Exhibit 10.5

 

THIS DEBENTURE AND THE CONVERSION SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS DEBENTURE
AND THE CONVERSION SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
DEBENTURE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY HOLDER), IN A GENERALLY
ACCEPTABLE FORM THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

 

CONVERTIBLE DEBENTURE

 

FOR VALUE RECEIVED, Thinspace Technology, Inc., a Delaware corporation (the
“Borrower”), promises to pay to Blue Citi, LLC, a New York corporation (the
“Holder”) or its registered assigns or successors in interest, the principal sum
of up to Forty-Five Thousand Dollars ($45,000), together with all accrued
interest thereon, on May 4, 2018 (the “Maturity Date”), if not sooner paid.

 

The following terms and conditions shall apply to this Convertible Debenture
(the “Debenture”):

 

ARTICLE I
INTEREST & AMORTIZATION

 

1.1       Interest Rate. Subject to Sections 4.1 and 5.7 hereof, interest
payable on this Debenture shall accrue at a rate per annum equal to eight
percent (8%) and shall be computed on the basis of a 365-day year.

 

1.2       Payments. Payment of the aggregate principal outstanding under this
Debenture (the “Principal Amount”), together with all accrued interest thereon
shall be made on the Maturity Date.

 

1.3       Prepayment Option. The Borrower may prepay in cash all or any portion
of the Principal Amount of this Debenture and accrued interest thereon, without
a penalty.

 

ARTICLE II
CONVERSION REPAYMENT

 

2.1.       Optional Conversion. Subject to the terms of this Article II, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or thereafter during an Event of Default, to convert all or any
portion of the outstanding Principal Amount, accrued interest and fees due and
payable thereon into fully paid and nonassessable shares of Common Stock of the
Borrower (the “Common Stock”) at the Conversion Price (as defined below). The
shares of Common Stock to be issued upon such conversion are herein referred to
as the “Conversion Shares.”

 

2.2.       Calculation of Conversion Price. The conversion price (the
“Conversion Price”) shall be subject to equitable adjustments for stock splits,
stock dividends or rights offerings by the Borrower relating to the Borrower’s
securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar
events. Subject to Section 4.6 hereof, the Conversion Price shall mean the 65%
(representing a discount rate of 35%) multiplied by the Market Price (as defined
herein). “Market Price” means the lowest Trading Price (as defined below) for
the Common Stock during the twenty (20) Trading Day period ending on the latest
complete Trading Day prior to the Conversion Date. “Trading Price” means, for
any security as of any date, the closing price on the OTCQB, or applicable
trading market as reported by a reliable reporting service (“Reporting Service”)
designated by the Holder (i.e., Bloomberg)

 

 

 

 

2.3.       Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the number of Conversion Shares that may be acquired by the Holder
upon conversion of this Debenture (or otherwise in respect hereof) shall be
limited to the extent necessary to ensure that, following such conversion (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the Holder's for purposes of
Section 13(d) of the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”), does not exceed 4.99% of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such conversion). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. 

 

2.4.       Mechanics of Holder’s Conversion. Subject to Section 2.3 hereof, this
Debenture will be converted by the Holder in part from time to time after the
Issue Date, by submitting to the Borrower a Notice of Conversion (whether by
facsimile, as a Portable Document (PDF) file sent by electronic mail or other
reasonable means of communication dispatched on the Conversion Date prior to
6:00 p.m., New York, New York time). On each Conversion Date (as hereinafter
defined) and in accordance with its Notice of Conversion, the Holder shall make
the appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Borrower
on the Conversion Date. Each date on which a Notice of Conversion is delivered
or telecopied to Borrower in accordance with the provisions hereof shall be
deemed a Conversion Date (the “Conversion Date”). A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit A. Pursuant to the
terms of the Notice of Conversion, Borrower will issue instructions to the
transfer agent within three (3) business days of the Conversion Date accompanied
by an opinion of counsel to Borrower of the Notice of Conversion and shall cause
the transfer agent to transmit the certificates representing the Conversion
Shares to the Holder by physical delivery or crediting the account of the
Holder’s designated broker with the Depository Trust Corporation (“DTC”) through
its Deposit Withdrawal Agent Commission (“DWAC”) system within five (5) business
days after receipt by Borrower of the Notice of Conversion (the “Delivery
Date”). In the case of the exercise of the conversion rights set forth herein,
the conversion privilege shall be deemed to have been exercised, and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued, upon the date of receipt by Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such Common
Stock, unless the Holder provides Borrower written instructions to the contrary.

