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Exhibit 10.3
 
SECURITY AGREEMENT

This Security Agreement (this “Agreement”) dated as of January 30, 2015, by and
among InsPro Technologies Corporation, a Delaware corporation (the “Company”)
and InsPro Technologies, LLC, a Delaware limited liability company (“InsPro” and
collectively with the Company, the “Borrowers”) and The Co-Investment Fund II,
L.P., a Delaware limited partnership (the “Secured Party”).  Capitalized terms
not defined herein shall have the meaning set forth in the Purchase Agreement
(as defined below).
 
RECITALS:
 
The Borrowers have issued and delivered to Secured Party a Note (as defined in
the Purchase Agreement) dated on or prior to the date of this
Agreement.  Pursuant to the Purchase Agreement and the Note, the Borrowers have
agreed to grant a security interest in and to the Collateral (as defined in this
Agreement) on the terms and conditions set forth in this Agreement.
 
NOW, THEREFORE, for and in consideration of the Debt (as defined in this
Agreement), and intending to be legally bound, the parties covenant and agree as
follows:
 
1.             Definitions.  In addition to the words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, unless the context otherwise clearly requires:
 
“Accounts” shall have the meaning given to that term in the Code and shall
include without limitation all rights of the Borrowers, whenever acquired, to
payment for goods sold or leased or for services rendered, whether or not earned
by performance.

“Chattel Paper” shall have the meaning given to that term in the Code and shall
include without limitation all writings owned by the Borrowers, whenever
acquired, which evidence both a monetary obligation and a security interest in
or a lease of specific goods.

“Code” shall mean the Uniform Commercial Code as in effect on the date of this
Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the Collateral from time to
time.

“Collateral” shall mean collectively all goods, Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory, and
all other personal property and Proceeds of each of the foregoing, whether now
owned or hereafter acquired, wherever located; provided that, notwithstanding
anything to the contrary contained herein, “Collateral” shall not shall not be
deemed to include any copyrights (including computer programs, blueprints and
drawings), copyright applications, copyright registration and like protection in
each work of authorship and derivative work thereof, whether published or
unpublished, now owned or hereafter acquired; any design rights; any patents,
patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, except that the Collateral shall include
all accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the foregoing.
 

 

 

 

 
“Debt” shall mean (i) all indebtedness, both principal and interest, of the
Borrowers to the Secured Party now or after the date of this Agreement evidenced
by the Note, (ii) all other debts, liabilities, duties and obligations of the
Borrowers to the Secured Party now existing or after the date of this Agreement
contracted, incurred, or arising in connection with the Loan Documents, and
(iii) all costs and expenses incurred by the Secured Party in the collection of
any of the indebtedness described in this paragraph or in connection with the
enforcement of any of the duties and obligations of the Borrowers to the Secured
Party described in this paragraph, including reasonable attorneys’ fees and
expenses, and (iv) all future advances made by the Secured Party for the
reasonable maintenance, protection, preservation or enforcement of, or
realization upon, the Collateral or any portion of the Collateral, including
advances for storage, transportation charges, taxes, insurance, repairs and the
like.

“Documents” shall have the meaning given to that term in the Code and shall
include without limitation all warehouse receipts (as defined by the Code) and
other documents of title (as defined by the Code) owned by the Borrowers,
whenever acquired.

“Equipment” shall have the meaning given to that term in the Code and shall
include without limitation all goods owned by the Borrowers, whenever acquired
and wherever located, used or brought for use primarily in the business or for
the benefit of the Borrower and not included in Inventory of the Borrowers,
together with all attachments, accessories and parts used or intended to be used
with any of those goods or Fixtures, whether now or in the future installed
therein or thereon or affixed thereto, as well as all substitutes and
replacements thereof in whole or in part.

“Event of Default” shall have the meaning given to that term in the Note.  For
the avoidance of doubt, if a specific event, matter or circumstance does not
become an Event of Default until the passage of time and/or giving of notice, it
shall not be considered an Event of Default for purposes of this Agreement until
such giving of notice and/or passage of time.

“Fixtures” shall have the meaning given to that term in the Code, and shall
include without limitation leasehold improvements.

