Proceeding
is defined in subsection 2.3.

     

    Senior
Indebtedness shall mean the obligations, liabilities and other amounts
owed under the Purchase Agreement, the Note or any other Loan Document including
all interest, fees, expenses, indemnities and enforcements costs, whether before
or after the commencement of a Proceeding and without regard to whether or not
an allowed claim, and all obligations and liabilities incurred with respect to
Permitted Refinancings, together with any amendments, restatements,
modifications, renewals or extensions of any thereof.

     

    Subordinated
Creditors shall mean the “Subordinated Creditors” which are each a
signatory to this Agreement and any other holders of the Series B-2 Stock or any
other Subordinated Indebtedness from time to time as permitted
hereunder.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Subordinated
Default shall mean a default in the payment of the Subordinated
Indebtedness, or performance of any term, covenant or condition contained in the
Subordinated Indebtedness Documents or the occurrence of any event or condition,
which default, event or condition permits any Subordinated Creditor to
accelerate or demand payment of all or any portion of the Subordinated
Indebtedness.

     

    Subordinated
Default Notice shall mean a written notice to Collateral Agent pursuant
to which Collateral Agent is notified of the existence of a Subordinated
Default, which notice incorporates a reasonably detailed description of such
Subordinated  Default.

     

    Subordinated
Indebtedness shall mean all of the obligations of the Company to the
Subordinated Creditors evidenced by the Series B-2 Stock, the COD and all other
amounts now or hereafter owed by the Company to the Subordinated Creditors
pursuant to the Subordinated Indebtedness Documents.

     

    Subordinated
Indebtedness Documents shall mean each of the Series B-2 Stock, the COD
and all other documents and instruments evidencing or pertaining to any portion
of the Subordinated Indebtedness, as amended, supplemented, restated or
otherwise modified from time to time as permitted hereunder.

     

    2.          
 Subordination of
Subordinated Indebtedness to Senior Indebtedness.

     

    2.1           Subordination.  The
payment of any and all of the Subordinated Indebtedness hereby expressly is
subordinated, to the extent and in the manner set forth herein, to the Payment
in Full of the Senior Indebtedness.  Each holder of Senior
Indebtedness, whether now outstanding or hereafter arising, shall be deemed to
have acquired Senior Indebtedness in reliance upon the provisions contained
herein.

     

    2.2           Restriction
on Payments.  Notwithstanding any provision of the Subordinated
Indebtedness Documents to the contrary and in addition to any other limitations
set forth herein or therein, no payment (whether made in cash, securities
(except as set forth in the following sentence) or other property or by set-off)
of dividends or the redemption value of the Series B-2 Stock, whether upon a
default or otherwise, or any other amount due with respect to the Subordinated
Indebtedness shall be made or received, and no Subordinated Creditor shall
exercise any right of set-off or recoupment with respect to any Subordinated
Indebtedness, until all of the Senior Indebtedness is Paid in
Full.  Notwithstanding anything to the contrary contained in the
preceding sentence or in the Loan Documents, the issuance of equity securities
of the Company to the Subordinated Creditors upon the Automatic Conversion or
the Optional Conversion, including, without limitation, the issuance of equity
securities to pay accrued but unpaid dividends on the Series B-2 Stock upon such
Automatic Conversion or Optional Conversion, in accordance with the terms of the
Series B-2 Stock and COD, as each are in effect on the date hereof, and the
issuance of shares of the Company’s common stock upon exercise of the Warrants
shall not be deemed a violation of (i) this Subordination Agreement or (ii) the
Loan Documents.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    2.3           Proceedings.  In
the event of any insolvency, bankruptcy, receivership, custodianship,
liquidation, reorganization, assignment for the benefit of creditors or other
proceeding for the liquidation, dissolution or other winding up of the Company
or any of the Viking Guarantors or any of their respective properties (a “Proceeding”):

     

    (i)           the
Buyers shall be entitled to receive payment in full in cash of the Senior
Indebtedness before any Subordinated Creditor is entitled to receive any
payment, including, without limitation, the payment of cash dividends or the
payment of the redemption value, upon the Subordinated Indebtedness, and Buyers
shall be entitled to receive for application in payment such Senior Indebtedness
any payment or distribution of any kind or character, whether in cash, property
or securities (other than as permitted by the last sentence of Section 2.2
hereof) or by set-off or otherwise, which may be payable or deliverable in any
such Proceedings in respect of the Subordinated Indebtedness;

     

    (ii)           any
payment or distribution of assets of the Company or any Viking Guarantor of any
kind or character, whether in cash, property or securities (other than as
permitted by the last sentence of Section 2.2 hereof), by set-off or otherwise,
to which any Subordinated Creditor would be entitled pursuant to the
Subordinated Indebtedness but for the provisions hereof shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the Collateral Agent for the benefit of Buyers until
the Senior Indebtedness shall have been Paid in Full, and each Subordinated
Creditor acknowledges and agrees that such payment or distribution may,
particularly with respect to interest on Senior Indebtedness after the
commencement of a Proceeding, result in such Subordinated Creditor receiving
less than it would otherwise receive;

     

    (iii)           each
Subordinated Creditor hereby irrevocably (x) authorizes, empowers and directs
all receivers, trustees, debtors in possession, liquidators, custodians,
conservators and others having authority in the premises to effect all such
payments and deliveries, and such Subordinated Creditor also irrevocably
authorizes, empowers and directs, the Collateral Agent until the Senior
Indebtedness shall have been Paid in Full, to demand, sue for, collect and
receive every such payment or distribution, and (y) agrees to execute and
deliver to the Collateral Agent and the Buyers all such further instruments
confirming the authorization referred to in the foregoing clause (x);
and

     

    (iv)           each
Subordinated Creditor hereby irrevocably authorizes, empowers and appoints
Collateral Agent (until the Senior Indebtedness shall have been Paid in Full) as
its agent and attorney in fact to (x) execute, verify, deliver and file such
proofs of claim upon the failure of such Subordinated Creditor promptly to do so
(and in any event prior to

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    thirty
(30) days before the expiration of the time to file any proof) and (y) vote such
claims in any such Proceeding; provided that no holder of Senior Indebtedness
shall have any obligation to execute, verify, deliver and/or file any such proof
of claim or vote such claim.  In the event the Collateral Agent or any
Buyer (or any agent, designee or nominee thereof) votes any claim in accordance
with the authority granted hereby, the Subordinated Creditor shall not be
entitled to change or withdraw such vote.

     

    The
Senior Indebtedness shall continue to be treated as Senior Indebtedness and the
provisions hereof shall continue to govern the relative rights and priorities of
Buyers and the Subordinated Creditors even if all or part of the Senior
Indebtedness or the security interests securing the Senior Indebtedness are
subordinated, set aside, avoided or disallowed in connection with any such
Proceeding and the provisions hereof shall be reinstated if at any time any
payment of any of the Senior Indebtedness is rescinded or must otherwise be
returned by Collateral Agent, any Buyer or any agent, designee or nominee of
such holder.

     

    2.4           Incorrect
Payments.  If any payment (whether made in cash, securities or
other property) not permitted under this Agreement is received by any
Subordinated Creditor on account of the Subordinated Indebtedness before all
Senior Indebtedness is Paid in Full, such payment shall not be commingled with
any asset of such Subordinated Creditor, shall be held in trust by such
Subordinated Creditor for the benefit of the Buyers and shall promptly be paid
over to the Collateral Agent or its designated representative, for application
(in accordance with the Purchase Agreement, the Note or the Permitted
Refinancing Loan Documents) to the payment of the Senior Indebtedness then
remaining unpaid, until all of the Senior Indebtedness is Paid in
Full.