 

2.5       Conversion Mechanics. The number of shares of Common Stock to be
issued upon each conversion of this Debenture shall be determined by dividing
that portion of the Principal Amount and interest and fees to be converted, if
any, by the then applicable Conversion Price.

 

2.6       Issuance of New Debenture. Upon any partial conversion of this
Debenture, a new Debenture containing the same date and provisions of this
Debenture shall, at the request of the Holder, be issued by the Borrower to the
Holder for the principal balance of this Debenture and interest which shall not
have been converted or paid. Subject to the provisions of Article III, the
Borrower will pay no costs, fees or any other consideration to the Holder for
the production and issuance of a new Debenture.

 

2.7       Fractional Shares. No fractional shares shall be issued upon the
conversion of this Debenture. As to any fraction of a share which Holder would
otherwise be entitled to upon such conversion, the Borrower shall round up to
the next whole share.

 

2.8       Share Reservation. The Borrower shall reserve 883,452,941 shares of
Common Stock issuable upon conversion of all outstanding amounts under this
Debenture.

 

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ARTICLE III
EVENTS OF DEFAULT

 

The occurrence of any of the following events set forth in Sections 3.1 through
3.9, inclusive, shall be an “Event of Default”:

 

3.1       Failure to Pay Principal, Interest or Other Fees. Borrower fails to
pay principal, interest or other fees hereon and such failure shall continue for
a period of five (5) days following the date upon which any such payment was
due.

 

3.2       Breach of Covenant. Borrower breaches any covenant or other term or
condition of this Debenture in any material respect and such breach, if subject
to cure, continues for a period of five (5) days after the occurrence thereof.

 

3.3       Breach of Representations and Warranties. Any representation or
warranty of Borrower made herein shall be false or misleading in any material
respect.

 

3.4       SEC Filings. Borrower fails to timely file, when due, any SEC report,
including any required XBRL file along with such report (e.g., Forms 8-K, 10-Q
or 10-K, or Schedules 14A, 14C or 14(f)), or, if the filing date of such report
is properly extended pursuant to SEC Rule 12b-25, when the date of any such
filing extension lapses ; provided, that the Company shall have 180 days
subsequent to the date hereof to meet such obligations prior to such failure
constituting an “Event of Default” hereunder.

 

3.5       Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of 10 consecutive days, provided that Borrower
shall not have been able to cure such trading suspension within 30 days of the
notice thereof or list the Common Stock on another Principal Market within 60
days of such notice. The “Principal Market” for the Common Stock shall include
the OTCQB, OTCQX, OTC Pink, OTC Bulletin Board, NASDAQ Capital Market, NASDAQ
Global Market, NYSE MKT, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock),
or any securities exchange or other securities market on which the Common Stock
is then being listed or traded.

 

3.6       SEC Reporting Status Matters.

 

(a)       Borrower indicates by check mark on the cover page of an SEC report
filing that it has not (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

 

(b)       Borrower indicates by check mark on the cover page of an SEC report
filing that it has not submitted electronically and posted on its corporate
website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files).

 

(c)       Borrower indicates by check mark on the cover page of an SEC report
filing that it is a shell company (as defined in Rule 12b-2 of the Exchange
Act).

 

(d)       Borrower files a Form 15 with the SEC to deregister its Common Stock,
provided that, such event will not be deemed an Event of Default if Borrower
files current reports with attorney opinions on not less than a quarterly basis
on www.otcmarkets.com until such time as Borrower re-registers its Common Stock
with the SEC.

 

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3.7       Receiver or Trustee. Each of the Borrower or its subsidiaries
(“Subsidiaries”), if any, shall make an assignment for the benefit of creditors,
or apply for or consent to the appointment of a receiver or trustee for it or
for a substantial part of its property or business; or such a receiver or
trustee shall otherwise be appointed; or shall become insolvent or generally
fails to pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any

 

3.8       Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries (Federal law or applicable state law).

 

3.9       DTC Eligibility. The Borrower shall lose its status as “DTC Eligible”
or the Borrower’s shareholders shall lose the ability to deposit (either
electronically or by physical certificates, or otherwise) shares into the DTC
System.