“General Intangibles” shall have the meaning given to that term in the Code and
shall include, without limitation, all leases under which the Borrowers now or
in the future leases and or obtains a right to occupy or use real or personal
property, or both, all membership interests in limited liability companies, all
of the other contract rights of the Borrowers, whenever acquired, and customer
lists, choses in action, claims (including claims for indemnification), books,
records, patents and patent applications, copyrights and copyright applications,
trademarks, trade names, trade styles, trademark applications, moral rights,
blueprints, drawings, designs and plans, trade secrets, methods, processes and
any other intellectual property rights, contracts, licenses, license agreements,
formulae, tax and any other types of refunds, returned and unearned insurance
premiums, rights and claims under insurance policies, and computer information,
software, domain names, URL’s, web pages, records and data, now owned or
acquired after the date of this Agreement by the Borrowers.
 

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“Instrument” shall have the meaning given to that term in the Code and shall
include, without limitation, all negotiable instruments (as defined in the
Code), all certificated securities (as defined in the Code) and all other
writings which evidence a right to the payment of money now or after the date of
this Agreement owned by the Borrowers.

“Inventory” shall have the meaning given to that term in the Code and shall
include without limitation all goods owned by the Borrowers, whenever acquired
and wherever located, held for sale or lease or furnished or to be furnished
under contracts of service, and all raw materials, work in process and materials
owned by the Borrowers and used or consumed in the Borrowers’ business, whenever
acquired and wherever located.

“Loan Documents” shall mean collectively, this Agreement, the Note, and the
Purchase Agreement, each of even date herewith among the Borrowers and the
Secured Party and all other agreements, documents and instruments executed and
delivered in connection herewith or therewith, as each may be amended,
supplemented or modified from time to time.

“Note” shall mean the Secured Convertible Promissory Note executed and delivered
by the Borrowers in connection with the Purchase Agreement.

“Permitted Lien” shall have the meaning assigned to such term in the Purchase
Agreement.

“Proceeds” shall have the meaning given to that term in the Code and shall
include without limitation whatever is received when Collateral or Proceeds is
sold, exchanged, collected or otherwise disposed of, whether cash or non-cash,
and includes without limitation proceeds of insurance payable by reason of loss
of or damage to Collateral.

“Purchase Agreement” shall mean that certain Secured Convertible Promissory Note
Purchase Agreement dated the date hereof among the Borrowers and the Secured
Party.

2.             Security Interest.  As security for the full and timely
performance and payment of the Debt in accordance with the terms of the Debt
including the performance of the obligations of the Borrowers under the Note and
this Agreement, the Borrowers agree that the Secured Party shall have, and the
Borrowers grant to and create in favor of the Secured Party, a security interest
under the Code in and to such of the Collateral as is now owned or acquired
after the date of this Agreement by the Borrowers.
 

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3.             Rights and Remedies of a Secured Party.  In addition to all
rights and remedies given to the Secured Party by this Agreement, the Note and
the other Loan Documents, the Secured Party shall have all the rights and
remedies of a secured party under the Code.
 
4.             Provisions Applicable to the Collateral.  The parties agree that
the following provisions shall be applicable to the Collateral:
 
(a)           The Borrowers covenant and agree that at all times during the term
of this Agreement it shall keep accurate and complete books and records
concerning the Collateral that is now owned or acquired after the date of this
Agreement by the Borrowers at its principal place of business at 150 N.
Radnor-Chester Road, Suite B-101, Radnor, Pennsylvania 19087 and at no other
location without the prior written consent of the Secured Party.
 
(b)           The Secured Party and its representatives shall have the right at
all times during regular business hours of the Borrowers, with prior notice, to
examine and inspect the Collateral and to review the books and records of the
Borrowers concerning the Collateral that is now owned or acquired after the date
of this Agreement by the Borrowers and to copy the same and make excerpts
therefrom; provided, however, that from and after the occurrence of an Event of
Default, the rights of inspection and entry shall be subject to the requirements
of the Code.
 
(c)           Except as otherwise agreed by the Secured Party, the Borrowers
shall at all times during the term of this Agreement keep the Equipment,
Inventory and Fixtures that are now owned or acquired after the date of this
Agreement by the Borrowers at its principal place of business at 150 N.
Radnor-Chester Road, Suite B-101, Radnor, Pennsylvania 19087, except to the
extent any such Collateral is intended to be portable and not fixed to any
particular location (such as portable computers, cellular phones, and other
similar property), Inventory and Equipment is located at the facilities of
third-party contractors and assemblers or, upon written notice to the Secured
Party, at such other locations for which the Secured Party has filed financing
statements, and at no other location without prior written notice to the Secured
Party, except that the Borrowers shall have the right until one or more Events
of Default shall occur to sell or otherwise dispose of Inventory in the ordinary
course of business.
 
