Exhibit 10.3
THE KEYSTONE EQUITIES GROUP(TM)
TURNING VISION INTO REALITY
CONFIDENTIAL
October 19, 2005
Xx. Xxxxx Xxxxxxx
Chief Executive Officer
Health Benefits Direct Corporation
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx X-000
Xxxx Xxxxx, XX 00000
Dear Xxxxx:
In response to our recent discussions, I am pleased to propose an
Agreement ("Agreement") between The Keystone Equities Group, LP, a Pennsylvania
limited partnership ("TKEG") and Health Benefits Direct Corporation, a Delaware
corporation (together with its affiliates and subsidiaries, hereby referred to
as the "Company"), as follows:
1. SERVICES TO BE RENDERED. During the Term, the Company hereby
retains TKEG to serve as its exclusive placement agent for a best-efforts
private placement (the "Placement") of up to 100 Units at a proposed offering
price of $60,000 per Unit, for maximum gross proceeds of up to $6,000,000. Each
Unit is currently expected to consist of (1) 40,000 shares of common stock of
the Company, $0.001 par value per share ("Common Stock"), and (ii) a three-year
warrant to purchase 10,000 shares of Common Stock at a proposed exercise price
$3.00 per share. TKEG agrees that it will use its best efforts to find
purchasers of the Units (the "Investors"), and any such Investors shall qualify
themselves as "accredited investors" as defined in Rule 501(a) under the
Securities Act of 1933 (the "Act"), but TKEG disclaims any agreement, expressed
or implied, in this Agreement or otherwise, that it will be successful in
placing the Units. If TKEG agrees to act as the placement agent for the
Placement, the Company agrees to not offer the Units to prospective investors,
or accept any subscriptions from prospective investors to invest in the Units,
except through TKEG, without the prior written consent of TKEG. It is understood
that the decision by TKEG to act as placement agent will depend on satisfactory
results of XXXX's due diligence investigation and the final approval by XXXX's
internal investment banking commitment committee. Notwithstanding anything in
this Agreement to the contrary, the Company shall have the sole and absolute
discretion to accept or not accept, in whole or in part, the terms of any
subscription for Units.
2. INFORMATION. In connection with TKEG's engagement, the Company
will furnish, or cause to be furnished, to TKEG all data, material and other
information requested by TKEG for the purposes of performing the services
contemplated hereunder, subject to a non-disclosure agreement signed by XXXX and
the Company. The Company represents and warrants to TKEG that any such
information, any reports required by it to be filed by it with any state or
federal authority (collectively "Reports") and any other information supplied to
TKEG or Investors by or on behalf of the Company in connection with the
Placement will not contain any materially untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading. The Company agrees to use its best efforts to cooperate with TKEG in
connection with the provision of services by TKEG hereunder, including
attendance or participation via phone by appropriate officers or principals of
the Company (with reasonable notice and availability) for meetings coordinated
by XXXX.
3. OFFERING MEMORANDUM. The Company shall prepare disclosure
documents to be provided to potential purchasers of the Units as offering
materials (the "Offering Materials"). The Company represents and warrants to the
best of its knowledge that the Offering Materials will not, as of the Closing
Date of the Placement, contain any untrue statement of material fact or omit to
state any material fact required to be stated therein, or necessary to make the
statements contained therein, not misleading. TKEG recognizes and acknowledges
The Keystone Equities Group, LP o Member NASD & SIPC o MSRB Registrant
0000 Xxxxx Xxxx x Xxxx, XX 00000-1155 o Tel: 000-000-0000 o Fax: 000-000-0000
o Int'l Tel: 0-000-000-0000
xxx.xxxxxxxxxxxxxxxx.xxx
TKEG - Health Benefits Direct Engagement Letter
October 19, 2005
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CONFIDENTIAL
that it is not authorized to make any representations and statements to any
potential purchaser other than and to the extent that such representations and
statements are contained in the Offering Materials.