     

    2.5           Sale,
Transfer.  Other than upon the Automatic Conversion or Optional
Conversion of the Series B-2 Stock as provided in Section C of the Recitals to
this Agreement, no Subordinated Creditor shall sell, assign, dispose of or
otherwise transfer all or any portion of the Subordinated Indebtedness (a)
without giving prior written notice of such action to Collateral Agent, (b)
unless prior to the consummation of any such action, the transferee thereof
shall execute and deliver to Collateral Agent a joinder to this Agreement, or an
agreement substantially identical to this Agreement and acceptable to the
Collateral Agent, in either case providing for the continued subordination and
forbearance of the Subordinated Indebtedness to the Senior Indebtedness as
provided herein and for the continued effectiveness of all of the rights of
Collateral Agent and Buyers arising under this Agreement and (c) unless
following such sale, assignment, pledge, disposition or other transfer, there
shall either be (i) no more than two holders of Subordinated Indebtedness or
(ii) one Person acting as agent for all holders of the Subordinated Indebtedness
pursuant to documentation reasonably satisfactory to Collateral Agent such that
any notices and communications to be delivered to Subordinated Creditors
hereunder and any consents required by Subordinated Creditors shall be made to
or obtained from such agent and shall be binding on each Subordinated Creditor
as if directly obtained from such Subordinated Creditor.  Other than
upon the

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Automatic
Conversion or Optional Conversion of the Series B-2 Stock, in the event of a
permitted sale, assignment, disposition or other transfer, the Subordinated
Creditors engaging in such sale, assignment, disposition or other transfer,
prior to the consummation of any such action, shall cause the transferee thereof
to execute and deliver to Collateral Agent a joinder to this Agreement, or an
agreement substantially identical to this Agreement and acceptable to the
Collateral Agent, in either case providing for the continued subordination and
forbearance of the Subordinated Indebtedness to the Senior Indebtedness as
provided herein and for the continued effectiveness of all of the rights of
Buyers and Collateral Agent arising under this
Agreement.  Notwithstanding the failure to execute or deliver any such
agreement, the subordination effected hereby shall survive any sale, assignment,
disposition or other transfer of all or any portion of the Subordinated
Indebtedness, and the terms of this Agreement shall be binding upon the
successors and assigns of each Subordinated Creditor, as provided in Section 10
below.

     

    2.6           Legends.  Until
the Senior Indebtedness is Paid in Full, each of the Subordinated Indebtedness
Documents at all times shall contain in a conspicuous manner the following
legend:

     

    “Shares
evidenced hereby are subordinate in the manner and to the extent set forth in
that certain Subordination Agreement (the “Subordination Agreement”), dated as
of June 30, 2008, by and among MRU Holdings, a Delaware corporation, Battery
Ventures VII, L.P., a
Delaware limited partnership, Battery Investment Partners
VII, LLC, a
Delaware limited liability company and Viking Asset
Management L.L.C, to the Senior Indebtedness (as defined in the Subordination
Agreement); and each holder of Shares, by its acceptance hereof, shall be bound
by the provisions of the Subordination Agreement.”

     

    2.7           Restriction
on Action by Subordinated Creditors.

     

    (a)           Until
the Senior Indebtedness is Paid in Full and notwithstanding anything contained
in the Subordinated Indebtedness Documents, the Purchase Agreement, the other
Loan Documents or the Permitted Refinancing Loan Documents to the contrary, no
Subordinated Creditor shall, without the prior written consent of Collateral
Agent, agree to any amendment, modification or supplement to the Subordinated
Indebtedness Documents, the effect of which is to (i) increase the aggregate
amount of Subordinated Indebtedness other than through the accrual of dividends
in accordance with the COD as in effect on the date hereof, the number of shares
of Series B-2 Stock beyond the number authorized in the COD or rate of dividends
(or cash pay rate of dividends) on any of the Subordinated Indebtedness, (ii)
shorten the dates upon which redemption or the payment of dividends may be made,
(iii) change in a manner adverse to the Company or add any event of default or
add or make more restrictive any covenant with respect to the Subordinated
Indebtedness, (iv) change the redemption, prepayment or put provisions of the
Subordinated Indebtedness, (v) alter the subordination provisions with respect
to the Subordinated Indebtedness, including,

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    without
limitation, subordinating the Subordinated Indebtedness to any other debt, (vi)
shorten the period prior to redemption of any of the Subordinated Indebtedness
or otherwise alter the redemption terms of the Subordinated Indebtedness in a
manner adverse to the Company, (vii) take any liens in any assets of the Company
or any of the Viking Guarantors or any other assets securing the Senior
Indebtedness or (viii) obtain any guaranties or credit support from any Person
or (ix) change or amend any other term of the Subordinated Indebtedness
Documents if such change or amendment would increase the obligations of the
Company or confer additional material rights on any Subordinated Creditor or any
other holder of the Subordinated Indebtedness in a manner adverse to the
Company, Collateral Agent or Buyers.

     

    (b)           Until
the Senior Indebtedness is Paid in Full, no Subordinated Creditor shall, without
the prior written consent of Collateral Agent, take or continue any action, or
exercise any rights, remedies or powers in respect of any of the Series B-2
Stock or any other Subordinated Indebtedness Documents, or exercise or continue
to exercise any other right or remedy at law or in equity that such Subordinated
Creditor might otherwise possess, to collect any amount due and payable in
respect of any Series B-2 Stock or any of the other Subordinated
Indebtedness, including, without limitation, the acceleration of the
Subordinated Indebtedness, the commencement of any action to enforce redemption
of the Series B-2 Stock or payment or foreclosure on any lien or security
interest, the filing of any petition in bankruptcy or the taking advantage of
any other insolvency law of any jurisdiction (any of the foregoing, an “Enforcement
Action”).  If any Subordinated Creditor shall attempt to take
any Enforcement Action or otherwise seek to collect or realize upon any of the
Subordinated Indebtedness in violation of the terms hereof, the holders of the
Senior Indebtedness may, by virtue of the terms hereof, restrain any such
Enforcement Action or other action, either in its own name or in the name of the
Company.

     

    (c)           Until
the Senior Indebtedness is Paid in Full, any Liens of Subordinated Creditors in
the Collateral which may exist in breach of each Subordinated Creditor's
agreement pursuant to subsection 2.7(a)(vii) or Section 18 of this Agreement
shall be and hereby are subordinated for all purposes and in all respects to the
Liens of Collateral Agent and Buyers in the Collateral, regardless of the time,
manner or order of perfection of any such Liens.  In the event that
any Subordinated Creditor obtains any Liens in the Collateral in violation of
subsection 2.7(a)(vii) or Section 18 of this Agreement, Subordinated Creditors
(i) shall (or shall cause their agent) to promptly execute and deliver to
Collateral Agent such termination statements and releases as Collateral Agent
shall request to effect the release of the Liens of such Subordinated Creditor
in such Collateral and (ii) shall be deemed to have authorized Collateral Agent
to file any and all termination statements required by Collateral Agent in
respect of such Liens. In furtherance of the foregoing, each Subordinated
Creditor hereby irrevocably appoints Collateral Agent its attorney-in-fact, with
full authority in the place and stead of such Subordinated Creditor and in the
name of such Subordinated Creditor or otherwise, to execute and deliver any
document or instrument which such Subordinated Creditor may be required to
deliver pursuant to this subsection 2.7(c).

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    3.           Continued Effectiveness of this Agreement;
Modifications to Senior Indebtedness.