 

ARTICLE IV

DEFAULT RELATED PROVISIONS AND OTHER PRIVILEGES

 

4.1       Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, interest on this Debenture shall
automatically be instated at a rate of 10% per annum, effective as of the date
of issuance of this Debenture, which interest shall be payable in cash or Common
Stock, at the option of the Borrower.

 

4.2       Conversion Privileges. The conversion privileges set forth in Article
II shall remain in full force and effect immediately from the date hereof and
until this Debenture is paid in full.

 

4.3       Cumulative Remedies. The remedies under this Debenture shall be
cumulative.

 

ARTICLE V

MISCELLANEOUS

 

5.1       Failure to Fund. Should the Holder fail to pay $45,000 in
consideration as of July 3, 2016 the Holder will be deemed in default and shall
forfeit all rights and privileges under Article II Optional Conversion as well
as Article 1.1 Interest Rate. The Holder shall have 30 days to cure default.

 

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5.2       Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by FedEx or other reputable express courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the next business day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:

 

If to the Borrower, to:

 

THINSPACE TECNOLOGY, INC.

Attn: CEO

1925 E. Belt Line Road Suite 349

Carrollton, Texas 75006

 

If to the Holder:

 

Blue Citi, LLC

Attn: Robert Malin

440 East 79th Street

New York, NY 10075

 

No change in any of such addresses shall be effective insofar as notices under
this Section 5.2 are concerned unless such changed address is located in the
United States of America and notice of such change shall have been given to such
other party hereto as provided in this Section 5.2.

 

5.3       Amendment Provision. Any term of this Debenture may be amended only
with the written consent of the Holder and the Borrower. . The term “Debenture”
and all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented, and any successor instrument as it may be amended or
supplemented.

 

5.4       Assignability. This Debenture shall be binding upon the Borrower and
its successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may not be assigned by the Borrower or the Holder
without the prior written consent of the other party, which consent may not be
unreasonably withheld.

 

5.5       Prevailing Party and Costs. In the event any attorney is employed by
any party with regard to any legal or equitable action, arbitration or other
proceeding brought by such party for the enforcement of this Debenture or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Debenture, the prevailing party in
such proceeding will be entitled to recover from the other party reasonable
attorneys' fees and other costs and expenses incurred, in addition to any other
relief to which the prevailing party may be entitled.

 

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5.6       Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Debenture shall be governed by, and construed in accordance with, the internal
laws of the State of New York, without regard to principles of conflicts of law.
THE BORROWER AND HOLDER WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS DEBENTURE OR ANY TRANSACTION
CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY
AND ALL OTHER COMMON LAW OR STATUTORY BASIS. Each party hereby submits to the
exclusive jurisdiction of the state and federal courts located in the County of
New York, State of New York. If the jury waiver set forth in this Section is not
enforceable, then any dispute, controversy or claim arising out of or relating
to this Debenture or any of the transactions contemplated herein will be finally
settled by binding arbitration in New York, New York in accordance with the then
current Commercial Arbitration Rules of the American Arbitration Association by
one arbitrator appointed in accordance with said rules. The arbitrator shall
apply New York law to the resolution of any dispute, without reference to rules
of conflicts of law or rules of statutory arbitration. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph. The expenses of the arbitration,
including the arbitrator’s fees and expert witness fees, incurred by the parties
to the arbitration, may be awarded to the prevailing party, in the discretion of
the arbitrator, or may be apportioned between the parties in any manner deemed
appropriate by the arbitrator. Unless and until the arbitrator decides that one
party is to pay for all (or a share) of such expenses, both parties shall share
equally in the payment of the arbitrator’s fees as and when billed by the
arbitrator.

 

5.7       Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by Borrower to the Holder and thus refunded to the
Borrower.

 

5.8       Construction. Borrower acknowledges that its legal counsel
participated in the preparation of this Debenture and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Debenture to
favor any party against the other.

 

5.9       Absolute Obligation. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Borrower, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct debt obligation
of Borrower.

 

5.10       Lost or Mutilated Debenture. If this Debenture shall be mutilated,
lost, stolen or destroyed, Borrower shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed.

 

[signature page follows]

 

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IN WITNESS WHEREOF, Borrower has caused this Convertible Debenture to be signed
in its name effective as of the 4th day of May 2016 (the “Effective Date”).

 

  BORROWER:       THINSPACE TECHNOLOGY, INC.       By:        /s/   Name: J.
Christopher Bautista   Title: CEO

 

 

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