MRU HOLDINGS, INC. DESIGNATION OF POWERS, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.001 PER SHARE Pursuant to Section 151(g) of the Delaware General Corporation Law
MRU
HOLDINGS, INC.
___________________________
DESIGNATION
OF
POWERS,
PREFERENCES AND RIGHTS OF
SERIES A
CONVERTIBLE PREFERRED STOCK,
PAR VALUE
$0.001 PER SHARE
___________________________
Pursuant
to Section 151(g) of the Delaware General
Corporation
Law
___________________________
IT
IS HEREBY CERTIFIED that:
1. The name
of the company (hereinafter called the “Company”) is MRU
Holdings, Inc., a corporation organized and now existing under the Delaware
General Corporation Law (the “DGCL”).
2. The
certificate of incorporation of this corporation (the “Certificate
of Incorporation”)
authorizes the issuance of Five Million (5,000,000) shares of preferred stock,
par value $0.001 per share (the “Preferred
Stock”), and
expressly vests in the Board of Directors of this corporation the authority to
issue any or all of said shares in one or more series by resolution or
resolutions, to establish from time to time the number of shares to be included
in such series and to fix the designations, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions of each series to be issued.
3. The board
of directors of this corporation, pursuant to the authority expressly vested in
it pursuant to the Certificate of Incorporation and pursuant to the provisions
of Section 151(g) of the DGCL, has adopted the resolution set forth below to
create a series issue of Preferred Stock. Pursuant to Section 151(g) of the
DGCL, the approval of this corporation’s stockholders was not
required.
“RESOLVED,
that the
Board of Directors (the “Board
of Directors”) of MRU
Holdings, Inc (the “Corporation”) hereby
authorizes the issuance of a series of preferred stock and fixes its
designation, powers, preferences and relative, participating, optional or other
special rights, and qualifications, limitations and restrictions thereof, as
follows:
1. Designation
and Amount. Four
Million Five Hundred Thousand (4,500,000) shares of the Five Million (5,000,000)
authorized shares of Preferred Stock of this corporation are designated as
shares of Series A Convertible Preferred Stock (the “Series
A Preferred”). The
Series A Preferred shall be issued or offered at a purchase price equal to $3.50
per share (the “Series
A Original Issue Price”). The
holders of record of the Series A Preferred are sometimes referred to herein as
the “Series
A Holders.”
Capitalized terms used herein without definition shall have the respective
meanings given them in Section 10.
2. Dividends.
(a) The
Series A Holders of record, as of the Record Date (as defined below) therefor,
shall be entitled to receive, out of funds legally available therefor,
cumulative dividends on the Series A Preferred at a rate equal to (i) $0.245 per
annum per share (equivalent to 7% of the Series A Original Issue Price annually)
through the first anniversary of the Original Issue Date and (ii) $0.14 per
annum per share (equivalent to 4% of the Series A Original Issue Price annually)
thereafter (collectively the “Dividend
Rate”),
payable quarterly in arrears in cash or, at the option of this corporation, in
additional shares of the Series A Preferred. If and when this corporation shall
elect from time to time to pay such dividends in shares of the Series A
Preferred, such shares will be valued at the Series A Original Issue Price.
Shares of Common Stock issued in payment of dividends may be fractional shares
(rounded to the nearest one-tenth (0.1) of a share).
(b) If the
Board of Directors elects in the exercise of its sole discretion to issue shares
of Series A Preferred in payment of dividends on the Series A Preferred with
respect to any Dividend Payment Date (as defined below), this corporation shall
(1) give notice to the Series A Holders on or any time prior to the applicable
Dividend Payment Date (as defined below in this Section) of this corporation's
election to exercise such right and (2) deliver, or cause to be delivered, by
the third Trading Day after such Dividend Payment Date to each Series A Holder
of record at the close of business on the Record Date for such dividend a stock
certificate that evidences the number of shares of Preferred Stock arrived at in
accordance with Section 2(a). Notwithstanding the foregoing, this corporation
may not exercise its right to issue shares of Series A Preferred in payment of
dividends on Series A Preferred if:
(1) the
number of shares of Series A Preferred at the time authorized, unissued and
unreserved for all purposes, together with the number of shares of the Series A
Preferred held in this corporation’s treasury, is insufficient to pay the
dividends to be paid in shares of the Series A Preferred;
(2) the
issuance or delivery of shares of the Series A Preferred as a dividend payment
would require registration with or approval of any governmental authority under
any law or regulation, and such registration or approval has not been effected
or obtained; or
(3) a Series
A Preferred Breach shall have occurred.
