Item 1.01.
Entry into a Material Definitive Agreement
Private
Placement
On
May 11, 2017, InsPro Technologies Corporation, a Delaware corporation (the “
Company
”), entered into and completed
a private placement (the “
Private Placement
”) with certain accredited investors (the “
Investors
”),
for an aggregate of 150,000 shares (each, a “
Preferred Share
”) of its Series C Convertible Preferred Stock,
par value $0.001 per share (“
Series C 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 Investors an aggregate of 150,000 shares of Series C Preferred Stock
in the Private Placement at a per share price equal to $2.00.
The
Series C 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 Series C 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 Series C 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 Series C 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
Series C Preferred Stock with an amount per share equal to two and a half (2.5) times the Series C 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 $300,000, 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 Investors 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 United Stated Securities and Exchange Commission, 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 Investors 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 Investors, subject to certain exceptions and limitations,
which grants the Investors 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 Investors may
participate in such financings at a level based on the Investors’ 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.