Exhibit 10.11
 
REVOLVING LINE OF CREDIT NOTE

 

$1,500,000.00 Minneapolis, Minnesota  
May 7, 2014

 
FOR VALUE RECEIVED, the undersigned CACHET FINANCIAL SOLUTIONS, INC., a Delaware
corporation (“Cachet DE”), and CACHET FINANCIAL SOLUTIONS INC., a Minnesota
corporation (“Cachet MN”) (Cachet MN and Cachet DE are jointly and severally
obligated, and collectively referred to herein as, the “Borrower”), promise to
pay to the order of MICHAEL J.  HANSON, whose current address is 2300
Territorial Road, Saint Paul, MN 55114 (“Lender”) at his current address, or at
such other place as the Lender may designate, in lawful money of the United
States of America and in immediately available funds, the principal sum of up to
ONE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,500,000.00), or so much
thereof as may be advanced and be outstanding, with interest thereon, to be
computed on each advance from the date of its disbursement as set forth herein.
 
INTEREST:
 
(a)                 Interest.  The outstanding principal balance of this Note
shall bear interest (computed on the basis of a 365-day year, actual days
elapsed) at a rate per annum equal to ten percent (10.0%).
 
(b)                 Payment of Interest.  Interest accrued on this Note shall be
payable on the Maturity Date (as defined below).
 
BORROWING AND REPAYMENT:
 
(a)                 Borrowing and Repayment.  Borrower may at any time prior to
the Maturity Date borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above.  The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the Lender less the amount of principal payments made hereon by or
for any Borrower, which balance may be endorsed hereon from time to time by the
Lender.  The outstanding principal balance of this Note shall be due and payable
in full on the earlier to occur of (a) the demand of Lender after the IPO (as
defined below) or (b) September 30, 2014 (as applicable, the “Maturity Date”).
 
(b)                 Application of Payments.  Each payment made on this Note
shall be credited first to any interest then due and second to the outstanding
principal balance hereof.
 
 
 

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(c)                 Conditions to Advances.  Notwithstanding anything to the
contrary set forth in this Note, Lender shall have no obligation to make any
advance hereunder, unless and until (1)  Borrower has obtained from Trooien
Capital, LLC and from Michaelson Capital Partners, LLC (f/k/a Imperium Special
Finance Fund, LP) written consent to the indebtedness evidenced hereby, in form
and substance acceptable to Lender and (2) there shall be no default or event of
default hereunder or with respect to any other obligation of Borrower to Lender.
 
CONVERSION:
 
Upon the consummation of an initial public offering of the  common stock of
Cachet DE (the “IPO”), the Lender shall have the option at any time prior to the
Maturity Date (the “Conversion Period”), to convert all or any portion of the
principal and interest then outstanding into common stock of Cachet DE at the
Discount Price.  Any portion of the principal and interest that the Lender does
not convert to common stock during the Conversion Period shall be due and
payable in full on the Maturity Date.
 
“Discount Percentage” means
 
(a) 15% if (i) the IPO is consummated on or before July 31, 2014, and (ii) the
gross proceeds of the IPO are greater than $11,000,000;
 
(b) 20% if (i) (A) the IPO is consummated on or before July 31, 2014, and (B)
the gross proceeds of the IPO are less than $11,000,000 or (ii) (A) the IPO is
consummated after July 31, 2014, and (B) the gross proceeds of the IPO are
greater than $11,000,000; or
 
(c) 25% if (i) the IPO is consummated after July 31, 2014, and (ii) the gross
proceeds of the IPO are less than $11,000,000.
 
“Discount Price” means (a) the price at which shares of the Borrower’s common
stock are sold in the IPO multiplied by (b) the sum of (i) 100% minus (ii) the
Discount Percentage.
 
REGISTRATION RIGHTS:
 
The Borrower shall, at Lender’s option, include in the IPO any shares of common
stock to be issued to the Lender upon conversion as described above (the
“Shares”).  In the event that the underwriter(s) of the IPO determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten in the public offering, or if applicable law or SEC rules or
guidance would prohibit the inclusions of any Shares, then the Shares may be
excluded from the public offering, provided that in such event the Lender shall
have piggyback registration rights relating to the Shares that are no less
favorable than any such piggyback registration rights that have been or shall
have been granted to any third party.  Borrower agrees to (i) execute and
deliver, and cause its directors and officers to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Lender, necessary or advisable to register the Shares
as required under this paragraph, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the effective date, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of
Lender, are necessary or advisable, all in conformity with the requirements of
the Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission applicable thereto.  Lender agrees to comply
with the provisions of the securities or “blue sky” laws of any and all
jurisdictions which the Lender shall designate.
 
 
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EVENTS OF DEFAULT:
 
The occurrence of any of the following shall constitute an “Event of Default”
under this Note:
 
(a)                 The failure to pay any principal, interest, fees or other
charges when due hereunder or under any contract, instrument or document
executed in connection with this Note.
 
(b)                 The filing of a petition by or against Borrower, under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of Borrower; Borrower becomes insolvent, makes a
general assignment for the benefit of creditors or is generally not paying its
debts as they become due; or any attachment or like levy on any property of
Borrower.
 