Shares of
the Series A Preferred issued in payment of dividends on the Series A Preferred
pursuant to this Section shall be, and for all purposes shall be deemed to be,
validly issued, fully paid and nonassessable shares of Common Stock of this
corporation and shall be entitled to receive and be paid dividends in accordance
with this Section 2; the issuance and delivery thereof is hereby authorized; and
the dispatch in full thereof will be, and for all purposes shall be deemed to
be, payment in full of the cumulative dividends to which holders are entitled on
the applicable Dividend Payment Date.
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(c) All
dividends shall accrue on any given share of Series A Preferred from the most
recent date on which a dividend has been paid with respect to such share of
Series A Preferred or, if no dividends have been paid, from the date of original
issuance of such share of Series A Preferred. All dividends shall accrue from
day to day, whether or not declared, based on the actual number of days elapsed
and shall be payable quarterly in arrears on January 1, April 1, July 1 and
October 1 of each year (each a “Dividend
Payment Date”),
commencing on April 1, 2005; provided,
that if a
Dividend Payment Date is not a Trading Day, then the dividend shall be payable
on the first immediately succeeding Trading Day. Dividends shall be paid to the
holders of record of the Series A Preferred as their names appear on the stock
transfer records of this corporation on the date (the “Record
Date”)
designated by the Board of Directors as the date of record for the payment of
such dividend; and, further
provided, that
such Record Date may not precede the date upon which the resolution fixing the
Record Date is adopted and may not be more than sixty (60) days prior to the
Dividend Payment Date.
(d) No
dividends may be paid or set apart for such payment on any Junior Securities and
no Junior Securities may be repurchased or otherwise retired for value nor may
funds be set apart for payment with respect thereto, if dividends have not been
paid in full on the Series A Preferred as provided in this Section 2;
provided, that
this corporation may repurchase Junior Securities (i) in the open market from
time to time as and to the fullest extent permitted by Rule 10b-18 promulgated
under the Exchange Act, or corresponding rule from time to time in effect, and
(ii) in a private purchase or in an “issuer
tender offer” as
defined in Rule 13e-4 under the Exchange Act from time to time so long as such
repurchases do not exceed ten percent (10%) of the then outstanding shares of
Junior Stock.
3. Rank. The
Series A Preferred shall rank (i) senior to all shares of the Common Stock and
(ii) senior to any class or series of capital stock of this corporation
hereafter created (collectively, with the Common Stock, the “Junior
Securities”), in
each case, as to any distribution of assets upon any liquidation, dissolution or
winding up of this corporation, whether voluntary or involuntary (all such
distributions being referred to collectively as “Distributions”).
4. Liquidation
Preference.
(a) If any
Distribution, occurs, the Series A Holders shall be entitled to receive, prior
in preference to any Distribution to the holders of the Junior Securities, an
amount per share equal to the Series A Original Issue Price, together with
unpaid and accrued dividends (whether or not earned or declared) on the Series A
Preferred. If upon any such Distribution, and after payment in full of any
amounts due the creditors of this corporation, the assets available to be
distributed to the Series A Holders shall be insufficient to pay to the Series A
Holders the full preferential amounts due to the Series A Holders, then the
entire assets of this corporation legally available for distribution shall be
distributed among the Series A Holders pro rata.
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(b) Upon the
completion of the Distribution required by Section 4(a), if assets remain in
this corporation, they shall be distributed to holders of Junior Securities in
accordance with this corporation’s Certificate of Incorporation, including any
duly adopted certificate(s) of designation.
