Item 1.01. Entry into a Material Definitive Agreement.

Preferred Stock Purchase Agreement

On May 22, 2020, Benefitfocus, Inc. (the "Company") entered into a preferred stock purchase agreement (the "Purchase Agreement") with BuildGroup LLC, a Delaware limited liability company (the "Buyer"). A. Lanham Napier, a current member of the Company's Board of Directors (the "Board"), is the Chief Executive Officer of the Buyer. Pursuant to the Purchase Agreement, the Company has agreed to sell to Buyer an aggregate of 1,777,778 shares of a newly created series of the Company's preferred stock, par value $0.001 per share, designated as "Series A Convertible Preferred Stock" (the "Series A Preferred Stock") at a purchase price of $45 per share, resulting in total gross proceeds to the Company of approximately $80.0 million.

The consummation of the transactions contemplated by the Purchase Agreement is subject to customary closing conditions, including the accuracy of representations and warranties and the performance of all obligations contained in the Purchase Agreement (in each case subject to customary materiality qualifiers), as well as the execution of a registration rights agreement and a co-sale and voting agreement. The consummation of the transactions contemplated by the Purchase Agreement is expected within two weeks.

The Series A Preferred Stock will rank senior to the Company's common stock, par value $0.001 per share (the "Common Stock"), with respect to dividends and distributions on liquidation, winding-up and dissolution. Each share of the Series A Preferred Stock will have an initial stated value of $45 per share. Holders of shares of the Series A Preferred Stock will be entitled a dividend equal to 8.00% per annum (the "Regular Dividends"), which will be paid quarterly, beginning on June 30, 2020 (each, a "Regular Dividend Payment Date"). The Regular Dividends are payable in cash or in kind, at the Company's option. In the event a Regular Dividend is paid in kind, the stated value of each share of the Series A Preferred Stock will be increased by an amount equal to the accrued Regular Dividend not paid in cash. Holders of the Series A Preferred Stock are also entitled to participate in and receive any dividends declared or paid on the Common Stock on an as-converted basis, and no dividends may be paid to holders of the Common Stock unless full participating dividends are concurrently paid to the holders of the Series A Preferred Stock.

Each holder of the Series A Preferred Stock will have the right, at its option, to convert its shares of the Series A Preferred Stock, in whole or in part, into fully paid and non-assessable shares of the Common Stock, at any time and from time to time. The number of shares of the Common Stock into which a share of the Series A Preferred Stock will convert at any time is equal to the quotient obtained by dividing (I) the sum of (x) the stated value then in effect with respect to such share, and (y) an amount equal to accumulated and unpaid Regular Dividends on such share of the Series A Preferred Stock (but only to the extent such accumulated and unpaid Regular Dividends are not included in the stated value referred to in the preceding clause (x)); by (II) $15.00, subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events (the "Conversion Price"). At closing, before payment of any dividends in kind, the 1,777,778 shares of the Series A Preferred Stock would be convertible into 5,333,334 shares of Common Stock.

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Following the fourth anniversary of the issuance of the Series A Preferred Stock, subject to certain conditions described below, the Company may, at its option, redeem all (or any number of shares or fractions thereof that is less than all) of the outstanding shares of the Series A Preferred Stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding the date the Company notifies the holders of the Series A Preferred Stock of the election to redeem, the last reported sale price of the Common Stock has been at least 150% of the Conversion Price then in effect. The Company will not exercise its right to redeem the outstanding shares of the Series A Preferred Stock unless the Company has sufficient funds legally available, and is permitted under the terms of its indebtedness for borrowed money, to fully pay the redemption price in cash in respect of all shares of the Series A Preferred Stock called for redemption. Upon redemption by the Company, the Company will pay the holder of the Series A Preferred Stock an amount for each share in cash equal to the sum of (1) 105% of the initial stated value of such share on the close of business on the redemption date plus (2) the difference between the stated value then in effect with respect to such share and the initial stated value, if any, plus (3) accumulated and unpaid Regular Dividends on such share from the immediately preceding Regular Dividend Payment Date to, but excluding, such date of redemption (to the extent such accumulated and unpaid Regular Dividends are not included in the stated value set forth in subclause (2) above).

If the Company undergoes a Change of Control (as defined in the Purchase Agreement), the Company must redeem, contingent upon and contemporaneously with the consummation of the Change of Control, but subject to the right of each holder to convert its shares of the Series A Preferred Stock, all of the then-outstanding shares of the Series A Preferred Stock for cash consideration equal to the greater of (x) the sum of (1) 105% of the initial stated value of such share at the close of business on the Change of Control redemption date plus (2) the difference between the stated value then in effect with respect to such share and the initial stated value, if any, plus (3) accumulated and unpaid Regular Dividends on such share from the immediately preceding Regular Dividend Payment Date to, but excluding, such Change of Control redemption date (to the extent such accumulated and unpaid Regular Dividends are not included in the stated value set forth in subclause (2) above) and (y) the amount such holder of shares of the Series A Preferred Stock would have received in respect of the number of shares of the Common Stock that would be issuable upon conversion of such share of the Series A Preferred Stock.

Unless and until approval of the Company's stockholders is obtained as contemplated by the NASDAQ listing rules, no holder of the Series A Preferred Stock may convert shares of the Series A Preferred Stock into shares of the Common Stock if and to the extent that such conversion would result in the holder beneficially owning in excess of 19.9% of the then-outstanding shares of the Common Stock (such limitation, the "Ownership Limitation").

As long as not less than 60% of the shares of the Series A Preferred Stock originally issued remain outstanding, the holders of a majority of the then-outstanding shares of the Series A Preferred Stock, voting together as a single class, will have the right at any election of directors to elect (A) two directors if the Board consists of nine or fewer directors; or (B) three . . .

Item 3.02. Unregistered Sales of Equity Securities.

As described in Item 1.01 above, pursuant to the Purchase Agreement, the Company has agreed to sell to the Buyer 1,777,778 shares of the Series A Preferred Stock. The offer and sale of the shares of the Series A Preferred Stock pursuant to the Purchase Agreement are being made in reliance on an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(a)(2) thereof. The information in Item 1.01 above is incorporated by reference into this Item 3.02.

Item 8.01 Other Events.

On May 26, 2020, the Company issued a press release announcing the execution of the Purchase Agreement. A copy of the press release is included herewith as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.





(d) Exhibits




Exhibit No.                                  Description

10.1                Preferred Stock Purchase Agreement, dated May 22, 2020, by and
                  between Benefitfocus, Inc. and BuildGroup LLC.

10.2                Consent to Senior Secured Revolving Credit Facility, dated as
                  of May  22, 2020, by and among Benefitfocus, Inc.,
                  Benefitfocus.com, Inc., BenefitStore, Inc., several lenders,
                  Silicon Valley Bank, as administrative agent, issuing lender and
                  swingline lender, and the lenders from time to time party
                  thereto.

99.1                Press release dated May 26, 2020.

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