4. TERM AND TERMINATION. The engagement of TKEG shall begin as of
the date hereof and continue until the earlier of (i) the date on which the
Company has accepted subscriptions for all Units or (ii) December 31, 2005 (the
"Term), unless the Term is extended by mutual agreement of TKEG and the Company.
During the Term, either party hereto may terminate the Agreement by giving 30
days prior written notice to the other party ("Termination Notice'). Upon
expiration or termination of this Agreement, TKEG shall have no further
obligations to the Company hereunder. If any potential Investor solicited by
TKEG and first introduced to the Company by TKEG during the Term makes an
Investment in the Company within twelve (12) months of termination of the Term,
TKEG shall be entitled to fees and warrants as outlined in paragraph 5 herein.
Any fees due or claimed by any other placement agents will be paid by the
Company. Sections 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of this
Agreement shall survive termination and remain operative and in full force and
effect.
5. PLACEMENT AGENT FEES. In consideration for serving as the
Placement Agent for the Placement, the Company agrees to (i) pay TKEG on the
Closing Date of the Placement, and on the date of any subsequent closing of such
Placement, a cash placement fee ("Placement Agent Cash Fee) of eight (8%)
percent of the gross proceeds of the sale of the Units subscribed for in the
Placement, and (ii) issue to TKEG (or its designees) warrants (the "Placement
Agent Warrants") to purchase a dollar value of shares of Common Stock of the
Company equal to ten (10%) percent of the total gross proceeds of the Placement.
The Placement Agent Warrants shall have a term of five (5) years from the
Closing Date of the Placement, and an exercise price equal to the price per
share of Common Stock in the Units purchased by Investors in the Placement. The
Company will also reimburse TKEG, upon request, for documented expenses
("Out-of-Pocket Expenses") reasonably and directly incurred in performing the
services of Placement Agent for the Placement, including reasonable fees and
disbursements of TKEG's counsel, which are, in the aggregate, not expected to
exceed $25,000. This Out-of-Pocket Expenses estimate explicitly assumes that the
Company will retain legal counsel to draft the Offering Materials for the
Placement.
6. OBLIGATIONS LIMITED. TKEG shall be under no obligation hereunder
to make an independent appraisal of assets or investigation or inquiry as to any
information regarding, or any representations of, Company and shall have no
liability hereunder in regard thereto.
7. INDEMNIFICATION. The Company agrees to indemnify TKEG and its
representatives, agents, partners, affiliates, officers and directors in
accordance with the indemnification provisions set forth in Appendix A, attached
hereto and made part hereof.
8. NO LIABILITY. The Company agrees that neither TKEG nor any of its
partners, affiliates, directors, agents, employees or controlling persons shall
have any liability to the Company or any, person asserting claims on behalf of
or in right of the Company in connection with or as a result of either TKEG's
engagement under this Agreement or any matter referred to in this Agreement,
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company are determined by a court of competent jurisdiction to
have resulted solely from the gross negligence or willful misconduct of TKEG in
performing the services that are the subject of this Agreement.
9. INDEPENDENT CONTRACTOR. The parties hereto acknowledge and agree
that the engagement of TKEG hereunder is not intended to confer rights upon any
person (including shareholders, employees or creditors of TKEG) not a party
hereto as against Company or its affiliates, or their respective directors,
officers, employees or agents, successors or assigns. TKEG shall act as an
independent contractor under this Agreement and does not create any partnership,
joint venture or other similar relationship between the Company and TKEG and any
duties arising out of its engagement shall be owed solely to Company. TKEG shall
TKEG - Health Benefits Direct Engagement Letter
October 19, 2005
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CONFIDENTIAL
have no authority to accept any order or to bind or obligate the Company in any
way or to renew any debt or obligation for or on account of the Company without
the Company's prior written consent. As an independent contractor, TKEG will be
solely responsible for its income and all other applicable taxes. TKEG shall
have no restrictions to on its ability to provide services to companies other
than the Company, except as stated herein.