(c) At the
option of each Series A Holder, (i) a sale, conveyance or disposition of all or
substantially all the assets of this corporation to any entity other than an
Affiliate of this corporation (a “Liquidating
Transaction”) or
(ii) any Fundamental Change shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section 4; provided, that
any Liquidating Transaction or any Fundamental Change that a Series A Holder
elects in writing not to treat as a liquidation, dissolution or winding up of
this corporation shall not be treated as a liquidation, dissolution or winding
up within the meaning of this Section 4(c), but instead shall be subject to
Section 5(f). Any Series A Holder as to which any Liquidating Transaction or any
Fundamental Change is treated as a liquidation, dissolution or winding up of
this corporation under this Section 4(c) is referred to herein as a
“Series
A Liquidating Holder.”
(d) Prior to
the closing of a transaction described in Section 4(c) which would constitute a
Liquidating Transaction or a Fundamental Change, this corporation shall either
(i) make all cash distributions it is required to make to the Series A
Liquidating Holders pursuant to the first sentence of Section 4(a), (ii) set
aside sufficient funds from which the cash distributions required to be made to
the Series A Liquidating Holders can be made or (iii) establish an escrow or
other similar arrangement with a third party pursuant to which the proceeds
payable to this corporation from a sale of all or substantially all the assets
of this corporation will be used to make the liquidating payments to the Series
A Liquidating Holders immediately after the consummation of such sale. If this
corporation has not fully complied with any of the foregoing alternatives, this
corporation shall either: (x) cause such closing to be postponed until such cash
distributions have been made or (y) cancel such transaction, in which event the
rights of the Series A Holders or other arrangements shall be the same as
existing immediately prior to such proposed transaction.
5. Conversion. The
holders of Series A Preferred have conversion rights (the “Conversion
Rights”) as
follows:
(a) Right
to Convert. At any
time after the date of issuance of such share of Series A Preferred, each share
of Series A Preferred shall be convertible into a share or shares of Common
Stock at the office of this corporation or any transfer agent for the Series A
Preferred, without the payment of any additional consideration at the option of
the Series A Holder thereof, into the number of fully paid and nonassessable
shares of Common Stock which results from dividing the Series A Original Issue
Price by the conversion value per share in effect for each share of Series A
Preferred (the “Series
A Conversion Value”) at the
time of conversion. The Series A Conversion Value shall initially be equal to
the Series A Original Issue Price and shall be adjusted from time to time
pursuant to the provisions of Section 5(d) and Section 5(e) and shall be subject
to adjustment from time to time as provided below. The number of shares of
Common Stock into which a share of Series A Preferred is convertible is
hereinafter referred to as the “Series
A Conversion Rate.”
(b) Mechanics
of Conversion.
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(i) Before
any holder of Series A Preferred shall be entitled to convert such shares into
full shares of Common Stock and to receive certificates therefor, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this corporation or of any transfer agent for the Series A Preferred,
as the case may be, and shall give written notice to this corporation at such
office that such holder elects to convert the same. This corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
a certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and a check payable to such holder in
the amount of any cash amounts payable as the 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
the shares of Series A Preferred to be converted, 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 such date.
(ii) No
fractional shares of Common Stock shall be issued upon conversion of Series A
Preferred. In lieu of any fractional shares to which the holder would otherwise
be entitled, this corporation shall pay cash equal to such fraction multiplied
by the then effective Series A Conversion Value.
(iii) This
corporation 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
shares of Series A Preferred pursuant to this Section 5. This corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involving the issuance and delivery of shares of Common Stock in a name
other than that in which the shares of Series A Preferred so converted were
registered, and no such issuance or delivery shall be made unless and until the
person or entity requesting such issuance has paid to this corporation the
amount of any tax or has established, to the satisfaction of this corporation,
that such tax has been paid.
(c) Reservation
of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series A Preferred such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred, this
corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purposes.
(d) Adjustments
to Series A Conversion Value for Dilutive Issuances.