     

    (a)           The
terms of this Agreement, the subordination effected hereby, and the rights and
the obligations of Subordinated Creditors, Collateral Agent and Buyers arising
hereunder, shall not be affected, modified or impaired in any manner or to any
extent by: (i) any amendment or modification of or supplement to the Purchase
Agreement, any other Loan Document or any Permitted Refinancing Loan Document or
any Subordinated Indebtedness Document; (ii) the validity or enforceability of
any of such documents; or (iii) any exercise or non-exercise of any right, power
or remedy under or in respect of the Senior Indebtedness or the Subordinated
Indebtedness or any of the instruments or documents referred to in clause (i)
above.

     

    (b)           Collateral
Agent and Buyers may at any time and from time to time in their sole discretion,
renew, amend, refinance, extend or otherwise modify the terms and provisions of
Senior Indebtedness (including, without limitation, the terms and provisions
relating to the principal amount outstanding thereunder, the rate of interest
thereof, the payment terms thereof and the provisions thereof regarding default
or any other matter) or exercise (or refrain from exercising) any of their
rights under the Loan Documents, all without notice to or consent from any
Subordinated Creditor and without incurring liability to such Subordinated
Creditor and without impairing or releasing the obligations of any Subordinated
Creditor under this Agreement.  No compromise, alteration, amendment,
renewal, restatement, refinancing or other change of, or waiver, consent or
other action in respect of any liability or obligation under or in respect of,
any terms, covenants or conditions of Senior Indebtedness or the Loan Documents,
whether or not in accordance with the provisions of the Senior Indebtedness,
shall in any way alter or affect any of the subordination provisions
hereof.

     

    4.           Representations
and Warranties.

     

    Each
Subordinated Creditor hereby represents and warrants (as to itself and not as to
any other Subordinated Creditor) to Collateral Agent and Buyers as
follows:

     

    4.1           Existence
and Power.  Such Subordinated Creditor is duly organized,
validly existing and in good standing under the laws of the state of its
organization.

     

    4.2           Authority.  Such
Subordinated Creditor has full power and authority to enter into, execute,
deliver and carry out the terms of this Agreement and to incur the obligations
provided for herein, all of which have been duly authorized by all proper and
necessary action and are not prohibited by the organizational documents of such
Subordinated Creditor.

     

    4.3           Binding
Agreements.  This Agreement, when executed and delivered, will
constitute the valid and legally binding obligation of such Subordinated
Creditor enforceable in accordance with its terms.

     

    4.4           Conflicting
Agreements; Litigation.  No provisions of any mortgage,
indenture, contract, agreement, statute, rule, regulation, judgment, decree or
order

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    binding
on such Subordinated Creditor or affecting the property of such Subordinated
Creditor conflicts with, or requires any consent which has not already been
obtained under, or would in any way prevent the execution, delivery or
performance of the terms of this Agreement.  The execution, delivery
and carrying out of the terms of this Agreement will not constitute a default
under, or result in the creation or imposition of, or obligation to create, any
Lien upon the property of such Subordinated Creditor pursuant to the terms of
any such mortgage, indenture, contract or agreement.  No pending or,
to the best of such Subordinated Creditor’s knowledge, threatened, litigation,
arbitration or other proceedings if adversely determined would in any way
prevent the performance of the terms of this Agreement.

     

    4.5           No
Divestiture.  On the date hereof, the Subordinated Creditor
which is signatory hereto is the current owner and holder of its Series B-2
Stock and all other Subordinated Indebtedness Documents.

     

    4.6           Default
under Subordinated Indebtedness Documents.

     

    (a)           To
the knowledge of such Subordinated Creditor, on the date hereof, no default
exists under or with respect to its Series B-2 Stock or any of the other
Subordinated Indebtedness Documents.

     

    (b)           The
Company hereby represents and warrants to Collateral Agent and Buyers that the
signatories to this Agreement under the heading “Subordinated Creditors”
constitute all of the holders of the Series B-2 Stock and the other Subordinated
Indebtedness.

     

    5.           Cumulative
Rights, No Waivers.  Each and every right, remedy and power
granted to Collateral Agent or Buyers hereunder shall be cumulative and in
addition to any other right, remedy or power specifically granted herein, in the
Purchase Agreement, the other Loan Documents or Permitted Refinancing Loan
Documents or now or hereafter existing in equity, at law, by virtue of statute
or otherwise, and may be exercised by Collateral Agent or Buyers, from time to
time, concurrently or independently and as often and in such order as Collateral
Agent or Buyers may deem expedient.  Any failure or delay on the part
of Collateral Agent or Buyers in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not operate as
a waiver thereof or affect Collateral Agent’s or Buyers’ right thereafter to
exercise the same, and any single or partial exercise of any such right, remedy
or power shall not preclude any other or further exercise thereof or the
exercise of any other right, remedy or power, and no such failure, delay,
abandonment or single or partial exercise of Collateral Agent’s or Buyers’
rights hereunder shall be deemed to establish a custom or course of dealing or
performance among the parties hereto.

     

    6.           Modification.  Any
modification or waiver of any provision of this Agreement, or any consent to any
departure by Collateral Agent or any Subordinated Creditor therefrom, shall not
be effective in any event unless the same is in writing and signed by Collateral
Agent and the holders of at least 51% of the then issued and outstanding shares
of Series B-2 Stock, and then such modification, waiver or consent shall be
effective only in the specific instance and for the specific instance and for
the specific purpose given.  Any notice to or demand on
any

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    Subordinated
Creditor in any event not specifically required of Collateral Agent hereunder
shall not entitle any Subordinated Creditor to any other or further notice or
demand in the same, similar or other circumstances unless specifically required
hereunder.

     

    7.           Additional
Documents and Actions.  Each Subordinated Creditor at any time,
and from time to time, after the execution and delivery of this Agreement, upon
the request of Collateral Agent and at the expense of Company, promptly will
execute and deliver such further documents and do such further acts and things
as Collateral Agent may request in order to effect fully the purposes of this
Agreement.

     

    8.           Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one (1) Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such
communications shall be:

     

    

     

    
      	
              If
      to a Subordinated    

              Creditor:

            	
              Battery
      Partners VII, LLC

              930
      Winter Street, Suite 2500

              Waltham,
      Massachusetts 02451

              Attention:
      Michael Brown

              Telecopy:  (781)
      478-6601

            
	 	 
	
              With
      a copy to:

            	
              Nixon
      Peabody LLP

              100
      Summer Street

              Boston,
      Massachusetts 02110

              Attention:
      Christopher Keefe, Esq.

              Telecopy:
      (866) 947-1550

            
	 	 
	
              If
      to the Company:    

            	
              MRU
      Holdings, Inc.

              590
      Madison Avenue, 13th
      Floor

              New
      York, NY 10022

              Attention:
      Yariv Katz, Esq.

              Telecopy:  (866)
      896- 1055

            
	 	 
	
              With
      a copy to:

            	
              Paul,
      Hastings, Janofsky & Walker LLP

              75
      East 55th Street

              New
      York, NY 10022

              Attention:
      Michael L. Zuppone, Esq.

              Telecopy:
      (212) 318-6906

            

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              If
      to Collateral Agent:    

            	
              Viking
      Asset Management L.L.C.

              600
      Montgomery Street, 44th Floor

              San
      Francisco, CA  94111

              Attention:  Michael
      Rudolph

              Telecopy:  (415)
      981-5301

            
	 	 
	
              with
      a copy to:

            	
              Viking
      Asset Management, LLC

              10
      Glenville Street, 3rd Floor

              Greenwich,
      Connecticut 06831

              Attention:  Robert
      J. Brantman

              Facsimile:
      (646) 840-4958

            
	 	 
	
              with
      a copy to:

            	
              Katten
      Muchin Rosenman LLP

              525
      West Monroe Street

              Chicago,
      Illinois 60661-3693

              Attn:
      Mark Wood, Esq.