(d)           Except as otherwise agreed by the Secured Party, the Borrowers
shall not move the location of its chief executive offices without prior written
notification to the Secured Party, and shall not change its jurisdiction of
formation without the prior written consent of the Secured Party.
 
(e)           Without the prior written consent of the Secured Party, such
consent not to be unreasonably withheld, the Borrowers shall not sell, lease or
otherwise dispose of any Equipment or Fixtures, except Equipment or Fixtures
reasonably deemed by the Borrowers to be no longer material to or useful in the
conduct of its business or Equipment leased to third parties in the ordinary
course of Borrowers’ business.
 

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(f)           Promptly upon request of the Secured Party, from time to time, the
Borrowers shall furnish the Secured Party with such information and documents
regarding the Collateral and the Borrowers’ financial condition, business,
assets or liabilities, at such times and in such form and detail as the Secured
Party may reasonably request.
 
(g)           Promptly upon request of the Secured Party, from time to time, the
Borrowers shall deliver to the Secured Party all documentation reasonably
requested by the Secured Party including, without limitation, (i) all invoices
and customer statements rendered to account debtors, documents, contracts,
chattel paper, instruments and other writings pertaining to the Borrowers’
contracts or the performance of the Borrowers’ contracts, (ii) evidence of the
Borrowers’ accounts and statements showing the aging, identification,
reconciliation and collection thereof and (iii) reports as to the Borrowers’
inventory and sales, shipment, damage or loss thereof, all of the foregoing to
be certified by authorized officers or other employees of the Borrowers.
 
(h)           Notwithstanding the security interest in the Collateral granted to
and created in favor of the Secured Party under this Agreement, the Borrowers
shall have the right until one or more Events of Default shall occur, at their
own cost and expense, to collect the Accounts and the Chattel Paper and to
enforce their contract rights generally.
 
(i)           After the occurrence of an Event of Default, the Secured Party
shall have the right, in its sole discretion, to give notice of the Secured
Party’s security interest to account debtors obligated to the Borrowers and to
take over and direct collection of the Accounts and the Chattel Paper, to notify
such account debtors to make payment directly to the Secured Party and to
enforce payment of the Accounts and the Chattel Paper and to enforce the
Borrowers’ contract rights.  It is understood and agreed by the Borrowers that
the Secured Party shall have no liability whatsoever under this Agreement except
for its own gross negligence or willful misconduct.
 
(j)           After the occurrence of an Event of Default, the Secured Party
shall cause to be opened and maintained a noninterest bearing deposit account
(the “Cash Collateral Account”) and after delivery of notice to the Borrowers by
the Secured Party, deposit, and require the Borrowers to deposit, therein all
cash proceeds of Collateral.  All cash proceeds of the Collateral received
directly by the Borrowers shall be held by the Borrowers in trust for the
benefit of the Secured Party, shall be segregated from all other funds of the
Borrowers and shall, within one business day after receipt, be paid over to the
Secured Party in the same form as so received (with any necessary endorsement or
assignment) for deposit in the Cash Collateral Account.  The Secured Party shall
have sole dominion and control over all items and funds in the Cash Collateral
Account and such items and funds may be withdrawn only by the Secured Party, it
being the intention of the parties to this Agreement that the Borrowers shall
have no control over or withdrawal rights in respect of the Cash Collateral
Account.  The Secured Party, in accordance with the Purchase Agreement, may, in
its discretion, release to the Borrowers from time to time all or any part of
the collected funds deposited in the Cash Collateral Account but the Secured
Party shall have the right at any time to apply all or any part of the collected
funds on deposit in the Cash Collateral Account to the payment of the Debt,
whether on account of principal or interest or otherwise as the Secured Party in
its discretion and in good faith may elect, until the Debt is fully paid.
 

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(k)          After the occurrence of an Event of Default and delivery of a
written request, the Borrowers shall promptly deliver to the Secured Party all
existing leases, and all other leases entered into by the Borrowers from time to
time, covering any Equipment or Inventory (“Leased Inventory”) which is leased
to third parties and will take such action as is necessary to perfect the
Secured Party’s security interest in Leased Inventory.
 