(i) No
Adjustment of Conversion Price. No
adjustment in the Series A Conversion Value shall be made in respect of the
issuance of Additional Shares of Common Stock unless the consideration per share
for an Additional Share of Common Stock issued or deemed to be issued by this
corporation is less than the Series A Conversion Value in effect on the date of,
and immediately prior to, such issue. No adjustment in the Series A Conversion
Value shall be made pursuant to Section 5(d)(iv) as a result of any stock
dividend or subdivision which causes an adjustment in the Series A Conversion
Value pursuant to Section 5(e) or any event which is subject to the provisions
of Section 5(f).
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(ii) Deemed
Issuance of Additional Shares of Common Stock. If this
corporation at any time or from time to time after the Series A Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date; provided, that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Section 5(d)(iv)) of such
Additional Shares of Common Stock would be less than the Series A Conversion
Value in effect on the date of and immediately prior to such issue, or such
record date, as the case may be; and provided,
further, that in
any case in which Additional Shares of Common Stock are deemed to be
issued:
(A) no
further adjustment in the Series A Conversion Value shall be made upon the
subsequent issue of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) if such
Options or Convertible Securities by their terms provide, with the passage of
time or otherwise, for any increase or decrease in the consideration payable to
this corporation, or any increase or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange thereof, the Series A
Conversion Value computed upon the original issue of such Options or Convertible
Securities (or upon the occurrence of a record date with respect to the issuance
of such Options or Convertible Securities), and any subsequent adjustments based
thereon shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities; and
(C) on the
expiration or cancellation of any Options or the termination of the right to
convert or exchange any Convertible Securities which shall have not been
exercised, if the Series A Conversion Value shall have been adjusted upon the
original issuance of such Options or Convertible Securities or shall have been
subsequently adjusted pursuant to clause (B) above, the Series A Conversion
Value shall be recomputed as if:
(1) in the
case of Convertible Securities or Options for Common Stock, the only Additional
Shares of Common Stock issued were the shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, and the consideration received therefor was the
consideration actually received by this corporation for the issuance of all such
Options, whether or not exercised, plus the consideration actually received by
this corporation upon such exercise, if any, or for the issuance of all such
Convertible Securities, whether or not actually converted or exchanged, plus the
consideration actually received by this corporation upon such conversion or
exchange, if any; and
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(2) in the
case of Options for Convertible Securities, only the Convertible Securities, if
any, actually issued upon the exercise of such Options were issued at the time
of issuance of such Options and the consideration received by this corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by this corporation for the issuance of all
such Options, whether or not exercised, plus the consideration deemed to have
been received by this corporation upon the issuance of the Convertible
Securities with respect to which such Options were actually
exercised;
(D) no
readjustment pursuant to clauses (B) and (C) above shall have the effect of
increasing the Series A Conversion Value to an amount which exceeds the lower of
(i) the Original Purchase Price and (ii) the Series A Conversion Value that
would have resulted from any issuance of Additional Shares of Common Stock
between the Series A Original Issue Date and the date of such
readjustment.
(iii) Adjustment
of Series A Conversion Value Upon Issuance of Additional Shares of Common
Stock. If this
corporation shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 5(d)(ii)) without
consideration or for a consideration per share less than the Series A Conversion
Value in effect on the date of and immediately prior to such issuance, then and
in such event, the Series A Conversion Value shall be reduced, concurrently with
such issuance, to a price (calculated to the nearest one cent) determined by
dividing (A) an amount equal to the sum of (w) the number of shares of Common
Stock outstanding immediately prior to such issue (determined on a fully-diluted
basis; i.e., treating as issued and outstanding all shares of Common Stock
issuable upon exercise, exchange or conversion of all outstanding options (to
the extent then vested or exercisable), warrants or other securities exercisable
or exchangeable for or convertible into, directly or indirectly, shares of
Common Stock) multiplied by the then existing Series A Conversion Value, plus
(x) the consideration, if any, received by this corporation (or deemed to have
been received by this corporation) upon such issue of Additional Shares of
Common Stock, by (B) the sum of (Y) the number of shares of this corporation’s
issued and outstanding Common Stock on a fully-diluted basis immediately before
the issuance of such Additional Shares of Common Stock and (z) the number of
shares of Additional Shares of Common Stock that were issued (or deemed to have
been issued) in the transaction to which this Section 5(d)(iii) applies.
