Exhibit 10.5


 


NEITHER THIS CONVERTIBLE
DEBENTURE, NOR THE SHARES ISSUABLE UPON CONVERSIONS HEREOF, HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) AND ACCORDINGLY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION ACCEPTABLE TO THE COMPANY.


 


CONVERTIBLE
DEBENTURE


 


	
  $5,000,000.00

  	
  November 14,
  2008

  



 


FOR VALUE
RECEIVED, the undersigned, Microfluidics International
Corporation, a corporation duly formed under the laws of the State
of Delaware (the “Issuer”), hereby unconditionally promises to pay to the order
of Global Strategic Partners, LLC (the “Holder”),
in lawful money of the United States of America and in immediately available
funds, the principal sum of FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00) on
the Maturity Date (as hereinafter defined), together with interest thereon
calculated and payable as provided below. 
This Debenture is being issued pursuant to the terms of the Debenture
and Warrant Purchase Agreement dated as of November 14, 2008 (the “Agreement”).


 


1.             Interest
on the outstanding principal amount of this Convertible Debenture (this “Debenture”)
shall be computed on the basis of twelve 30-day months in a 360-day year and
shall be payable quarterly in arrears. 
The principal of this Debenture shall bear interest at the rate of nine
percent (9%) per annum, or if less, at the highest rate permitted by applicable
law.  All accrued but unpaid interest on
the principal amount of this Debenture shall be due and payable in cash on the
first business day of each calendar quarter (each an “Interest Payment Date”).


 


2.             The
outstanding principal amount of this Debenture and all accrued and unpaid
interest thereon shall be due and payable on (i) November 14, 2015 or
(ii) the acceleration of the maturity of this Debenture by the Holder upon
the occurrence of an Even of Default (as defined below) (such earlier date, the
“Maturity Date”).


 


3.             On
the Maturity Date, any Interest Payment Date prior thereto or a Change of
Control Event (as defined below), at the written election of the Holder and
upon three (3) business days’ notice to the Issuer, all or any portion of
the outstanding principal amount of this Debenture may be converted (the “Conversion”)
into that number of shares of the Issuer’s common stock, par value $.01 per
share (the “Common Stock”) equal to the quotient of:  (i) the outstanding principal amount of
this Debenture, divided by (ii) $1.25 (the “Conversion Price”), rounded to
the nearest share.  Upon the Conversion,
all or any portion of the accrued and unpaid interest on the outstanding
principal of this Debenture to be converted as provided herein shall become
immediately due and payable which amount may be payable in the form of such


 

















 


securities in accordance with the formula set forth above.  The Issuer shall use its best efforts to
amend its Certificate of Incorporation at its next Annual Meeting of the
Stockholders, which meeting shall be held no later than June 30, 2009, to
increase its duly authorized shares of Common Stock by such number as would be
required for the Issuer to fulfill its obligations in full upon conversion of
this Debenture and the exercise of the Warrant (as such term is defined in the
Agreement).  The Holder shall not have
any voting rights or other rights as a shareholder of the Issuer under this
Debenture prior to the Conversion.


 


4.             At
any time that this Debenture is outstanding, the Issuer agrees to use its best
efforts to cause the election to its Board of Directors of at least one person
designated by the Holder, and such additional persons designated by the Holder
as may be necessary to cause the Holder’s representation on the Board of
Directors of the Issuer to be proportional to the Holder’s stockholdings in the
Issuer.  As an illustration, and without
limiting the application of the foregoing provision, if the Issuer has a five
person Board of Directors the Issuer shall be entitled to have its designee
elected to the Board of Directors until such time as this Debenture has been
retired in full; and, at such time as the Holder acquires 40% or more of the
Common Stock of the Issuer, the Issuer agrees to use its best efforts to cause
the election of a second (2nd) designee of the Holder to the Issuer’s Board of
Directors.


 


5.             Immediately
following the date hereof the Issuer shall exercise its best efforts to cause
all of the shares of Common Stock issuable upon Conversion hereof to be
registered with the Securities and Exchange Commission.