              Telecopy:
      (312) 577-8858

            

    

     

    or, in
the case of party named above, at such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or deposit with a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

     

    9.           Severability.  In
the event that any provision of this Agreement is deemed to be invalid by reason
of the operation of any law or by reason of the interpretation placed thereon by
any court or governmental authority, this Agreement shall be construed as not
containing such provision and the invalidity of such provision shall not affect
the validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect.

     

    10.         Successors
and Assigns.  This Agreement shall inure to the benefit of the
successors and assigns of Collateral Agent and Buyers and shall be binding upon
the successors and assigns of the Subordinated Creditors and the
Company.

     

    11.         Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to each other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

     

    12.         Defines Rights of Creditors;
Subrogation.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (a)           The
provisions of this Agreement are solely for the purpose of defining the relative
rights of Subordinated Creditors, Collateral Agent and Buyers and shall not be
deemed to (i) create any rights or priorities in favor of any other Person,
including, without limitation, the Company or any Viking Guarantor, or (ii)
amend any of the Loan Documents or in any way waive any of the rights that the
Collateral Agent and the Buyers have against the Company or any Viking Guarantor
under the Loan Documents.

     

    (b)           Subject
to the Payment in Full of the Senior Indebtedness, in the event and to the
extent cash, property or securities otherwise payable or deliverable to the
holders of the Subordinated Indebtedness shall have been applied pursuant to
this Agreement to the payment of Senior Indebtedness, then and in each such
event, the holders of the Subordinated Indebtedness shall be subrogated to the
rights of each holder of Senior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Senior Indebtedness; and, for
the purposes of such subrogation, no payment or distribution to the holders of
Senior Indebtedness of any cash, property or securities to which any holder of
Subordinated Indebtedness would be entitled except for the provisions of this
Agreement shall, and no payment over pursuant to the provisions of this
Agreement to the holders of Senior Indebtedness by the holders of the
Subordinated Indebtedness shall, as between the Company or any Viking Guarantor,
its creditors other than the holders of Senior Indebtedness and the holders of
Subordinated Indebtedness, be deemed to be a payment by the Company or any
Viking Guarantor to or on account of Senior Indebtedness.

     

    13.         Conflict.  In
the event of any conflict between any term, covenant or condition of this
Agreement and any term, covenant or condition of any of the Subordinated
Indebtedness Documents, the provisions of this Agreement shall control and
govern.  For purposes of this Section 13, to the extent that any
provisions of any of the Subordinated Indebtedness Documents provide rights,
remedies and benefits to Collateral Agent or Buyers that exceed the rights,
remedies and benefits provided to Collateral Agent or Buyers under this
Agreement, such provisions of the applicable Subordinated Indebtedness Documents
shall be deemed to supplement (and not to conflict with) the provisions
hereof.

     

    14.         Statement
of Indebtedness to Subordinated Creditors.  Company will
furnish to Collateral Agent upon demand, a statement of the indebtedness owing
from the Company to Subordinated Creditors, and will give Collateral Agent
access to the books of the Company in accordance with the Purchase Agreement so
that Collateral Agent can make a full examination of the status of such
indebtedness.

     

    15.         Headings.  The
paragraph headings used in this Agreement are for convenience only and shall not
affect the interpretation of any of the provisions hereof.

     

    16.         Termination.  This
Agreement shall terminate upon the Payment in Full of the Senior
Indebtedness.

     

    
      17.         Subordinated
Default Notice.  Company shall provide Collateral Agent with a
Subordinated Default Notice upon the occurrence of each Subordinated Default,
and

    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Subordinated
Creditors shall notify Collateral Agent in the event such Subordinated Default
is cured or waived.

     

    18.         No
Contest of Senior Indebtedness or Liens; No Security for Subordinated
Indebtedness.  Each Subordinated Creditor agrees that it will
not, and will not encourage any other Person to, at any time, contest the
validity, perfection, priority or enforceability of the Senior Indebtedness or
Liens in the Collateral granted to Collateral Agent pursuant to the Purchase
Agreement, the other Loan Documents or the Permitted Refinancing Loan Documents
or accept or take any collateral security for the Subordinated
Indebtedness.  In furtherance of the foregoing, on the date hereof,
each Subordinated Creditor hereby represents and warrants that it has not taken
or received a security interest in, or lien upon, any asset of the Company or
any Viking Guarantor, whether in respect of the Subordinated Indebtedness or
otherwise.

     

    19.         Governing
Law, Jurisdiction Waiver of Jury Trial.  All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith 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 Agreement 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.

     

    20.         Waiver of
Consolidation.  Each Subordinated Creditor acknowledges and
agrees that (i) the Company and each Viking Guarantor are each separate and
distinct entities; and (ii) it will not at any time insist upon, plead or seek
advantage of any substantive consolidation, piercing the corporate veil or any
other order or judgment that causes an effective combination of the assets and
liabilities of the Company and any Viking Guarantor in any case or proceeding
under Title 11 of the United States Code or other similar
proceeding.

     

    [Remainder
of Page Intentionally Left Blank; Signature Page to Follow]

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, each
Subordinated Creditor, the Company, Collateral Agent and Buyers has caused this
Agreement to be executed as of the date first above written.

     

    
    

     

    
      	 	SUBORDINATED
      CREDITORS:
	 	 
	 	BATTERY VENTURES VII,
      L.P., a Delaware limited
	 	partnership
	 	By: BATTERY
      PARTNERS
      VII, LLC, a Delaware limited
	 	liability
      company
	 	Its: General
      Partner
	 	 
	 	 
	 	By: /s/ Thomas J.
      Crotty                                                      
      	 
	 	Name: 	Thomas J.
      Crotty	 
	 	Title:	Member-Manager	 

    

     

     

    
      	 	BATTERY INVESTMENT PARTNERS
      VII, LLC, a
	 	Delaware limited
      liability company
	 	By: BATTERY
      PARTNERS VII,
      LLC, a Delaware limited
	 	liability
      company
	 	Its:
    Manager
	 	 
	 	 
	 	By: /s/ Thomas J.
      Crotty                                                      
      	 
	 	Name: 	Thomas J.
      Crotty	 
	 	Title:	Member-Manager	 

    

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

        

    
      	 	THE
COMPANY:
	 	 
	 	MRU HOLDINGS, INC., a
      Delaware corporation
	 	 
	 	 
	 	By: /s/ Vishal
      Garg                                                      
      	 
	 	Name: 	Vishal
Garg	 
	 	Title:	Co-President	 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    
      	 	COLLATERAL
    AGENT:
	 	 
	 	VIKING ASSET MANAGEMENT
      L.L.C. in its capacity
	 	as collateral agent
      for Buyers
	 	 
	 	 
	 	By: /s/ S. Michael
      Rudolph                                                      
      	 
	 	Name: 	S. Michael
      Rudolph	 
	 	Title:	Chief Financial
      Officer	 

    

     

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    
      	 	BUYERS:
	 	 
	 	LONGVIEW MARQUIS MASTER FUND,
      L.P., a
	 	British Virgin
      Islands limited partnership
	 	By:  Viking
      Asset Management, LLC
	 	Its:   Investment
      Manager
	 	 
	 	 
	 	By: /s/ S. Michael
      Rudolph                                                      
      	 
	 	Name: 	S. Michael
      Rudolph	 
	 	Title:	Chief Financial
      Officer	 

    

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    CERTIFICATE
OF DESIGNATION OF SERIES B-2 STOCKexhibit10one.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SETTLEMENT AGREEMENT AND
MUTUAL RELEASE

    

    This Settlement Agreement and Mutual
Release ("Agreement"), effective June 30, 2008,  is by and among Frank
Vazquez (“Vazquez”) and Lawrence Wunderlich (“Wunderlich”) (collectively,
“Claimants”), and CytoGenix, Inc. (“CytoGenix”).

