Item 1.01. Entry into a Material Definitive Agreement
Private Placement
On April 20, 2017, InsPro Technologies Corporation,
a Delaware corporation (the “
Company
”), entered into and completed a private placement (the “
Private
Placement
”) with The Co-Investment Fund II, L.P. (the “
Investor
”), for an aggregate of 1,000,000 shares
(each, a “
Preferred Share
”) of its Series
C Convertible Preferred Stock, par value $0.001 per share (“
Preferred
Stock
”) pursuant to the terms of a securities purchase agreement (the “
Purchase Agreement
”).
Pursuant to the Purchase Agreement, the
Company agreed to sell to the Investor 1,000,000 shares of Preferred Stock in the Private Placement at a per share price equal
to $2.00.
The Preferred Stock is entitled to vote
as a single class with the holders of the Company’s Common Stock, with each Preferred Share having the right to 20 votes.
Upon the liquidation, sale or merger of the Company, each Preferred Share is entitled to receive an amount equal to the greater
of (A) a liquidation preference equal to two and a half (2.5) times the Preferred Stock original issue price, subject to certain
customary adjustments, or (B) the amount such Preferred Share would receive if it participated
pari passu
with the holders
of shares of common stock of the Company, par value $0.001 per share (“
Common Stock
”) on an as-converted basis.
Each Preferred Share is convertible into 20 shares of Common Stock (the “
Shares
”). For so long as any Preferred
Shares are outstanding, the vote or consent of the Holders of at least two-thirds of the Preferred Shares is required to approve
(Y) any amendment to the Company’s certificate of incorporation or bylaws that would adversely alter the voting powers, preferences
or special rights of the Preferred Stock or (Z) any amendment to the Company’s certificate of incorporation to create any
shares of capital stock that rank senior to the Preferred Stock. In addition to the voting rights described above, for so long
as 1,000,000 Preferred Shares are outstanding, the vote or consent of the holders of at least two-thirds of the Preferred Shares
is required to effect or validate any merger, sale of substantially all of the assets of the Company or other fundamental transaction,
unless such transaction, when consummated, will provide the holders of Preferred Stock with an amount per share equal to two and
a half (2.5) times the Preferred Stock original issue price plus any declared but unpaid dividends.
The closing of the Private Placement was
subject to customary closing conditions. The gross proceeds from the closing of the Private Placement were $2,000,000, and the
Company intends to use the net proceeds of the Private Placement for working capital purposes.
In connection with the signing of the
Purchase Agreement, the Company and the Investor also entered into a registration rights agreement (the
“
Registration Rights Agreement
”). Under the terms of the Registration Rights Agreement, the Company agreed
to prepare and file with the SEC, within 30 days following the receipt of a demand notice of a holder of Registrable
Securities, a registration statement on Form S-1 (the “
Registration Statement
”) covering the resale of the
Shares (collectively, the “
Registrable Securities
”). Subject to limited exceptions, the Company also
agreed to use its reasonable best efforts to cause the Registration Statement to be declared effective under the Securities
Act of 1933, as amended (the “
Securities Act
”), as soon as practicable but, in any event, no later than
60 days following the date of the filing of the Registration Statement (or 120 days following the date of the
filing of the Registration Statement in the event the Registration Statement is subject to review by the SEC), and agreed to
use its reasonable best efforts to keep the Registration Statement effective under the Securities Act until the date that all
of the Registrable Securities covered by the Registration Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(b)(i) promulgated under the Securities Act. In addition, if the Company proposes to register any of its
securities under the Securities Act in connection with the offering of such securities for cash, the Company shall, at such
time, promptly give each holder of Registrable Securities notice of such intent, and such holders shall have the option to
register their Registrable Securities on such additional registration statement. The Registration Rights Agreement also
provides for payment of partial damages to the Investor under certain circumstances relating to failure to file or obtain or
maintain effectiveness of the Registration Statement, subject to adjustment.
The Company also agreed, pursuant to the
terms of the Purchase Agreement, that for a period of 90 days after the effective date of the Purchase Agreement, the Company shall
not, subject to certain exceptions, offer, sell, grant any option to purchase, or otherwise dispose of any equity securities or
equity equivalent securities, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, capital stock and
other securities of the Company.
The Purchase Agreement also provides for
a customary participation right for the Investor, subject to certain exceptions and limitations, which grants the Investor the
right to participate in any future capital raising financings of the Company occurring from the effective date of the Purchase
Agreement until 24 months after the effective date of the Purchase Agreement. The Investor may participate in such financings at
a level based on the Investor’s ownership percentage of the Company on a fully-diluted basis prior to such financing.
The foregoing is a summary of the terms
of the Purchase Agreement and the Registration Rights Agreement and does not purport to be complete. This summary is qualified
in its entirety by reference to the full text of each of the Purchase Agreement and the Registration Rights Agreement, which are
attached hereto as Exhibits 4.1 and 4.2, respectively, and are incorporated by reference herein.