Notwithstanding the foregoing provisions of this Section, if the operation of
the foregoing provisions shall result in a new Series A Conversion Value which
is less than or equal to the price paid or deemed to have been paid for such
Additional Shares of Common Stock (the “Additional
Shares Issue Price”), then
the new Series A Conversion Value shall be the amount which is $0.001 more than
the Additional Shares Issue Price. If such Additional Shares of Common Stock are
issued for no consideration, then the Additional Shares Issue Price shall be
deemed to be $0.001.
(iv) Determination
of Consideration. For
purposes of this Section 5(d), the consideration received by this corporation
for the issuance of any Additional Shares of Common Stock shall be computed as
follows:
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(A) Cash
and Property. Such
consideration shall:
(1) insofar
as it consists of cash, be computed at the aggregate amount of cash received by
this corporation;
(2) insofar
as it consists of securities (i) if the securities are then traded on a national
securities exchange or an Alternative Stock Exchange, then the value shall be
computed based on the average of the closing prices of the securities on such
exchange or system over the 30-day period ending three days prior to receipt of
such securities by this corporation, (ii) if the securities are actively traded
over-the-counter, then the value shall be computed based on the average of the
closing bid prices over the 30-day period ending three days prior to the receipt
of such securities by this corporation, and (iii) if there is no active public
market, then the value shall be computed based on the fair market value thereof
on the date of receipt of such securities by this corporation, as determined in
good faith by the Board of Directors;
(3) insofar
as it consists of property other than cash and securities, be computed at the
fair market value thereof at the time of such issuance, as determined in good
faith by the Board of Directors; and
(4) if
Additional Shares of Common Stock are issued together with other shares or
securities or other assets of this corporation for consideration which covers
both, be the proportion of such consideration so received for such Additional
Shares of Common Stock, computed as provided in clauses (A)(1), (A)(2) and
(A)(3) of this Section 5(d)(iv), in each case as determined in good faith by the
Board of Directors.
(B) Options
and Convertible Securities. The
consideration per share received by this corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 5(d)(ii), relating
to Options and Convertible Securities, shall be determined by
dividing
(1) the total
amount, if any, received or receivable by this corporation as consideration for
the issue of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to this corporation upon the exercise
of such Options or the conversion or exchange of such Convertible Securities,
or, in the case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange of such
Convertible Securities by
(2) the
maximum number of shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(e) Adjustment
to the Conversion Rate due to Stock Split, Stock Dividend or Other Similar
Event. If,
prior to the conversion of all the Series A Preferred, the number of outstanding
shares of Common Stock is increased by a stock split, stock dividend or other
similar event, the Series A Conversion Value shall be proportionately reduced,
or if the number of outstanding shares of Common Stock is decreased by a
combination or reclassification of shares, or other similar event, the Series A
Conversion Value shall be proportionately increased.
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(f) Adjustment
Due to Consolidation, Merger, Exchange of Shares, Recapitalization,
Reorganization or Other Similar Event. If,
prior to the conversion of all the Series A Preferred, (i) there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event, as a result of which shares of Common Stock of this
corporation shall be changed into the same or a different number of shares of
the same or another class or classes of stock or securities of this corporation
or another entity, or (ii) there occurs a sale of all or substantially all of
this corporation’s assets that is not deemed to be a liquidation, dissolution or
winding up of this corporation pursuant to Section 4(c), then the Series A
Holders thereafter shall have the right to receive upon conversion of the shares
of Series A Preferred held by them, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, (i) such stock, securities
and/or other assets which the Series A Holders would have been entitled to
receive in such transaction had the Series A Preferred, together with all unpaid
and accrued dividends thereon (whether or not earned or declared), been
converted immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Series A Holders to the end that the provisions hereof (including, without
limitation, provisions for the adjustment of the Series A Conversion Value and
the Series A Conversion Rate) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities thereafter deliverable upon the
exercise hereof.