    WHEREAS, on November 17, 2006,
Claimants resigned as officers, directors and employees of CytoGenix;
and

    WHEREAS, on December 4, 2006, Claimants
filed an arbitration against CytoGenix under No. 70 144 08333 06, styled Frank Vazquez and Lawrence
Wunderlich v. CytoGenix, Inc., before the American Arbitration
Association in Houston, Texas, alleging certain claims relating to Claimants’
employment with CytoGenix, including the Claimants’ rights and obligations under
their employment agreements with CytoGenix (the “Arbitration”); and

    WHEREAS, on January 24, 2007,
Wunderlich filed a complaint against CytoGenix with the Department of Labor,
Case No. 6-3280-07-905, alleging that CytoGenix retaliated against him in
violation of the Sarbanes-Oxley Act of 2002 (the “SOX Complaint”);
and

    WHEREAS, bona fide disputes and
controversies exist between the parties as to the claims asserted, or which
could have been asserted, in the Arbitration and the SOX Complaint, and because
liability and the extent of damages are uncertain, unliquidated, disputed and
denied, the parties hereto, in an effort to end these disputes and avoid further
controversy, expense and delay, desire to settle and compromise the claims
asserted, or that could have been asserted, in the Arbitration and the SOX
Complaint.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    NOW, THEREFORE, for and in
consideration of the mutual obligations and promises herein contained, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

    1. CytoGenix shall pay $150,000 each to
Vazquez and Wunderlich in equal monthly installments ($3,125 per month to each
Claimant) over a four year period commencing October 1, 2008.  Each
monthly payment shall be made by check payable to each Claimant in the amount of
$3,125 and mailed to Claimants at their home addresses and postmarked on or
before the first of each month.  CYTOGENIX HEREBY AFFIRMATIVELY STATES
THAT IT DOES NOT CURRENTLY POSSESS A SUFFICIENT AMOUNT OF CASH TO MAKE ALL SUCH
PAYMENTS.

    2. Within three (3) business days of the
execution and delivery of this Agreement by Claimants, CytoGenix shall issue
non-callable warrants to purchase 2,000,000 shares of CytoGenix Section 144
restricted common stock to Vazquez and non-callable warrants to purchase
3,200,000 shares of CytoGenix Section 144 restricted common stock to Wunderlich,
in substantially the form attached as Exhibit A hereto, in the following
amounts:

    
      	
               
      

            	
              a.

            	
              one-third
      of said warrants (666,666 warrants for Vazquez and 1,066,666 warrants for
      Wunderlich) shall be issued with an exercise price of $0.05 per
      share;

            

    

    

    
      	
               
      

            	
              b.

            	
              one-third
      of said warrants (666,667 warrants for Vazquez and 1,066,667 warrants for
      Wunderlich) shall be issued with an exercise price of $0.10 per share;
      and

            

    

    

    
      	
               
      

            	
              c.

            	
              one-third
      of said warrants (666,667 warrants for Vazquez and 1,066,667 warrants for
      Wunderlich) shall be issued with an exercise price of $0.15 per
      share.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CYTOGENIX
HEREBY AFFIRMATIVELY STATES THAT IT DOES NOT CURRENTLY POSSESS SUFFICIENT
WORKING CAPITAL TO SUPPORT THE VALUE OF THE WARRANTS TO BE ISSUED HEREUNDER AND
THE BUSINESS OPERATIONS OF CYTOGENIX THROUGH DECEMBER 31, 2008, AND THAT SUCH
WARRANTS MAY BE DEEMED WORTHLESS BOTH AS OF THE EFFECTIVE DATE OF THIS AGREEMENT
AND/OR AT SOME TIME IN THE FUTURE.

    3. In the event CytoGenix fails to timely
make any of the payments or issue the warrants as set forth above, CytoGenix
shall have fifteen (15) days to cure any alleged default.  If
CytoGenix fails to cure any defaults within the cure period, Claimants shall be
entitled to accelerate, at their discretion, the payment of all remaining
installments and demand payment in full, and may also submit an agreed
arbitration award to Judge Ruby Sondock, as arbitrator, in the form of Exhibit B
attached hereto (the “Agreed Arbitration Award”). CytoGenix shall cooperate and
not oppose any efforts by Claimants to enforce and execute upon the Agreed
Arbitration Award.  CytoGenix shall not withdraw its consent to the
Agreed Arbitration Award at any time.  To the extent permitted by law,
no final judgment of any court of law shall be required to execute upon the
Agreed Arbitration Award.  In the event that a court judgment is
necessary, CytoGenix agrees to cooperate and not oppose the entry of such
judgment.

    4. Upon execution of this Agreement by all
parties, the Arbitration shall be dismissed with prejudice.

    5. Upon execution of this Agreement by all
parties, if not sooner, the SOX Complaint shall be dismissed with
prejudice.  The parties acknowledge that this Agreement
must

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    be
submitted to and approved by the Department of Labor prior to its execution and
effectiveness.

    6.                                
CytoGenix and the Claimants shall each be responsible for their own attorneys’
fees and costs.

    7. Vazquez, his heirs, executors,
administrators, attorneys, successors and assigns, as well as any person or
entity claiming by, through or under any of the foregoing, hereby RELEASE,
ACQUIT AND FOREVER DISCHARGE CytoGenix, its current and former officers,
directors, employees, shareholders, agents, legal representatives, attorneys,
successors and assigns, from any and all claims, causes of action, suits,
damages (actual, compensatory, exemplary or punitive), debts, obligations,
benefits, wages, bonuses, compensation, back pay, front pay, vacation pay, sick
pay, medical bills and expenses, and demands, of any kind, nature or description
whatsoever, whether known or unknown, whether at law or in equity, in contract
or in tort (including but not limited to claims for wrongful discharge,
discrimination, retaliation, interference with protected rights, interference
with present or prospective contractual relations, breach of contract,
defamation, invasion of privacy, intentional or negligent infliction of
emotional distress, fraud, misrepresentation, personal injury, negligence,
intentional conduct, misconduct or interference with present or prospective
business relations or contracts), arising under federal or state statutory or
common law (including but not limited to the Sarbanes-Oxley Act of 2002, § 8307c
of the Texas Workers Compensation Act, Title VII of the Civil Rights Act of 1964
as amended, Civil Rights Act of 1866 and 1871, Employee Retirement Income
Security Act of 1974 as amended, Equal Pay Act of 1963, Age Discrimination in
Employment Act, Fair

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     Labor
Standards Act, Civil Rights Act of 1991, Americans with Disabilities Act,
Rehabilitation Act of 1974 as amended, and Texas Commission on Human Rights Act)
relating to or arising out of the employment relationship between the parties,
as well as the matters that were asserted, or could have been asserted, in the
Arbitration and the SOX Complaint.  This release applies to all claims
and causes of action that exist or could have been asserted on or before the
effective date of this Agreement.

