Exhibit 10.5
 
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT Of 1933, AS AMENDED (THE “SECURITIES ACT”) AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND AN OPINION OF COUNSEL
IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT.
 
 
UNSECURED SUBORDINATED PROMISSORY NOTE
 
$500,000.00

 January 25, 2022

 
For value received, Novume Solutions, Inc., a Delaware corporation (the
“Company”), as assignee of KeyStone Solutions, LLC, a Delaware LLC (“KeyStone”,
being successor of KeyStone Solutions, Inc., a Delaware corporation (“KSI”)),
promises to pay to Lancer Financial Group, Inc., an Illinois corporation, (the
“Holder”), the principal sum of five hundred thousand dollars ($500,000.00) or
such other amount as may have been advanced and may be outstanding from time to
time (the “Principal Amount”). Simple interest shall accrue from the Issuance
Date (as defined below) of this Note on the unpaid Principal Amount at a rate
equal to the lower of (i) 7% per annum, or (ii) the highest rate permitted by
applicable law. This Note was originally issued by KSI to the Holder as one of a
series of Unsecured Subordinated Promissory Notes containing substantially
identical terms and conditions issued pursuant to that certain Membership
Interest Purchase Agreement (the “Purchase Agreement”), dated January 25, 2017
(the “Issuance Date”), by and among KSI and certain other parties, including the
other note holders. KSI merged with and into KeyStone as of August 28, 2017,
with KeyStone surviving such merger and succeeding KSI as the issuer of this
Note. KeyStone assigned this Note to the Company pursuant to an Assignment and
Assumption Agreement by and between KeyStone and the Company dated as of
September 29, 2017. Such Notes are referred to herein, collectively, as the
“Notes,” and the holders thereof are referred to herein, collectively, as the
“Holders.” This Note is subject to the following terms and conditions.
 
 
1.        Maturity. This Note will automatically mature and be due and payable
on January 25, 2022 (the “Maturity Date”). Interest shall accrue on this Note
and shall be payable monthly in arrears. Notwithstanding any of the foregoing,
the entire unpaid Principal Amount of this Note, together with accrued and
unpaid interest thereon, shall become immediately due and payable upon the
insolvency of the Company, the commission of any act of bankruptcy by the
Company, the execution by the Company of a general assignment for the benefit of
creditors, the filing by or against the Company of a petition in bankruptcy or
any petition for relief under the federal bankruptcy act or the continuation of
such petition without dismissal for a period of ninety (90) days or more, or the
appointment of a receiver or trustee to take possession of the property or
assets of the Company.
 
 
               2.         Payment; Prepayment. All payments shall be made in
lawful money of the United States of America at such place as the Holder hereof
may from time to time designate in writing to the Company. Payment shall be
credited first to the accrued interest then due and payable, and the remainder
shall be applied to the outstanding Principal Amount. This Note may be prepaid
in whole or in part from time to time by the Company.
 
 
3.  Nature of Obligation. This Note is a general unsecured obligation of the
Company.
 
 
4.      Transfer; Successors and Assigns. The terms and conditions of this Note
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Notwithstanding the foregoing, the Holder may
not assign, pledge or otherwise transfer all or any part of this Note without
the prior written consent of the Company.
 
 
5.          Purchase Agreement Indemnification. To the extent one or more Buyer
Indemnified Persons is entitled to indemnification under Section 8.2(a) or
Section 8.2(b) of the Purchase Agreement as determined by the non-appealable
decision or order of a Court of competent jurisdiction as provided for in
Section 11.13 of the Purchase Agreement, the aggregate dollar amount recoverable
by such Buyer Indemnified Person, or Buyer Indemnified Persons, as the case may
be, shall, at Novume’s option, be offset on a pro rata basis against the
outstanding amounts payable by Novume under the Notes. The aggregate amount
owing as outstanding Principal Amounts and accrued but unpaid interest under all
of the Notes shall, at Novume’s option, be reduced dollar for dollar, on a pro
rata basis, by the aggregate amount owing to one or more Buyer Indemnified
Persons under Section 8.2(a) or Section 8.2(b) of the Purchase Agreement.
 