(g) Certificates
as to Adjustments. Upon
each adjustment or readjustment of the Series A Conversion Value pursuant to
Sections 5(d), (e) and (f) above, this corporation at its expense promptly shall
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred a certificate of the
Chief Financial Officer of this corporation setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the then effective Series A Conversion Value, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of each share of such Series A
Preferred.
(h) No
Impairment. This
corporation will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions hereof and in the taking of all such action
as may be necessary or appropriate to protect the Conversion Rights against
impairment.
6. Mandatory
Conversion by Corporation.
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(a) If:
(i) the
shares of Common Stock to be issued on any mandatory conversion of shares of the
Series A Preferred pursuant to this Section 6 are Freely Tradeable,
(ii) the
Common Stock is listed on a Principal Market and trading on such market or
exchange shall not have been suspended, or
(iii) no Series
A Preferred Breach or any event which, with the notice or passage of time, or
both, would become an Series A Preferred Breach has occurred and is
continuing,
then this
corporation may, at its option, cause all of the outstanding Series A Preferred
to be converted into shares of Common Stock, in accordance with Section 6(b), at
any time and from time to time, if the Market Price of the Common Stock for any
twenty (20) of any thirty (30) most recent consecutive Trading Days prior to the
giving of the notice referred to in Section 6(c) below equaled or exceeds the
Target Price;
(b) Each
share of Series A Preferred plus the amount of any accrued and unpaid dividends
thereon (whether or not earned or declared) on the Series A Preferred shall be
converted into a number of shares of Common Stock equal to the Series A
Conversion Rate.
Notwithstanding
the preceding, this corporation may, at its sole discretion, pay any or all of
the accrued and unpaid dividends in cash. Subject to the provisions of the DGCL,
no fractional shares of Common Stock shall be issued on the mandatory
conversion, but the number of shares shall be rounded up or down to the nearest
whole number. The amount of any accrued and unpaid dividends that this
corporation elects to pay in cash shall be promptly sent to the holder thereof
by means of check or other means provided by this corporation.
(c) This
corporation shall give thirty (30) days notice of its intent to convert in
accordance with this Section no later than five (5) calendar days from the end
of the thirty (30)-day period described above. Upon the giving of the notice
referred to above, this corporation shall be bound to convert the Series A
Preferred as to which notice has been provided. During the 30-day notice period,
holders of the Series A Preferred will retain their right to convert their
shares of Series A Preferred in accordance with Section 5.
7. Voting
Rights.
(a) Except
as provided in Section 7(b), the Series A Holders shall have no voting power
whatsoever except to the extent otherwise expressly provided by the DGCL, and no
Series A Holder shall vote or otherwise participate in any proceeding in which
actions shall be taken by this corporation or the stockholders thereof or be
entitled to notification as to any meeting of the stockholders.
(b) If a
Series A Preferred Breach occurs and is outstanding, then as long as such Series
A Preferred Breach remains uncured, the Series A Holders shall have the right to
vote the Series A Preferred as one class together with the Common Stock, and
each Series A Holder shall have the number of votes equal to the number of
shares into which the shares of Series A Preferred held by such Series A Holder
may be converted pursuant to Section 5.
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8. Protective
Provisions. So long
as any shares of Series A Preferred are outstanding, this corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
the DGCL) of the Majority Holders:
(a) alter or
change the rights, preferences or privileges of the Series A Preferred,
including, but not limited to, the creation or authorization of any Senior
Securities;
(b) increase
the size of the authorized number of Series A Preferred; or
(c) do any
act or thing not authorized or contemplated by these Certificate of
Incorporation which would result in taxation of the Series A Holders under
Section 305 of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time
amended).