    8. Wunderlich, his heirs, executors,
administrators, attorneys, successors and assigns, as well as any person or
entity claiming by, through or under any of the foregoing, hereby RELEASE,
ACQUIT AND FOREVER DISCHARGE CytoGenix, its current and former officers,
directors, employees, shareholders, agents, legal representatives, attorneys,
successors and assigns, from any and all claims, causes of action, suits,
damages (actual, compensatory, exemplary or punitive), debts, obligations,
benefits, wages, bonuses, compensation, back pay, front pay, vacation pay, sick
pay, medical bills and expenses, and demands, of any kind, nature or description
whatsoever, whether known or unknown, whether at law or in equity, in contract
or in tort (including but not limited to claims for wrongful discharge,
discrimination, retaliation, interference with protected rights, interference
with present or prospective contractual relations, breach of contract,
defamation, invasion of privacy, intentional or negligent infliction of
emotional distress, fraud, misrepresentation, personal injury, negligence,
intentional conduct, misconduct or interference with present or prospective
business relations or contracts), arising under federal or state statutory or
common law (including but not limited to the Sarbanes-Oxley Act of 2002, § 8307c
of the Texas Workers Compensation Act, Title VII of the Civil Rights
Act

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    of 1964
as amended, Civil Rights Act of 1866 and 1871, Employee Retirement Income
Security Act of 1974 as amended, Equal Pay Act of 1963, Age Discrimination in
Employment Act, Fair Labor Standards Act, Civil Rights Act of 1991, Americans
with Disabilities Act, Rehabilitation Act of 1974 as amended, and Texas
Commission on Human Rights Act) relating to or arising out of the employment
relationship between the parties, as well as the matters that were asserted, or
could have been asserted, in the Arbitration and the SOX
Complaint.  This release applies to all claims and causes of action
that exist or could have been asserted on or before the effective date of this
Agreement.

    9. CytoGenix, its current and former
officers, directors, employees, shareholders, agents, legal representatives,
attorneys, successors and assigns, as well as any person or entity claiming by,
through or under any of the foregoing, hereby RELEASE, ACQUIT AND FOREVER
DISCHARGE Vazquez and Wunderlich, their respective heirs, executors,
administrators, attorneys, successors and assigns, from any and all claims and
causes of action whatsoever, whether known or unknown, at law, in equity,
statutory or otherwise, including, without limitation, all claims and causes of
action relating to or arising out of the employment relationship between the
parties, as well as the matters that were asserted, or could have been asserted,
in the Arbitration and SOX Complaint.  This release applies to all
claims and causes of action that exist or could have been asserted on or before
the effective date of this Agreement.

    10. None of the releases set forth herein
are intended to release any of the rights and obligations established by this
Agreement.  The rights duties and obligations set forth
herein

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    shall
survive the dismissal of the Arbitration and SOX Complaint and survive the
release of claims set forth herein.

    11.                       The
parties hereto acknowledge that this Agreement is being made by each party of
its own free choice, without any inducement offered in any way other than the
express agreements contained in this Agreement.  Each party warrants
and represents that no promise, agreement, representation, inducement or
condition not set forth in this Agreement has been made or relied upon by said
party in executing this Agreement. The parties further state that in entering
into this Agreement, each party has been advised by an attorney of that party’s
choice and selection, and has had the opportunity to consult with such attorney
regarding the benefits and detriments of entering into this
Agreement.

    12. This Agreement contains the full and
complete agreement of the parties hereto, and all prior negotiations and
agreements pertaining to the subject matter hereof are merged into and
superseded by this Agreement.  No change, amendment, waiver or
discharge of any provision of all or any part of this Agreement shall be valid
unless such change, amendment, waiver or discharge is in writing and duly
executed by all parties to this Agreement, or their authorized
agents.

    13. The parties hereto warrant and
represent that none of them has sold, assigned, granted, or otherwise
transferred to anyone not a party hereto any right, privilege, claim or cause of
action,  or any part thereof, arising out of or otherwise connected
with the subject matter of this Agreement.

    14. This Agreement is entered into and is
performable in Harris County, Texas, and

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    shall be
governed by, construed, interpreted, and enforced in accordance with the laws of
the State of Texas.

    15. Any controversy or claim (whether such
claim arises in contract, tort, or otherwise) arising out of or relating to this
Agreement, or the breach thereof, or the commercial or economic relationship of
the parties hereto, shall be submitted to binding arbitration in accordance with
the rules and procedures of the American Arbitration
Association.  Notwithstanding the preceding sentence, Claimants shall
be entitled to submit and enforce the Agreed Arbitration Award in accordance
with paragraph 3 without complying with this paragraph 15.  The
arbitration shall be conducted by a single arbitrator and the place of
arbitration shall be in Houston, Texas.  A judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof.  Unless the parties otherwise agree, the arbitration will be
governed by the Commercial Arbitration Rules of the American Arbitration
Association.

    16. The persons signing this Agreement on
behalf of any of the parties hereto hereby warrant and represent that they are
authorized to sign this Agreement on behalf of themselves or their respective
entities and that such persons have the power to bind themselves and/or their
respective entities.

    17. This Agreement is a result of
substantial negotiations between the parties and their
counsel.  Accordingly, the fact that counsel for one party or another
drafted this Agreement shall not be material to the interpretation of this
Agreement.

    18. All parties to this Agreement have read
the Agreement and fully understand and

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    comprehend
its meaning and binding effect.

    19. If any portion of this Agreement is
found to be null, void or unenforceable, the remainder of this Agreement shall
remain in full force and effect and be severable.

    20. This Agreement shall be effective upon
full execution and delivery of the Agreement by each of the parties
hereto.  This Agreement may be executed by fax, and in multiple
counterparts or copies, each of which shall be deemed to be an original for all
purposes.

     

     

                   
CYTOGENIX, INC.

    

    

    Date:
___________                                                                           By:_______________________________________

    Malcolm
Skolnick

    President
and CEO

    

    
      	
              Date:
      ___________

            	
              __________________________________________

            

    

                  
Frank Vazquez

    

    
      	
              Date:
      ___________

            	
              __________________________________________

            

    

    
      	
               
      

            	
              Lawrence
      Wunderlich

            

    

    

    

    

    

    

    

    
      	
              APPROVED:

            

    

    

    
      	
              THE
      UNITED STATES DEPARTMENT OF LABOR

            

    

    

    

    
      	
              By:__________________________________

            	
              Date:_______________________________

            

    

    

    
      	
              Title:_________________________________

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CYTOGENIX,
INC.

     

    

     

    WARRANT TO PURCHASE COMMON
STOCK

     

    

     

    JUNE
_____, 2008

     

    FOR VALUE
RECEIVED, CYTOGENIX, INC., a Nevada corporation (the Company), hereby certifies
that ____________________________________ (the Holder), is entitled, subject to
the provisions of this warrant (the “Warrant”), to purchase from
the Company, at any time, or from time to time during the period commencing on
the day hereof and expiring at 5:00 p.m. Houston, Texas time on June ____, 2011
(the “Exercise Period”),
_____________ shares of common stock, par value $0.001 per share, of the Company
(the “Common Stock”), at
a price equal to $0.0___ per share (such exercise price per share, as it may be
adjusted as set out herein, being hereinafter referred to as the “Exercise Price”).

     

    The
number of shares of Common Stock that may be purchased upon the exercise of this
Warrant set forth above may be adjusted from time to time as hereinafter set
forth.  The shares of Common Stock purchasable upon such exercise, as
adjusted from time to time, are hereinafter sometimes referred to as the “Warrant Shares.”

     

    Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.

     

    The
Holder agrees with the Company that this Warrant is issued, and all the rights
hereunder shall be held, subject to all of the conditions, limitations and
provisions set forth herein.