10. SEVERABILITY. If any provision of this Agreement for any reason
shall be held to be illegal, invalid or unenforceable, such illegality shall not
affect any other provision of this Agreement and this Agreement shall be amended
so as to enforce the illegal, invalid or unenforceable provision to the maximum
extent permitted by applicable law, and the parties shall cooperate in good
faith to further modify this Agreement so as to preserve to the maximum extent
possible the intended benefits to be received by the parties hereto.
11. PUBLICITY. With the Company's prior approval, which shall not be
unreasonably withheld or delayed, TKEG may, at its own expense, place customary
tombstone announcements or advertisements in financial newspapers and journals
describing its services hereunder upon completion of the Placement.
12. ASSIGNMENT; BENEFIT. Neither party hereto, without the explicit
prior written consent of the other may assign this Agreement or, in whole or in
part, the rights and obligations hereunder. The provisions of the Agreement will
be binding upon and inure to the benefit of the parties hereto and then
respective heirs, legal representatives, permitted successors and assigns.
13. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior or contemporaneous communications,
understandings, arrangements, discussions and agreements between the parties
hereto concerning the subject matter herein. No change, amendment or supplement
to, or waiver of this Agreement will be valid or of any effect, except by the
written agreement of the parties hereto. The waiver of any particular condition,
precedent, or provision provided by this Agreement will not constitute the
waiver of any other.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to its conflict of laws provisions. Any action or proceeding brought by either
party against the other party arising out of or related to this Agreement shall
be brought exclusively in the courts of the Commonwealth of Pennsylvania located
in Xxxxxxxxxx County, Pennsylvania or in the United States District Court for
the Eastern District of Pennsylvania, which courts shall have exclusive
jurisdiction over the adjudication of such matters, and the Company and TKEG
consent to the jurisdiction of such courts and personal service with respect
thereto. The Company hereby consents to personal jurisdiction, service and venue
in any court in which any claim arising out of or in any way relating to this
Agreement is brought by any third party against TKEG or any indemnified party;
except as to any third party claim as to which the court before which such third
party claim is pending has determined by final non-appealable order that TKEG or
an indemnified party is not subject to jurisdiction. The Company agrees that a
final judgment in any such proceeding or counterclaim brought in any such court
shall be conclusive and binding upon the Company and may be enforced in any
other courts to the jurisdiction of which the Company is or may be subject by
suit upon such judgment. Each of TKEG and the Company waives all right to trial
by jury in any proceeding or counterclaim (whether based upon contract, tort or
otherwise) in any way arising out of or relating to this agreement.
15. REPRESENTATIONS.
15.1 Each party hereto represents, warrants and covenants to the
other party that:
(a) it has the power and authority to enter into this
Agreement and to perform its respective obligations hereunder.
TKEG - Health Benefits Direct Engagement Letter
October 19, 2005
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CONFIDENTIAL
(b) this Agreement has been duly authorized, executed and
delivered and constitutes the legal, valid and binding obligation of such party,
enforceable against it in accordance with its terms.
(c) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
violation of, or be in conflict with, or constitute a default under, any
agreement or instrument to which such party is a party or by which its
properties are bound, or any judgment, decree, order, statute, rule or
regulation applicable to such party.
15.2 TKEG represents, warrants and covenants to the Company
that:
(a) it is in compliance and will comply with all applicable
laws, rules and regulations regarding its provision of services hereunder.
(b) it has and will maintain all licenses and memberships
required to perform its obligations and services hereunder in accordance with
applicable law.
(c) it has not and will not take any action, directly or
indirectly that would cause the Placement to violate the provisions of the Act,
the Securities Exchange Act of 1934 (the "1934 Act"), the respective rules and
regulations promulgated thereunder (the "Rules and Regulations") or applicable
"blue sky" laws of any state or jurisdiction and it will, insofar as is under
its control, conduct the Placement in a manner prescribed by Rule 506 of
Regulation D.