(l)           The Borrowers which are limited liability companies shall not
issue certificates evidencing the membership interests in such Borrowers.
 
5.             Secured Party’s Actions with Respect to Accounts.  The Borrowers
irrevocably make, constitute and appoint the Secured Party its true and lawful
attorney-in-fact with power to sign the Borrowers’ name and to take any of the
following actions after the occurrence of an Event of Default, such actions only
to be taken during the continuance of an Event of Default, in Secured Party’s
name, as Secured Party may determine, at any time without notice to the
Borrowers and at the Borrowers’ expense:
 
(a)          Verify the validity and amount of, or any other matter relating to,
the Collateral by mail, telephone, telegraph or otherwise;
 
(b)          Notify all account debtors that the Accounts have been assigned to
the Secured Party and that the Secured Party has a security interest in the
Accounts;
 
(c)          Direct all account debtors to make payment of all Accounts directly
to the Secured Party;
 
(d)          Take control in any manner of any cash or non-cash items of payment
or proceeds of Accounts;
 
(e)          Notify the United States Postal Service to change the address for
delivery of mail addressed to the Borrowers to such address as the Secured Party
may designate;
 
(f)          Receive, open and dispose of all mail addressed to the Borrowers
(any sums received pursuant to the exercise of the rights provided in this
Agreement shall be deposited in the Cash Collateral Account);
 
(g)          Take control in any manner of any rejected, returned, stopped in
transit or repossessed goods relating to Accounts;
 
(h)          Enforce payment of and collect any Accounts, by legal proceedings
or otherwise, and for such purpose the Secured Party may:
 
(1)  Demand payment of any Accounts or direct any account debtors to make
payment of Accounts directly to the Secured Party;

(2)  Receive and collect all monies due or to become due to the Borrowers;
 

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(3)    Exercise all of the Borrowers’ rights and remedies with respect to the
collection of Accounts;

(4)    Settle, adjust, compromise, extend, renew, discharge or release Accounts;

(5)    Sell or assign Accounts on such terms, for such amount and at such times
as the Secured Party deems advisable;

(6)    Prepare, file and sign the Borrowers’ name or names on any Proof of Claim
or similar documents in any proceeding filed under federal or state bankruptcy,
insolvency, reorganization or other similar law as to any account debtor;

(7)    Prepare, file and sign the Borrowers’ name or names on any notice of
lien, claim of mechanic’s lien, assignment or satisfaction of lien or mechanic’s
lien or similar document in connection with the Collateral;

(8)    Endorse the name of the Borrowers upon any chattel papers, documents,
instruments, invoices, freight bills, bills of lading or similar documents or
agreements relating to Accounts or goods pertaining to Accounts or upon any
checks or other media of payment or evidence of a security interest that may
come into the Secured Party’s possession;

(9)    Sign the name of the Borrowers to verifications of Accounts and notices
of Accounts sent by account debtors to the Borrowers; or

(10)  Take all other actions necessary or desirable to protect the Borrowers’
interest in the Accounts.

(i)           Negotiate and endorse any Document in favor of the Secured Party
or its designees, covering Inventory including the Leased Inventory, which
constitutes Collateral, and related documents for the purpose of carrying out
the provisions of this Agreement and taking any action and executing in the name
of Borrowers any instrument which the Secured Party may deem necessary or
advisable to accomplish the purpose hereof.  Without limiting the generality of
the foregoing, the Secured Party shall have the right and power to receive,
endorse and collect checks and other orders for the payment of money made
payable to the Borrowers representing any payment or reimbursement made under,
pursuant to or with respect to, the Collateral or any part thereof and to give
full discharge to the same.
 
The Borrowers ratify and approve all acts of said attorney and agrees that said
attorney shall not be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law, except for said attorney’s own
gross negligence or willful misconduct.  This power, being coupled with an
interest, is irrevocable until the Debt is paid in full and the Borrowers shall
have performed all of its obligations under this Agreement.  The Borrowers
further agree to use their commercially reasonable efforts to assist the Secured
Party in the collection and enforcement of the Accounts and will not hinder,
delay or impede the Secured Party in any manner in its collection and
enforcement of the Accounts.
 