     

    1.     
Exercise of
Warrant.  This Warrant may be exercised at any time, or from
time to time, during the Exercise Period, in whole or in part.  This
Warrant shall be exercised by presentation and surrender hereof to the Company
at its principal office with the Warrant Exercise Form attached hereto duly
executed and accompanied by payment (either in cash or by certified or official
bank check, payable to the order of the Company) of the Exercise Price for the
number of Warrant Shares specified in such Form and instruments of transfer, if
appropriate, duly executed by the Holder.  If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares.  Upon
receipt by the Company of this Warrant, together with the Exercise Price, at its
office in proper form for exercise, the Holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise, notwithstanding
that certificates representing such Warrant Shares, if any, shall not then be
actually delivered to the Holder.

     

    2.     
Reservation of
Shares.  The Company will at all times reserve for issuance and
delivery upon exercise of this Warrant all shares of Common Stock or other
shares of capital stock of the Company (and other securities) from time to time
receivable upon exercise of this Warrant.

     

    EXHIBIT
A

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    All such
shares (and other securities) shall be duly authorized and, when issued upon
such exercise, shall be validly issued, fully paid and nonassessable and free of
all taxes, liens and charges in respect thereof.  The Company shall
endeavor to comply with all securities laws regulating the offer and delivery of
Warrant Shares upon exercise of this Warrant.

     

    3.     
Absence of Registration
under Securities Act of 1933; Restrictions on Transferability. The shares
of Common Stock are not presently, and upon their issuance will not be,
registered under the Securities Act of 1933, as amended (the “Act”) or any state securities
laws.  The Holder acknowledges that this Warrant was issued in a
transaction that is intended to be exempt from the registration requirements of
the Act and applicable state securities laws and must be held by the Holder and
may not be resold unless subsequently registered under the Act and any
applicable state securities laws or an exemption from such registration is
available. The Holder, by its acceptance hereof, agrees to indemnify and hold
the Company harmless against loss or liability arising from the transfer of the
shares of Common Stock or this Warrant or any interest therein in violation of
the Act or any applicable state securities laws.

     

    4.     
Exchange, Transfers,
Assignment of Warrant.  Subject to Section 3, this Warrant may
be sold, exchanged, transferred, pledged or assigned, in whole or in
part.  Upon such event and upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be canceled; provided, that, should this Warrant be
sold, exchanged, transferred, pledged or assigned in part, the Company shall
also execute and deliver a new Warrant in the name of the Holder representing
the part of this Warrant not sold, exchanged, transferred, pledged or
assigned.

     

    5.     
Rights of the
Holder.  The Holder shall not, by virtue hereof, be entitled to
any rights as a shareholder of the Company, either at law or in equity, and the
rights of the Holder are limited to those set forth in this
Warrant.

     

    6.     
Special Agreements of the
Company.  If the shares of Common Stock are listed on a stock
exchange, the Company covenants and agrees to use its commercially reasonable
efforts to procure at its sole expense the listing of all Warrant Shares
(subject to issuance or notice of issuance) on all stock exchanges on which the
Common Stock are then listed and maintain the listing of such shares and other
securities after issuance.

     

    7.     
Antidilution
Provisions.  As of June 30, 2008, the Company has ____________
fully diluted shares of Common Stock outstanding.  For purposes of the
preceding sentence, “fully diluted” equals the number of shares outstanding that
would be used to calculate fully diluted earnings (loss) per share pursuant to
generally accepted accounting principles.  The number and kind of
shares of Common Stock purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as
follows:

     

    7.1     
Stock
Dividends.  If and whenever at any time the Company shall
declare a dividend or make any other distribution upon the shares of Common
Stock payable in shares of Common Stock or securities directly or indirectly
convertible into or exercisable for Common Stock, the number of shares of Common
Stock for which this Warrant is exercisable and the

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     Exercise
Price shall be proportionately adjusted to reflect the issuance of any such
securities issuable in payment of such dividend or distribution.

     

    7.2     
Subdivision or Combination of Common
Stock.  If and whenever the Company shall at any time subdivide
its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased.  Upon each adjustment of the Exercise Price, the holder of
this Warrant shall thereafter be entitled to purchase at the Exercise Price
resulting from such adjustment, the number of shares obtained by dividing (a)
the product of (y) the number of shares purchasable pursuant hereto immediately
prior to such adjustment and (z) the Exercise Price immediately preceding such
adjustment by (b) the Exercise Price resulting from such
adjustment.  Each such adjustment of the Exercise Price shall become
effective immediately after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.

     

    7.3     
Distributions. In case the
Company shall, by dividend or otherwise, distribute to all holders of its Common
Stock (a) evidences of its indebtedness or (b) shares of any class of capital
stock, cash or other assets (excluding any dividend or distribution for which an
adjustment has been made under Sections 7.1 or 7.2 above), then in each case,
the Holder of this Warrant shall be entitled to receive upon exercise of this
Warrant for each Warrant Share for which this Warrant is exercised the evidence
of indebtedness or such shares of any class of capital stock, cash or other
assets to which a holder of Common Stock deliverable on exercise would have been
entitled had such exercise occurred immediately prior to the date fixed for the
determination of holders of Common Stock entitled to receive such
distribution.

     

    7.4     
Recapitalizations.  If
at any time or from time to time there shall be any capital reorganization or
reclassification of the capital stock of the Company, consolidation, share
exchange or merger of the Company into or with another corporation, or sale,
transfer or other disposition of all or substantially all of the Company’s
property to another corporation (any such event being referred to herein as a
“recapitalization”) provision shall be made so that the Holder shall thereafter
be entitled to receive upon exercise of this Warrant the number of shares of
stock or other securities or property of the Company or otherwise, to which a
holder of Common Stock deliverable upon exercise would have been entitled on
such recapitalization.  Appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect to the rights of
the Holder of this Warrant after the recapitalization to the end that the
provisions of this Section 7 (including adjustment of the Exercise Price then in
effect and the number of shares for which this Warrant may be exercised) shall
be applicable after that event in as nearly an equivalent manner as may be
applicable.

     

    7.5     
No Adjustments.  No
adjustment in the Exercise Price need be made until all cumulative adjustments
amount to 1% or more of the Exercise Price as last adjusted.  Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.  All calculations under this Section 7
shall be made to the nearest 1/1,000th of a cent or to the nearest 1/1,000th of
a share, as the case may be.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    7.6    
 Equivalent
Distributions.  No adjustment in the Exercise Price need be
made under Sections 7.1 and 7.3 above if the Company issues or distributes to
the Holder the shares of Common Stock or evidences of indebtedness, assets,
cash, securities, rights, options or warrants referred to in those paragraphs
which the Holder would have been entitled to receive had this Warrant been
exercised prior to the happening of such event or the record date with respect
thereto.

     

    7.7    
Notices of Record Date,
Etc.  In the event:

     

    (a)   the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities, or to receive any other right; or

     

    (b)   of any
capital reorganization of the Company, any reclassification of the capital stock
of the Company, any consolidation, share exchange or merger of the Company with
or into another corporation or any conveyance of all or substantially all of the
assets of the Company to another corporation; or

     

    (c)   of any
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company shall deliver or cause to be delivered
to the Holder notice specifying, as the case may be, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any, is to be fixed, as to which the holders of record of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
share exchange, merger, conveyance, dissolution, liquidation or
winding-up.  Such notice shall be delivered at least 10 days prior to
the date therein specified and this Warrant may be exercised, conditional upon
the occurrence of any such event, prior to said date during the term of this
Warrant no later than five days prior to said date.

