TISA Top Image Systems, Ltd. - Ordinary Shares

Item 1.01 Entry into a Material Definitive Agreement.

 

On January 18, 2019, Top Image Systems Ltd., a company organized under the laws of the State of Israel (“ TIS ”) and its subsidiaries entered into a Note Purchase Agreement with HCP-FVE, LLC, a Delaware limited liability company (“ Hale Capital ”) (the “ Note Purchase Agreement ”) pursuant to which Hale Capital agreed to purchase senior secured term loans notes (the “ Notes ”) from TIS in the aggregate principal amount of $2,350,000.  At the initial closing held on January 18, 2019, Hale Capital purchased a Note from TIS in the original principal amount of $1,860,000, and on February 5, 2019, Hale Capital purchased a Note from TIS in the original principal amount of $490,000.  The Notes had an initial maturity date of March 31, 2019, which maturity date was extended to May 31, 2019 as set forth below.

The interest rate on the Notes is the Prime Rate plus 6.00% per annum, payable monthly in arrears in cash.

Under certain circumstances set forth in the Note Purchase Agreement, including a change in control of TIS, TIS is obligated to redeem the Notes.

The Notes are secured obligations of TIS and its subsidiaries, senior to all existing and future indebtedness of TIS.  The Notes are guaranteed by the subsidiaries of TIS.  Subject only to any existing liens, the Notes are secured by all assets of TIS and its subsidiaries with a first priority lien.

The Note Purchase Agreement contains customary representations and warranties, covenants, indemnification provisions and customary provisions prohibiting additional indebtedness or liens.

The proceeds from the Notes were used as follows: $804,993 was used to repay an existing line of credit balance, accrued interest and fees to Silicon Valley Bank, $492,902 to pay Hale Capital for specified borrowing fees and for the reimbursement of legal and related expenses pursuant to the Note Purchase Agreement and other agreements and the remainder is being utilized for working capital.

In connection with the Note Purchase Agreement, TIS and Hale Capital amended and restated the Convertible Note, dated December 5, 2016, issued by TIS in favor of Hale Capital, in the original principal amount of $5,000,000 (the “ Convertible Note ”), to, among other things, secure the obligations thereunder by TIS and its subsidiaries’ granting a lien on the collateral as set forth in the guaranty and collateral agreement and increasing the interest rate to the Prime Rate plus eight percent (8%), such rate to be determined as of the beginning of each calendar quarter.   Hale Capital waived and released TIS and its subsidiaries from all claims Hale Capital had or may have relating to, or arising out of, any breach of TIS’ obligations under the Securities Purchase Agreement by and between TIS and Hale Capital, dated December 5, 2016 or the Convertible Note prior to the date of the Note Purchase Agreement.

Further, TIS agreed to pay Hale Capital a success fee in the amount of $313,255 (the “ Success Fee ”).  The Success Fee is payable at the earlier of (i) the sale of TIS, (ii) the retirement of any portion of the indebtedness evidenced by the Notes or the Convertible Note or (iii) May 31, 2019.

The borrowings under the Note Purchase Agreement were intended to, among other things, pay for certain expenses related to the previously announced Agreement and Plan of Merger (the “ Merger Agreement ”) between TIS, Kofax, Inc. and certain other parties and to provide financing for TIS’s operations until the anticipated closing of that transaction.

On February 3, 2019, in connection with the entry of the Merger Agreement, the Note Purchase Agreement was amended to, among other things, extend the maturity date of the borrowings thereunder to May 31, 2019 and include an Amendment Fee of $5,513.81 per day for each day from April 1, 2019 through May 31, 2019 that any of the indebtedness under the Notes or the Convertible Note or any other obligations remains outstanding.