If the
Majority Holders agree to allow this corporation to alter or change the rights,
preferences or privileges of the shares of Series A Preferred, pursuant to this
Section, so as to affect adversely the Series A Preferred, then this corporation
will deliver notice of such approved alteration or change to the Series A
Holders that did not agree to such alteration or change (the “Series
A Dissenting Holders”), and
the Series A Dissenting Holders shall thereafter have the right for a period of
30 days to convert pursuant to the terms of these Certificate of Incorporation
as they exist prior to such alteration or change or continue to hold their
shares of Series A Preferred subject to the approved alteration or change of the
rights, preferences or privileges of the Series A Preferred.
9. Status
of Converted Stock.
Whenever any shares of Series A Preferred are converted pursuant to Section 5,
the shares so converted shall be canceled, shall return to the status of
authorized but unissued preferred stock of no designated series, and shall not
be issuable by this corporation as Series A Preferred.
10. Definitions. As used
herein, the following terms shall have the following meanings:
“Additional
Shares of Common Stock” shall
mean all shares of Common Stock issued (or, pursuant to Section 5(d)(ii), deemed
to be issued) by this corporation after the Series A Original Issue Date, other
than shares of Common Stock issued or issuable:
(i) upon
conversion of shares of Series A Preferred;
(ii) to
officers, directors or employees of, or financial advisors or other consultants
to, this corporation pursuant to a Plan or Plans or pursuant to any acquisition,
financing or other written agreement so long as any such Plan or written
agreement has been approved by the Board of Directors; and
(iii) as a
dividend or distribution on Series A Preferred.
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“Affiliate” means,
with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the subject Person. For purposes of the term “Affiliate,”
the term “control” (including the terms “controlling,” “controlled by” and
“under common control with”) means the possession, direct or indirect, of the
power to direct or to cause the direction of the management and policies of a
Person, whether through the ownership of securities, by contract or otherwise.
“Alternative Stock
Exchange” means
any other national stock exchange or the Nasdaq National Market or the Nasdaq
Smallcap Market.
“Board
of Directors”
means the
Board of Directors of this corporation.
“Common
Stock” shall
mean the common stock, par value $0.001 per share, of this
corporation.
“Convertible
Securities” shall
mean any evidences of indebtedness, shares (other than Common Stock or Series A
Preferred) or other securities convertible into or exchangeable for Common
Stock.
“Exchange
Act” means
the Securities Exchange Act of 1934, as amended.
“Freely
Tradeable” means,
with respect to the Common Stock issuable upon the conversion or redemption of
or, if relevant, on the payment of a dividend upon the Series A Preferred, that
under the Securities Act the holders thereof may then offer and sell any amount
of such outstanding securities to the public in the United States in
transactions that are not brokers’ transactions (as defined in the Securities
Act) either (i) pursuant to an effective registration statement then in effect
or (ii) pursuant to Rule 144(k) under the Securities Act. For purposes of
determining whether such securities are Freely Tradeable, it shall be assumed
that no affiliate of the issuer has ever held such securities from and after
their issuance.
“Fundamental
Change” means
(a) any
consolidation or merger of this corporation or any Subsidiary with or into
another entity (other than a merger or consolidation of a Subsidiary into this
corporation or a wholly-owned Subsidiary) that has been approved by the Board of
Directors where the stockholders of this corporation immediately prior to such
transaction do not collectively own at least 51% of the outstanding voting
securities of the surviving entity of such consolidation or merger immediately
following such transaction; or
(b) the
acquisition by a Person or entity or group of Persons or entities acting in
concert as a partnership, limited partnership, syndicate or group, as a result
of a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise approved or consented to by the Board of Directors, of
beneficial ownership of securities of this corporation representing 50% or more
of the combined voting power of the outstanding voting securities of this
corporation ordinarily (and apart from voting rights accruing in special
circumstances) having the right to vote in the election of directors other than
any such acquisition that arises from a transfer of outstanding securities of
this corporation that have voting power and not through action taken by this
corporation or any Subsidiary.
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“Majority
Holders” means
at any time the Holders of outstanding shares of Series A Preferred which shares
constitute a majority of the outstanding shares of Series A
Preferred.