     

    7.8   Notice of
Adjustment.  On the happening of an event requiring an
adjustment of the Exercise Price or the shares purchasable hereunder, the
Company shall forthwith give written notice to the Holder stating the adjusted
Exercise Price and the adjusted number and kind of securities or other property
purchasable hereunder resulting from the event and setting forth in reasonable
detail the method of calculation and the facts upon which the calculation is
based.

     

    8.     
Payment of
Taxes.  The Company will pay all documentary stamp taxes
attributable to the initial issuance of this Warrant and of the Warrant Shares
upon the exercise of this Warrant; provided, however, that the Company shall not
be required to pay any tax or taxes which may be payable in respect of any
transfer of all or any part of this Warrant or any certificates for Warrant
Shares in a name other than that of the Holder of this Warrant, and the Company
shall not be required to issue or deliver any Warrant to any transferee unless
or until the person or persons requesting the transfer thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    9.     
Applicable
Law.  This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas.

     

    10.     Notice. Any notice,
request, instruction, correspondence or other document to be given hereunder by
any party to another shall be in writing and delivered in person or by courier
service requiring acknowledgment of receipt of delivery or mailed by certified
mail, postage prepaid and return receipt requested, or by telecopier, as
follows:

     

    If to the
Company, addressed to:

     

    CytoGenix,
Inc.

    3100
Wilcrest, Suite 140

    Houston,
Texas 77042

    Attention:
President

    Telecopy:
(713) 789-0702

     

    

     

    If to
Holder, addressed to:

     

    

     

    

     

    

     

    Notice
given by personal delivery, courier service or mail shall be effective upon
actual receipt.  Notice given by telecopier shall be confirmed by
appropriate answer back and shall be effective upon actual receipt if received
during the recipient’s normal business hours, or at the beginning of the
recipient’s next business day after receipt if not received during the
recipient’s normal business hours. All notices by telecopier shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
Any party may change any address to which notice is to be given to it by giving
Notice as provided above of such change of address.

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf,
in its corporate name, by its duly authorized officer, all as of the day and
year first above written.

     

    CYTOGENIX,
INC.

    

    

    

    By:_____________________________________

         Malcolm
Skolnick

         Chief
Executive Officer and President

    

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    WARRANT EXERCISE
FORM

     

    The
undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing ____ shares of [description of Warrant Shares], and hereby
makes payment in full therefor of $_____________ in cash.

     

    

    

     

    
      	 	 

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    WARRANT
ASSIGNMENT FORM

     

    FOR VALUE
RECEIVED, ___________________________________________ hereby sells, assigns and
transfers unto ____________________________________________________

     

    Name (Please typewrite or print in
block letters)

     

    the right
to purchase [describe number of shares of Warrant Shares] of CytoGenix, Inc.
represented by this Warrant to the extent of shares as to which such right is
exercisable and does hereby irrevocably constitute and appoint
______________________________ Attorney, to transfer the same on the books of
CytoGenix, Inc. with full power of substitution in the premises.

     

    DATED:
______________

     

     

    
      	
               

            	 

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    BEFORE
THE AMERICAN ARBITRATION ASSOCIATION

    HOUSTON
REGION

    

    

      
        	
                FRANK
      VAZQUEZ and

              	
                '

              	 
      	 
      
	
                LAWRENCE
      WUNDERLICH,

              	
                '

              	 
      	 
      
	 
      	
                '

              	 
      	 
      
	 	
                Claimants,

              	
                '

              	 
      	 
      
	 
      	
                '

              	 
      	
                NO.
      70 166 00833 06

              
	
                v.

              	
                '

              	 
      	 
      
	 
      	
                '

              	 
      	 
      
	
                CYTOGENIX,
      INC.,

              	
                '

              	 
      	 
      
	 
      	
                '

              	 
      	 
      
	 	
                Respondent,

              	
                '

              	 
      	 
      
	 	
                Counter-Claimant.

              	
                '

              	 
      	 
      

      

    

    AGREED ARBITRATION
AWARD

    

    Claimants
Frank Vazquez (“Vazquez”) and Lawrence Wunderlich (“Wunderlich”) (collectively,
“Claimants”) filed this proceeding on November 17, 2006 against their former
employer, CytoGenix, Inc. (“CytoGenix”).  Claimants sought to recover
severance compensation allegedly owed under their respective employment
contracts with CytoGenix.

    A hearing
on the merits was held on May 12-13, 2008. At the request of the parties, an
award was not immediately issued so that the parties could attempt to reach a
settlement.

    The
parties subsequently entered into a Settlement Agreement and Mutual Release
effective June 30, 2008 (the “Settlement Agreement”).  Pursuant to the
Settlement Agreement, the parties agreed to the terms of this Agreed Arbitration
Award, to be entered only in the event of an uncured default by CytoGenix of its
obligations under paragraphs 1 and 2 of the Settlement Agreement.

    

    EXHIBIT
B

    
      
        
           

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    I find
CytoGenix is in default of its obligations under paragraph 1 and/or paragraph 2
of the Settlement Agreement and has failed to cure said default(s) within the
allotted time.  Therefore, I hereby enter this Agreed Arbitration
Award in favor of Claimants as follows:

    1)           The
unpaid monthly installments due under paragraph 1 of the Settlement Agreement
are hereby accelerated.  The amount owed to each Claimant has been
established by a letter from Claimants’ counsel to the undersigned, with a copy
to CytoGenix’s counsel, setting forth the total unpaid installments due under
paragraph 1 of the Settlement Agreement to each Claimant.  Each of the
Claimants shall have and recover from CytoGenix the amount of $____________,
representing the accelerated total of the unpaid monthly installments due under
paragraph 1 of the Settlement Agreement.

    2)           If
not previously issued, pursuant to paragraph 2 of the Settlement Agreement,
CytoGenix is hereby ordered to issue, within ten (10) days from the date hereof,
the balance of any unissued non-callable warrants to purchase 2,000,000 shares
of CytoGenix Section 144 restricted common stock to Vazquez and non-callable
warrants to purchase 3,200,000 shares of CytoGenix Section 144 restricted common
stock to Wunderlich, in substantially the form of Exhibit A to the Settlement
Agreement, in the following amounts:

    
      	
               
      

            	
              a.

            	
              one-third
      of said warrants (666,666 warrants for Vazquez and 1,066,666 warrants for
      Wunderlich) shall be issued with an exercise price of $0.05 per
      share;

            

    

    

    
      	
               
      

            	
              b.

            	
              one-third
      of said warrants (666,667 warrants for Vazquez and 1,066,667 warrants for
      Wunderlich) shall be issued with an exercise price of $0.10 per
      share;

            

    

    

    
      	
               
      

            	
              c.

            	
              one-third
      of said warrants (666,667 warrants for Vazquez and 1,066,667 warrants for
      Wunderlich) shall be issued with an exercise price of $0.15 per
      share;

            

    

    
      
        
          

          - - 

          

        

         

      

      
         

        
          

        

      

      
         

      

    

                   
3)           All costs
and expenses, including attorneys’ fees, administrative fees and expenses of the
American Arbitration Association and compensation to the Arbitrator shall be
borne and paid by the party incurring such costs, fees and
expenses.  Notwithstanding the foregoing, Claimants shall be entitled
to recover their reasonable attorney’s fees and costs incurred in connection
with the enforcement and execution of this Agreed Arbitration Award, not to
exceed $10,000.

    4)           This
Award is intended to dispose of all claims and counterclaims asserted in this
Arbitration.  All claims and counterclaims not expressly granted
herein are hereby DENIED.

    So
entered this ____ day of ________________, 200____.

    

    _____________________________________________

    HONORABLE
RUBY K. SONDOCK, Arbitrator

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00144-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00144-of-00352.parquet"}]]