 


6.             Notwithstanding
anything in this Debenture to the contrary, should an Event of Default, as such
term is defined herein, occur and be continuing, interest on the outstanding
principal amount of this Debenture and unpaid interest shall be increased by
two percent (2%) per annum, or if less, at the highest rate permitted by
applicable law. and the outstanding balance of the principal amount, including
unpaid interest, shall continue to accrue interest from the date of such Event of
Default at such interest rate until such Event of Default is cured or
waived.  For purposes of this Debenture,
each of the following events shall constitute an Event of Default:


 


(i)            The Issuer shall
default in the payment of principal of or interest on this Debenture after the
same becomes due and payable, whether at the Maturity Date or at a date fixed
for the payment of any installment or prepayment thereof or otherwise, and such
default shall remain uncured for five (5) business days after notice thereof
to Issuer;


 


(ii)           default shall occur in
the observance or performance of any covenant, obligation or agreement of the
Issuer under this Debenture, the Agreement, the Security Agreement (as that
term is defined in the Agreement) or any other agreement pursuant to which the
Issuer or any other person provides a guaranty or a lien on its assets in favor
of the Holder and such default shall continue uncured for a period of fifteen
(15) days after the Issuer knew or should have known, exercising reasonable diligence,
of the event or circumstances giving rise to such default;


 


(iii)          any representation,
warranty or certification made by the Issuer herein or in the Agreement or the
Security Agreement in any certificate, report, document, agreement or
instrument delivered pursuant to any provision hereof or thereof shall prove to
have been false or


 


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incorrect in any material, respect on the date or dates as of which
made (any such falsity being a “Representation Default”) and, to the extent the
event or circumstances giving rise to such Representation Default is amenable
to being cured such that the Representation Default would no longer exist, such
Representation Default shall continue uncured for a period of fifteen (15) days
after the Issuer knew or should have known, exercising reasonable diligence, of
the event or circumstances giving rise to such Representation Default;


 


(iv)          the Issuer shall (A) apply
for or consent to the appointment of a receiver, trustee, custodian or
liquidator of itself or any part of its property, (B) become subject to
the appointment of a receiver, trustee, custodian or liquidator for itself or
any part of its property if such appointment is not terminated or dismissed
within thirty (30) days, (C) make an assignment for the benefit of
creditors, (D) fail generally, or admit in writing to its inability, to
pay its debts as they become due, (E) institute any proceedings under the
United States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law affecting the
rights of creditors generally, or file a petition or answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law, or file an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it, or (F) become
subject to any involuntary proceedings under the United States Bankruptcy Code
or any other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors generally, or
have an order for relief entered against it in any proceeding under the United
States Bankruptcy Code;


 


(v)           the Issuer shall not have amended its Certificate of
Incorporation on or before June 30, 2009 to increase its duly authorized
shares of Common Stock by such number as would
be required for the Issuer to fulfill its obligations in full under this
Debenture and the Warrant issuable under the Agreement; or


 


(vi)          Any of the following
occurs (each a “Change of Control Event”): 
(A) a sale, lease or other disposition of all or substantially all
of the assets of Issuer; (B) a merger, consolidation, reorganization, sale
of shares by Issuer or share exchange or sale of shares by the stockholders of
Issuer, or other similar transaction or series of related transactions, which
results in Issuer’s stockholders immediately prior to such transaction holding
less than fifty percent (50%) of the voting power of the outstanding securities
of the surviving, continuing or purchasing entity (other than by Holder’s
exercise of the Warrant); or (C) the direct or indirect acquisition by any
person or related group of persons (other than the Holder or an acquisition
from or by the Issuer or by a Issuer-sponsored employee benefit plan or by a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Issuer) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated pursuant to the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Issuer’s outstanding securities.


 


7.             Notwithstanding
anything in this Debenture to the contrary, in case an Event of Default shall
occur, payment of this Debenture shall be accelerated and the entire unpaid
principal amount of this Debenture, and all accrued and unpaid interest
thereon, shall become immediately due and payable in full.  Upon the occurrence of an actual or deemed
entry of an order for relief with respect to the Issuer under the United States
Bankruptcy Code, then all


 


3

















 


indebtedness under this Debenture shall automatically be due
immediately without notice of any kind. 
Holder shall also have any other rights which Holder may have been
afforded under any contract or agreement at any time and any other rights which
Holder may have pursuant to applicable law. 
Holder may exercise any and all of its remedies under the Security
Agreement contemporaneously or separately from the exercise of any other
remedies hereunder or under applicable law.


 


8.             Payment
of the principal and interest on this Debenture shall be made in money of the
United States of America which at the time of payment is legal tender for the
payment of public and private debts, by wire transfer in immediately available
funds to such account as the Holder shall from time to time have designated to
the Issuer in writing, or, if requested by the Holder, by certified or back
cashier’s check payable to the Holder, mailed to the Holder at the address set
forth herein, or such other address as shall be designated in writing by the
Holder to the Issuer.


 


9.             Any
and all payments made by the Issuer in respect of this Debenture shall be
applied first to payment of the fees and charges due under this Debenture,
second to payment of accrued and unpaid interest, and then to payment of the
outstanding principal amount of this Debenture.