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Anything herein to the contrary notwithstanding, (a) the Borrowers shall remain
liable under the contracts and agreements included in the Collateral to the
extent set forth therein to perform all of their duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Secured Party of any of the rights hereunder shall not
release the Borrowers from any of their duties or obligations under the
contracts and agreements included in the Collateral, and (c) the Secured Party
shall not have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Borrowers
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
 
6.           Preservation and Protection of Security Interest.  The Borrowers
shall faithfully preserve and protect the Secured Party’s security interest in
the Collateral and shall, at its own cost and expense, cause, or assist the
Secured Party to cause that security interest to be perfected and continue
perfected so long as the Debt or any portion of the Debt is outstanding, unpaid
or executory.  For purposes of the perfection of the Secured Party’s security
interest in the Collateral in accordance with the requirements of this
Agreement, the Borrowers shall from time to time at the reasonable request of
the Secured Party file or record, or cause to be filed or recorded, such
instruments, documents and notices, including assignments, financing statements
and continuation statements, as the Secured Party may deem necessary or
advisable from time to time in order to perfect and continue perfected such
security interest.  The Borrowers irrevocably appoint the Secured Party as the
attorney-in-fact of the Borrowers to do all acts and things which the Secured
Party may reasonably deem necessary or advisable from time to time to preserve,
perfect and continue perfected the Secured Party’s security interest in the
Collateral in accordance with the requirements of this Agreement, including, but
not limited to, signing any financing statements or amendments to financing
statements evidencing the Secured Party’s security interest in the Collateral
for and on behalf of the Borrowers.  The Borrowers agree that a carbon,
photographic or other reproduction of this Agreement or a financing statement is
sufficient as a financing statement and may be filed instead of the original.
 
7.           Insurance.  Risk of loss of, damage to or destruction of the
Equipment, Inventory and Fixtures is on the Borrowers.  The Borrowers shall
insure the Equipment, Inventory and Fixtures against such risks and casualties
and in such amounts and with such insurance companies in accordance with its
past practices.  At the request of the Secured Party, copies of all such
policies, or certificates evidencing the same, shall be deposited with the
Secured Party.  If the Borrowers fail to effect and keep in full force and
effect such insurance or fail to pay the premiums when due, the Secured Party
may (but shall not be obligated to) do so for the account of the Borrowers and
add the cost thereof to the Debt.  After the occurrence of an Event of Default,
the Borrowers shall assign and set over to the Secured Party all monies which
may become payable on account of such insurance and shall direct the insurers to
pay the Secured Party any amount so due.  In such event, the Secured Party is
irrevocably appointed attorney-in-fact of the Borrowers to endorse any draft or
check which may be payable to the Borrowers in order to collect the proceeds of
such insurance.  The Borrowers shall apply such proceeds either (i) to the
repair of damaged Equipment, Inventory or Fixtures, or (ii) to the replacement
of destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or
Fixtures of the same or similar type and function and of at least equivalent
value, provided such replacement Equipment, Fixtures or Inventory is made
subject to the security interest created by this Agreement and constitutes
a  security interest in the Equipment, Inventory and Fixtures subject only to
security interests permitted under this Agreement, and is perfected by the
filing of financing statements in the appropriate public offices and the taking
of such other action as may be necessary or desirable in order to perfect and
continue perfected such security interest.  In the event that there is any
balance of insurance proceeds remaining in the possession of the Secured Party
after payment in full of the Debt, such balance shall be paid over to the
Borrowers or their order.
 

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8.             Maintenance and Repair.  The Borrowers shall maintain the
Equipment, Inventory and Fixtures, and every portion thereof, in good condition,
repair and working order, reasonable wear and tear alone excepted, and shall pay
and discharge all taxes, levies and other impositions assessed or levied thereon
as well as the cost of repairs to or maintenance of the same.  If the Borrowers
fail to do so, the Secured Party may (but shall not be obligated to) pay the
cost of such repairs or maintenance and such taxes, levies or impositions for
the account of the Borrowers and add the amount of such payments to the Debt.
 
9.             Preservation of Rights Against Third Parties; Preservation of
Collateral in Secured Party’s Possession.  Until such time as the Secured Party
exercises its right to effect direct collection of the Accounts and the Chattel
Paper and to effect the enforcement of the Borrowers’ contract rights, the
Borrowers assume full responsibility for taking any and all steps to preserve
rights in respect of the Accounts and the Chattel Paper and its contracts
against prior parties.  The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of such of the Collateral as may
come into its possession from time to time if the Secured Party takes such
action for that purpose as the Borrowers shall request in writing, provided that
such requested action shall not, in the judgment of the Secured Party, impair
the Secured Party’s security interest in the Collateral or its right in, or the
value of, the Collateral, and provided further that the Secured Party receives
such written request in sufficient time to permit the Secured Party to take the
requested action.
 