(d) it is a member in good standing of the National
Association of Securities Dealers, Inc., and is a broker-dealer registered as
such under the 1934 Act and under the securities laws of the states in which the
Units will be offered or sold by it unless an exemption for such state
registration is available. It is in compliance with the rules and regulations
applicable to it generally and applicable to its participation in the Placement.
(e) it has not taken and will not take any action, directly
or indirectly, that may cause the Placement to fail to be entitled to exemption
from registration under United States federal securities laws, or applicable
state securities or "blue sky" laws, or the applicable laws of the foreign
countries in which the securities may be offered or sold.
(f) it will comply with all federal and state laws in
connection with the performance of its obligations under this Agreement.
The Company shall be responsible for any costs and expenses
associated with filings, applications or registrations with any governmental or
regulatory body, including, without limitation, those associated with any sales
pursuant to Regulation D under the Act, "blue sky" and the laws of the foreign
countries in which the securities will be offered or sold that are required to
be made by the Company.
16. COUNTERPARTS. This Agreement may be executed in or more
counterparts, each of which may be deemed an original and all of which together
shall constitute one and the same instrument.
TKEG - Health Benefits Direct Engagement Letter
October 19, 2005
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CONFIDENTIAL
17. NOTICES: Any notice, consent or other communication given
pursuant to this Agreement shall be in writing and shall be effective when (i)
delivered personally, (ii) sent by telex or telecopies (with receipt confirmed),
provided that a copy is mailed registered mail, return receipt requested, or
(iii) when received by the addressee, if sent by Express Mail, Federal Express
or other express delivery service (receipt requested), in each case to the
appropriate addressee set forth below:
If to TKEG: Xx. Xxxxxxx X. Xxxxxx
The Keystone Equities Group
0000 Xxxxx Xxxx, Xxx 0000
Xxxx, XX 00000-0000
If to the Company: Xx. Xxxxx Xxxxxxx
Health Benefits Direct Corporation
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx X-000
Xxxx Xxxxx, XX 00000
If the foregoing correctly sets forth your understanding, please so
indicate by signing and returning to us the enclosed copy of this letter.
Sincerely,
THE KEYSTONE EQUITIES GROUP, LP
By /S/ Xxxxxxx X. Xxxxxx By: /S/ Xxxxxxx X. Xxxxx
--------------------- --------------------
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxx
Chairman President
Intending to be legally bound the foregoing
is Confirmed and Agreed to by:
HEALTH BENEFITS DIRECT CORPORATION
By /S/ Xxxxx Xxxxxxx Date: 11/17/05
-----------------
Xxxxx Xxxxxxx
CEO
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October 19, 2005
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CONFIDENTIAL
APPENDIX A
INDEMNIFICATION
The Company agrees to indemnify and hold harmless TKEG and its affiliates (as
defined in Rule 405 under the Securities Act of 1933, as amended) and their
respective directors, officers, employees, agents and controlling persons (TKEG
and each such person being an "Indemnified Party') from and against all losses,
claims, damages and liabilities (or actions, including shareholder actions, in
respect thereof), joint or several, to which such Indemnified Party may become
subject under any applicable federal or state law, or otherwise, which are
related to or result from the performance by TKEG of the services contemplated
by, or the engagement of TKEG pursuant to, this Agreement and will promptly
reimburse any Indemnified Party for all reasonable expenses (including
reasonable counsel fees and expenses) as they are incurred in connection with
the investigation of, preparation for or defense arising from any threatened or
pending claim, whether of not such Indemnified Party is a party and whether or
not such claim, action or proceeding is initiated or brought by the Company. The
Company will not be liable to any Indemnified Party under the foregoing
indemnification and reimbursement provisions, (i) for any settlement by an
Indemnified Party effected without its prior written consent (not to be
unreasonably withheld); or (ii) to the extent that any loss, claim, damage or
liability is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted primarily from TKEG's willful misconduct or gross
negligence. The Company also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company or it security holders or creditors related to or arising out of the
engagement of TKEG pursuant to, or the performance by TKEG of the services
contemplated by, this Agreement except to the extent that any loss, claim,
damage or liability is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted primarily from TKEG's willful misconduct
or gross negligence.