 


10.           All
calculations and applications of amounts due on any date, whether by
acceleration or otherwise, shall be made by the Holder, and the Issuer agrees
that all such calculations and applications shall be conclusive and binding
absent manifest error.


 


11.           The
Issuer may, at its option, upon thirty (30) days’ advance written notice to the
Holder, prepay all of the principal balance of this Debenture, without penalty
or premium, together with accrued and unpaid interest through the date of
prepayment.  Any prepayment must occur on
a regularly scheduled Interest Payment Date. 
The Issuer’s right to prepay this Debenture is subject to the right of
the Holder to convert this Debenture as contemplated herein.


 


12.           This
Debenture is secured by all assets, property rights and interests of the Issuer
and shall be senior to all other indebtedness of the Issuer, except for certain
bank guarantees up to an aggregate amount of one million dollars ($1,000,000),
as required by certain customers of the Issuer in accordance with the Security
Agreement.


 


13.           The
Issuer hereby waives presentment, notice of dishonor, protest and notice of
protest, and any or all other notices or demands in connection with the
delivery, acceptance, performance, default, endorsement or guarantee of this
Debenture.


 


14.           In
case any principal of or interest on this Debenture is not paid when due, or
any other Event of Default shall occur, the Issuer shall be liable for, and
agrees to pay, in addition to principal and interest hereunder, all costs of
enforcement and collection of this Debenture incurred by the Holder, including,
without limitation, reasonable attorney’s fees, disbursements and court
costs.  In addition, if an Event of
Default shall occur, the Issuer shall pay all reasonable attorney’s fees and
disbursements incurred by the Holder in obtaining advice as to its rights and
remedies in connection with such default.


 


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15.           All
communications under this Debenture shall be in writing and shall be personally
delivered or sent prepaid by first class registered or certified mail with
return receipt requested, or by recognized overnight delivery service to the
respective addresses set forth below (or such other addresses as may be
furnished in writing by the Holder and the Issuer).


 


(a) 
To the Issuer:


 


Microfluidics
International Corporation


30 Ossipee Street


Newton,
Massachusetts   02464-9101


            Attention:  President


 


(b)  To the Holder:


 


at such address set forth
on Schedule I hereto


 


16.           Subject
to applicable securities laws, this Debenture and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the parties hereto; provided, however, that neither
party may assign or transfer its rights or obligations hereunder without the prior written consent of
the other party except to (i) its Affiliates or (ii) an entity
that is the successor to substantially all of the business or assets of the
assigning party relating to the performance of this Agreement.


 


17.           This
Debenture may be modified or amended or the provisions hereof waived only with
the written consent of the Holder and the Issuer.


 


18.           This
Debenture shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to instruments made and to be performed wholly
within that state.  If any provision of
this Debenture is held to be illegal or unenforceable for any reason
whatsoever, such illegality or unenforceability shall not affect the validity
of any other provision of this Debenture.


 


19.           EACH
OF THE ISSUER AND THE HOLDER AGREES THAT ANY ACTION, SUIT OR PROCEEDING IN
RESPECT OF OR ARISING OUT OF THIS DEBENTURE MAY BE INITIATED AND
PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN
THE COMMONWEALTH OF MASSACHUSETTS.  EACH
OF THE ISSUER AND THE HOLDER CONSENTS TO AND SUBMITS TO THE EXERCISE OF
JURISDICTION OVER ITS PERSON BY ANY SUCH COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS
THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE
HOLDER AT ITS ADDRESS SET FORTH ABOVE, AND TO THE ISSUER AT ITS ADDRESS SET
FORTH BELOW OR TO ANY OTHER ADDRESS AS MAY APPEAR IN THE HOLDER’S RECORDS
AS THE ADDRESS OF THE ISSUER.


 


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IN ANY ACTION,
SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS DEBENTURE, EACH OF THE
HOLDER AND THE ISSUER WAIVES TRIAL BY JURY, AND THE ISSUER ALSO WAIVES (I) ANY
OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE AND (II) ANY CLAIM FOR
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.


 


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IN WITNESS
WHEREOF, the Issuer has caused this Debenture to be duly executed and
delivered.


 


	
   

  	
  Microfluidics
  International Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael C.
  Ferrara

  
	
   

  	
   

  	
   Michael C.
  Ferrara, President and Chief Executive Officer

  



 


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Schedule
I


 


Address for Notice Purposes:


 


Global
Strategic Partners, LLC


11755
Wilshire Blvd., Suite 2000


Los
Angeles, CA 90025


Attention:
Charles Kim


Telephone:
310-405-7431


Facsimile:
310-998-8553


ckim@abraxisbio.com


 


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