10.           Events of Default and Remedies.
 
(a)           If any one or more of the Events of Default shall occur or shall
exist, the Secured Party may then, or at any time thereafter, so long as such
default shall continue, foreclose the Secured Party’s lien or security interest
in the Collateral in any way permitted by law, or upon ten (10) days prior
written notice to the Borrowers, sell any or all Collateral at private sale at
any time or place in one or more sales, at such price or prices and upon such
terms, either for cash or on credit, as the Secured Party, in its sole
discretion, may elect, or sell any or all Collateral at public auction, either
for cash or on credit, as the Secured Party, in its sole discretion, may elect,
and at any such sale, the Secured Party may bid for and become the Secured Party
of any or all such Collateral.  Pending any such action the Secured Party may
liquidate the Collateral.
 

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(b)           If any one or more of the Events of Default shall occur or shall
exist, the Secured Party may then, or at any time thereafter, so long as such
default shall continue, grant extensions to, or adjust claims of, or make
compromises or settlements with, debtors, guarantors or any other parties with
respect to Collateral or any securities, guarantees or insurance applying
thereon, without notice to or the consent of the Borrowers, without affecting
the Borrowers’ liability under this Agreement or the Note.  The Borrowers waive
notice of acceptance, of nonpayment, protest or notice of protest of any
Accounts or Chattel Paper or any of their contract rights and any other notices
to which the Borrowers may be entitled.
 
(c)           If any one or more of the Events of Default shall occur or shall
exist and be continuing, then in any such event, the Secured Party shall have
such additional rights and remedies in respect of the Collateral or any portion
thereof as are provided by the Code and such other rights and remedies in
respect thereof which it may have at law or in equity or under this Agreement,
including without limitation the right to enter any premises where Equipment,
Inventory and/or Fixtures are located and take possession and control thereof
without demand or notice and without prior judicial hearing or legal
proceedings, which the Borrowers expressly waive.
 
(d)           The Secured Party shall apply the Proceeds of any sale or
liquidation of the Collateral, and, subject to Section 7, any Proceeds received
by the Secured Party from insurance, first to the payment of the reasonable
costs and expenses incurred by the Secured Party in connection with such sale or
collection, including without limitation reasonable attorneys’ fees and legal
expenses, second to the payment of the Debt, whether on account of principal or
interest or otherwise as the Secured Party in its sole discretion may elect, and
then to pay the balance, if any, to the Borrowers or as otherwise required by
law.  If such Proceeds are insufficient to pay the amounts required by law, the
Borrowers shall be liable for any deficiency.
 
(e)           Upon the occurrence of any Event of Default and delivery of a
written request, the Borrowers shall promptly upon demand by the Secured Party
assemble the Equipment, Inventory and Fixtures and make them available to the
Secured Party at a place or places to be designated by the Secured Party.  The
rights of the Secured Party under this paragraph to have the Equipment,
Inventory and Fixtures assembled and made available to it is of the essence of
this Agreement and the Secured Party may, at their election, enforce such right
by an action in equity for injunctive relief or specific performance.
 
(f)           If any one or more of the Events of Default shall occur or shall
exist and be continuing, then in any event, the Secured Party have the right to
use and operate under all trade names under which the Borrowers do business.
 
11.         Defeasance.  Notwithstanding anything to the contrary contained in
this Agreement upon payment and performance in full of the Debt owed to the
Secured Party, this Agreement shall terminate and be of no further force and
effect as to the Secured Party, and the Secured Party shall thereupon terminate
its security interest in the Collateral.  Upon such termination, the Secured
Party hereby authorizes the Borrowers to file any UCC termination statements
necessary to reflect such termination and Secured Party will execute and deliver
to the Borrowers any additional documents or instruments as Borrowers shall
reasonably request to evidence such termination.  Until such time, however, this
Agreement shall be binding upon and inure to the benefit of the parties, their
successors and assigns, provided that, without the prior written consent of the
Secured Party, the Borrowers may not assign this Agreement or any of its rights
under this Agreement or delegate any of their duties or obligations under this
Agreement and any such attempted assignment or delegation shall be null and
void.  This Agreement is not intended and shall not be construed to obligate the
Secured Party to take any action whatsoever with respect to the Collateral or to
incur expenses or perform or discharge any obligation, duty or disability of the
Borrowers.
 