 
6.          Governing Law. This Note and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of Law.
 
 
7.         Jurisdiction and Venue. Each of the Holder and the Company
irrevocably consents to the exclusive jurisdiction and venue of the United
States District Court for the Southern District of New York, to the extent
subject matter jurisdiction exists therefor, or, but only if jurisdiction does
not exist in the Southern District of New York, the Supreme Court of the State
of New York, County of Sullivan, in connection with any matter based upon or
arising out of this Note or the matters contemplated herein, and agrees that
process may be served upon them in any manner authorized by the laws of the
State of New York for such persons
 
 
8.          Subordination.
 
                            (a)        The Holder acknowledges and agrees that
the Company’s payment obligations under this Note may be subordinated to the
obligations of the Company to its lenders under any financing facility that it
may obtain during the term of this Note, including any increase in the size of
such facility from time to time (the lenders under any such facility, the
“Lenders”) solely in the event that Company is unable to meet its obligations
under the financing facility; solely in such event, no payments under this Note
shall be paid to Holder and any payment received by Holder shall be held in
trust for the Lenders and shall be immediately turned over to the Lenders until
such time as the Company is able to satisfy such obligations to the Lenders in
full. By accepting this Note, the Holder agrees to execute a subordination
agreement with any Lender or Lenders evidencing such subordination as requested
by the Company and/or its Lenders. If the terms or conditions of any
subordination agreement with any Lender shall change, the Holder shall execute
and deliver such further documents or instruments as such Lender may reasonably
request in order to give effect to the provisions of such subordination
agreement and the provisions of this Note.
 
                            (b)        The Holder acknowledges and agrees that
the Company’s payment obligations under this Note shall be subordinate to the
obligations of the Company to Avon Road Partners, L.P. (“Avon Partners”) under
that certain subordinated note in the original principal amount of $500,000,
dated March 16, 2016 and assumed by the Company, as assignee of KSI, on August
25, 2017 (the “Avon Note”) solely in the event that Company is unable to meet
its obligations under the Avon Note; solely in such event, no payments under
this Note shall be paid to Holder and any payment received by Holder shall be
held in trust for Avon Partners and shall be immediately turned over to Avon
Partners until such time as the Company is able to satisfy such obligations to
Avon Partners in full. By accepting this Note, the Holder agrees to execute a
subordination agreement with Avon Partners evidencing such subordination as
requested by the Company and/or Avon Partners. If the terms or conditions of any
subordination agreement with any Avon Partners shall change, the Holder shall
execute and deliver such further documents or instruments as Avon Partners may
reasonably request in order to give effect to the provisions of such
subordination agreement and the provisions of this Note so long as such
additional terms and conditions are consistent with this Section 8.
 
                            (c)        Notwithstanding the forgoing and anything
else to the contrary herein, the Company may not cause, permit or suffer the
aggregate amount of indebtedness to which this Note is subordinate to exceed
seven million dollars ($7,000,000.00), without the prior written consent of the
Holder.
 
 
9.         Offset of Notes. This Note is one of four (4) Notes issued under the
Purchase Agreement and assumed by the Company. Notwithstanding anything else in
this Note or the Purchase Agreement to the contrary, with respect to any right
of a Buyer Indemnified Person to offset certain amounts due to it against sums
outstanding under one or more Notes, as described in Section 8.4 of the Purchase
Agreement, no such sums may be set off against any payments due to the Holder of
this Note unless and until the aggregate amount recoverable by such Buyer
Indemnified Person is first offset against the outstanding amounts due under
each of the Notes issued to SL, HR and JS (each as defined in the Purchase
Agreement). To the extent that, subsequent to the offsets against such other
Notes, there remain excess amounts due the Buyer Indemnified Person under
Article VIII of the Purchase Agreement, then the excess amounts may be set off
against this Note.

 
 
[Signature Page to Follow]
 
 

 
 
 
 
COMPANY:
 
NOVUME SOLUTIONS, INC.
 
By: 
/s/ Robert A. Berman
 
                                                                               
        Name: Robert A. Berman

 
                                                                               
        Title: Chief Executive Officer

 
 
Address:
 
14420 Albemarle Point Place, Suite 200
Chantilly, VA 20151
 
Copy to:
 
Morris DeFeo
Crowell & Moring LLP
1001 Pennsylvania Ave. NY
Washington, D.C. 20004