“Market
Price” means
with respect to any security on any date the VWAP of such security for such date
on the Principal Market, as reported by Bloomberg Financial, L.P.
“Options” shall
mean rights, options or warrants to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities.
“Plan” shall
mean a written stock grant, option plan or purchase plan or other employee stock
incentive program.
“Person” means
any individual, corporation, partnership, association, trust or other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
“Principal
Market” means
the NASD OTC Bulletin Board or any Alternative Stock Exchange on which the
Common Stock is listed for trading which at such time constitutes the principal
securities market for the Common Stock.
“Property” means
any kind of property or asset, whether real, personal, mixed, or tangible or
intangible, and any interest therein.
“Securities
Act” means
the Securities Act of 1933, as amended.
“Series
A Original Issue Date” shall
mean January 28, 2005.
“Series
A Preferred Breach” means
any one of the following events:
(1) any
Fundamental Change;
(2) this
corporation fails to declare or pay in full any dividend payable on the shares
of Series A Preferred on the applicable Dividend Payment Date, and such failure
is not cured with 30 days, or fails to issue, within three Trading Days, any
Shares of Common Stock due upon the due conversion or redemption of any share of
Series A Preferred;
(3) the
adoption of any amendment to the Certificate of Incorporation of this
corporation (other than (A) any such amendment which has been approved by the
Majority Holders or (B) any Certificate of Designations for a series of
preferred stock of this corporation which (i) has been approved by the Majority
Holders or (ii) creates any stock which is a Junior Security) which materially
and adversely affects the rights of the Holders or the taking of any other
action by this corporation which materially and adversely affects the rights of
the Holders;
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(4) this
corporation (A) fails to comply with any provision of Section 2(b), 4 or 8 or
(B) fails to comply in any material respect with Section 2 of the Subscription
Agreement, and such breach continues for a period of 30 days after notice
thereof to this corporation from any Series A Holder;
(5) any
written representation or warranty of this corporation made in or pursuant to
any Transaction Document shall be false or misleading in any material respect
when made or deemed made; or
(6) this
corporation or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due or shall admit in writing its inability generally to pay its debts as they
become due.
“Subscription
Agreement” means
the Subscription Agreement, dated as of January 28, 2005, by and between this
corporation and the original holder pursuant to which the shares of Series A
Preferred were issued.
“Subsidiary” of any
Person means any corporation of which at least a majority of the shares of stock
having by the terms thereof ordinary voting power to elect a majority of the
Board of Directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have voting
power by reason of the happening of any contingency) is directly or indirectly
owned or controlled by any one of or any combinations of this corporation or one
or more of its Subsidiaries.
“Target
Price” means
115% of the Series A Conversion Value at the time in effect.
“Trading
Day” means
any day (other than a Saturday or Sunday) on which the American Stock Exchange
or the Alternative Stock Exchange, as the case may be, is open for
business.
“Transaction
Documents” means,
individually or collectively, the Subscription Agreements, this Certificate of
Designations, and each other instrument statement or certificate given in
writing in connection herewith or therewith.
“VWAP” of any
security on any Trading Day means the volume-weighted average closing price of
such security on such Trading Day on the Principal Market, as reported by
Bloomberg Financial, L.P. (based on a Trading Day from 9:30 a.m., Eastern Time,
to 4:00 p.m., Eastern Time), using the AQR Function, for such Trading Day;
provided,
however, that
during any period the VWAP is being determined, the VWAP shall be subject to
adjustments acceptable to the Majority Holders for stock splits, stock
dividends, combinations, and capital reorganizations, as
applicable.”
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4. This
Designation of Powers, Preferences and Rights of Series A convertible Preferred
Stock shall be effective on January 28, 2005.
IN
WITNESS WHEREOF, this
Certificate of Designations have been duly adopted by the Board of Directors of
this corporation and have been duly executed as the act and deed of this
corporation by its Secretary thereunto duly authorized this 27th day of
January, 2005.
MRU HOLDINGS, INC.
By:
______________________
▇▇▇▇▇ ▇.
▇▇▇▇▇
Secretary
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