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12.           Miscellaneous.
 
(a)           The provisions of this Agreement are intended to be severable.  If
any provision of this Agreement shall for any reason be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or any other provision of this
Agreement in any jurisdiction.
 
(b)           No failure or delay on the part of the Secured Party in exercising
any right, remedy, power or privilege under this Agreement and the Note shall
operate as a waiver thereof or of any other right, remedy, power or privilege of
the Secured Party under this Agreement, the Note or any of the other Loan
Documents; nor shall any single or partial exercise of any such right, remedy,
power or privilege preclude any other right, remedy, power or privilege or
further exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges of the Secured Party
under this Agreement, the Note and the other Loan Documents are cumulative and
not exclusive of any rights or remedies which it may otherwise have.
 
(c)           All notices, statements, requests and demands given to or made
upon either party in accordance with the provisions of this Agreement shall be
deemed to have been given or made when given in accordance with Section 7.5 of
the Purchase Agreement.
 
(d)           The section headings contained in this Agreement are for reference
purposes only and shall not control or affect its construction or interpretation
in any respect.
 
(e)           Unless the context otherwise requires, all terms used in this
Agreement which are defined by the Code shall have the meanings stated in the
Code.
 
(f)           The Code shall govern the settlement, perfection and the effect of
attachment and perfection of the Secured Party’s security interest in the
Collateral, and the rights, duties and obligations of the Secured Party and the
Borrowers with respect to the Collateral.  This Agreement shall be deemed to be
a contract under the laws of the Commonwealth of Pennsylvania and the execution
and delivery of this Agreement and, to the extent not inconsistent with the
preceding sentence, the terms and provisions of this Agreement shall be governed
by and construed in accordance with the laws of that Commonwealth.
 

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(g)           No amendment or waiver of any provision of this Agreement, and no
consent to any departure by the Borrowers herefrom, shall in any event be
effective unless the same shall be in writing and signed by the Secured Party,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given..
 
(h)           This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that the Borrowers may not assign the Agreement or any rights or duties
hereunder without the Secured Party’s prior written consent and any prohibited
assignment shall be absolutely void.  The Secured Party may assign this
Agreement and its rights and duties hereunder to another Secured Party or to a
transferee of the Note, and no consent or approval by the Borrowers is required
in connection with any such assignment.
 
(i)           This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.  Delivery of an
executed counterpart of this Agreement by telefacsimile or email shall be
equally as effective as delivery of a manually executed counterpart of this
Agreement.  Any party delivering an executed counterpart of this Agreement by
telefacsimile or email also shall deliver a manually executed counterpart of
this Agreement but the failure to deliver a manually executed counterpart shall
not affect the validity, enforceability, and binding effect of this Agreement.
 
(j)           The Borrowers shall pay to the Secured Party reasonable costs and
expenses (including reasonable attorneys’ fees and disbursements) paid or
incurred to enforce the security interest created hereunder, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of this
Agreement, or to defend any claims made or threatened against the Secured Party
arising out of the transactions contemplated hereby (including preparations for
the consultations concerning any such matters).  The foregoing shall not be
construed to limit any other provisions of this Agreement or the Loan Documents
regarding costs and expenses to be paid by the Borrowers.
 
[Signature Pages Follow]
 

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IN WITNESS WHEREOF, and intending to be legally bound, the parties have executed
and delivered this Security Agreement as of the day and year set forth at the
beginning of this Security Agreement.

 
BORROWERS:
     
INSPRO TECHNOLOGIES CORPORATION
             
/s/ Anthony R. Verdi
 
Name:   Anthony R. Verdi
 
Title:     Chief Financial Officer
             
INSPRO TECHNOLOGIES, LLC
             
/s/ Anthony R. Verdi
 
Name:     Anthony R. Verdi
 
Title:       Chief Financial Officer

 
[Signature page to Security Agreement]
 

 

 

 

 

 
SECURED PARTY:
             
THE CO-INVESTMENT FUND II, L.P.
         
By:  Co-Invest Management II, L.P., its General Partner
         
By:  Co-Invest II Capital Partners, Inc., its General Partner
             
By: /s/ Brian Adamsky
 
Name:      Brian Adamsky
 
Title:        CFO & Treasurer

 
[Signature page to Security Agreement]