Promptly after receipt by an Indemnified Party of notice of any
intention or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will, if
a claim in respect thereof is to be made against the Company pursuant hereto,
promptly notify the company in writing of the same. In case any such action is
brought against any Indemnified Party and such Indemnified Party notifies the
Company of the commencement thereof, the Company may elect to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and an
Indemnified Party may employ counsel to participate in the defense of any such
action provided, that the employment of such counsel shall be at the Indemnified
Party's own expense, unless (i) the employment of such counsel has been
authorized in writing by the Company, (ii) the Indemnified Party has reasonably
concluded (based upon advice of counsel to the Indemnified Party) that there may
be legal defenses available to it or other Indemnified Parties that are
different from or in addition to those available to the Company, or that a
conflict or potential conflict exists (based upon advice of counsel to the
Indemnified Party) between the Indemnified Party and the Company that makes it
impossible or inadvisable for counsel to the Indemnifying Party to conduct the
defense of both The Company and the Indemnified Party (in which case the Company
will not have the right to direct the defense of such action on behalf of the
Indemnified Party), or (iii) the Company has not in fact employed counsel
reasonably satisfactory to the Indemnified Party to assume the defense of such
action within a reasonable time after receiving notice of the action, suit or
proceeding, in each of which cases the reasonable fees, disbursements and other
charges of such counsel will be at the expense of the Company; provided,
further, that in no event shall the Company be required to pay fess and expenses
for more than one firm of attorneys representing Indemnified Parties unless the
defense of one Indemnified Party is unique or separate from that of another
Indemnified party subject to the same claim or action. Any failure or delay by
an Indemnified Party to give the notice referred to in this paragraph shall not
affect such Indemnified Party's right to be indemnified hereunder, except to the
extent that such failure or delay causes actual harm to the Company, or
prejudices to its ability to defend such action, suit or proceeding on behalf of
such Indemnified Party.
If the indemnification provided for in this Agreement is for any
reason held unenforceable by an Indemnified Party, the Company agrees to
contribute to the losses, claims, damages and liabilities for which such
TKEG - Health Benefits Direct Engagement Letter
October 19, 2005
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CONFIDENTIAL
indemnification is held unenforceable (i) in such proportion as is appropriate
to reflect the relative benefits to the Company, on the one hand, and TKEG on
the other hand, of the Offering as contemplated whether or not the Offering is
consummated or, (ii) if (but only if) the allocation provided for in clause (i)
is for any reason unenforceable, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but any other relevant
equitable considerations. The Company agrees that for the purposes of this
paragraph the relative benefits to the Company and TKEG of the Offering as
contemplated shall be deemed to be in the same proportion that the total value
received or contemplated to be received by the Company or its shareholders, as
the case may be, as a result of or in connection with the Offering bear to the
fees paid or to be paid to TKEG under this Agreement. Notwithstanding the
foregoing, the Company expressly aggress that TKEG shall not be required to
contribute any amount in excess of the amount by which fees paid TKEG hereunder
(excluding reimbursable expenses), exceeds the amount of any damages which TKGE
has otherwise been required to pay.
The Company aggress that without TKEG's prior written consent, which
shall not be unreasonably withheld, it will not settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding in respect of which indemnification could be sought under the
indemnification provisions of this Agreement (in which TKEG or any other
Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out
of such claim, action or proceeding.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against the
Company in which such Indemnified Party is not named as a defendant, the Company
agrees to promptly reimburse TKEG on a monthly basis for all expenses incurred
by it in connection with such Indemnified Party's appearing and preparing to
appear as such a witness, including, without limitation, the reasonable fees and
disbursements of its legal counsel.
If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement the Company agrees that any judgment of arbitrate award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the judgment or arbitrate award
expressly states that it, or any portion thereof, is based solely on a claim as
to which indemnification is not available.