(c)                 Any default in the payment or performance of any obligation,
or any defined default or event of default, under any provisions of any
contract, instrument or document pursuant to which Borrower has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the Lender.
 
(d)                 Any financial statement provided by Borrower to Lender
proves to be incorrect, false or misleading in any material respect.
 
(e)                 Any sale or transfer of all or a substantial or material
part of the assets of Borrower other than in the ordinary course of its
business.
 
(f)                 Any violation or breach of any provision of, or any defined
event of default under, any addendum to this Note or any loan agreement,
guaranty, security agreement, deed of trust, mortgage or other document executed
in connection with or securing this Note.
 
MISCELLANEOUS:
 
(a)           Remedies.  Upon the occurrence of any Event of Default, the
Lender, at the Lender’s option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, notice of nonperformance, notice of protest, protest or notice of
dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the Lender to extend any further credit hereunder shall
immediately cease and terminate.  The Borrower shall pay to the Lender
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees, expended or incurred
by the Lender in connection with the enforcement of the Lender’s rights and/or
the collection of any amounts which become due to the Lender under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Lender or any other person) relating to
any Borrower or any other person or entity.
 
 
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(b)            Governing Law.  This Note shall be governed by and construed in
accordance with the laws of the State of Minnesota.
 
(c)            Intentionally Omitted.
 
(d)            Additional Collateral Security.  The obligations under this Note
are secured by that certain Third Party Pledge of even date herewith executed by
James L. Davis and that certain Third Party Pledge of even date herewith
executed by Jeffrey C. Mack, each in favor of the Lender.
 
(e)            Lender’s Expenses.  Borrower agrees to reimburse Lender upon
demand for all reasonable out-of-pocket expenses incurred by Lender in
connection with this Note, including, but not limited to, reasonable legal
expenses and attorneys’ fees sustained by Lender in connection with the
preparation of this Note (in an amount not to exceed $10,000), the
administration of the loan or the exercise of any right or remedy available to
Lender hereunder (whether or not suit is commenced) or otherwise at law or in
equity.
 
(f)            Representations and Warranties of Borrower. Borrower represents
and warrants to Lender as follows:
 
(1)           Qualification of Undersigned.  The person executing this Note on
behalf of Borrower is familiar with the facts herein represented and warranted
and is duly authorized to represent and warrant the same and to execute this
Agreement.
 
(2)           Representations and Warranties in Loan Agreement.  The
representations and warranties of Borrower contained in that certain Loan and
Security Agreement by and among the parties and dated as of March 4, 2014, are
true and correct in all material respects as of the date of this Note as if such
representations and warranties were made effective as of such date.
 
(3)           Organizational Documents.  The organizational documents of each
Borrower remain in full force and effect and have not been amended or modified
since March 4, 2014, the date on which the organizational documents were last
certified by Borrower to Lender (other than as publicly disclosed).
 
(4)           Power to Perform.  Borrower has the power, under its
organizational documents, to execute and deliver this Note and to perform the
obligations required to be performed by Borrower hereunder.
 
(5)           Due Authorization.  The execution, delivery and performance by
Borrower of this Note, and the issuance of Shares upon conversion as provided
herein, have been duly authorized by all necessary action on the part of
Borrower.  This Note has been duly executed and delivered by Borrower and,
constitutes the legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles affecting the
enforcement of creditors’ rights generally.
 
 
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(6)           Borrower’s Claims; Release of Lender.  Borrower acknowledges that
it has no defenses, counterclaims or claims of offset with regard to its
obligations under the Loan Agreement.  Borrower affirms that Lender has
completely fulfilled the terms, provisions and conditions of the Loan Agreement
to be performed by it through the date of this Note, and Borrower hereby
releases, acquits and discharges all claims, demands, suits, debts, causes of
action, damages and defenses that it now has, whether known or unknown, by
reason of any performance or non-performance by Lender of its obligations under
the Loan Agreement from the time of execution of the Loan Agreement through the
date hereof.  Borrower has entered into the foregoing release freely and
voluntarily upon its own information and investigation and after consultation
with legal counsel of its choice.  Borrower is aware that it or its attorneys
may discover facts different from or in addition to the facts that they now know
or believe to be true with respect to the subject matter of the foregoing
release, but it is its intention to, and it hereby does, fully, finally,
absolutely and forever settle any and all claims, disputes and differences which
now exist, or have ever existed in favor of Borrower against Lender.

 
[signatures on next page]
 
 
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
 

 
CACHET FINANCIAL SOLUTIONS, INC., a Delaware corporation
       
 
 
/s/ Jeffrey C. Mack 
   
By:
Jeffrey C. Mack      Its: CEO  

 

 
CACHET FINANCIAL SOLUTIONS INC., a Minnesota corporation
       
 
 
/s/ Jeffrey C. Mack 
   
By:
Jeffrey C. Mack      Its: CEO  

 
 
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
 

 
LENDER:
       
 
/s/ Michael J. Hanson
    Michael J. Hanson  

 
 
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