SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
HEALTH BENEFITS DIRECT CORPORATION
(Name of Issuer)
Common Stock, $.001 par value per share
(Title of Class of Securities)
42220V107
(CUSIP Number)
Alan Krigstein
Chief Financial Officer
Independence Blue Cross
1901 Market Street
Philadelphia, PA 19103
(215) 241-2420
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 30, 2010
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f), or 240.13d-1(g), check the following box: o.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act.
CUSIP No. 42220V107
(1) Names of reporting persons: Independence Blue Cross
(2) Check the appropriate box if a member of a group (see instructions)
(a) o
(b) o
(3) SEC use only
(4) Source of funds (see instructions) WC
(5) Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e) o
(6) Citizenship or place of organization Pennsylvania
Number of shares beneficially owned by each reporting person with:
(7) Sole voting power 44,000,010*
(8) Shared voting power
(9) Sole dispositive power 44,000,010*
(10) Shared dispositive power
(11) Aggregate amount beneficially owned by each reporting person 44,000,010*
(12) Check if the aggregate amount in Row (11) excludes certain shares (see instructions) o
(13) Percent of class represented by amount in Row (11) 23.6%**
(14) Type of reporting person (see instructions) CO
* | The reporting person acquired 1,466,667 Units, each unit consisting of (i) 1 share of Series B Stock (which are convertible into 20 shares of common stock, subject to certain adjustments) and (ii) a Warrant to purchase 10 shares of common stock of the Issuer. |
** | The total issued and outstanding shares used to determine the percent of class represented by the amount in Row (11) is 186,342,239 shares and includes the shares of Issuer’s common stock outstanding as of August 16, 2010 as set forth on the cover page of the Issuer’s Quarterly Report on Form 10-Q, together with shares issuable on conversion or exercise of certain securities referenced therein (as adjusted), plus (i) the shares issuable upon conversion of the Series B Stock and (ii) the shares issuable upon exercise of the Warrants in each case issued on September 30, 2010. |
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Item 1. Security and Issuer
This Schedule 13D (the "Schedule") is filed by Independence Blue Cross in connection with its acquisition in a private placement of (a) 1,466,667 shares of Series B Convertible Preferred Stock, par value $0.001 per share (the "Series B Stock") of Health Benefits Direct Corporation, a Delaware corporation (the "Issuer") (each share of Series B Stock is convertible into 20 shares of common stock, par value $0.001 per share of the Issuer (the “Common Stock”)); and (b) warrants (the “Warrants”) to purchase an additional 14,666,670 shares of Common Stock of the Issuer. The address of the principal executive offices of the Issuer is 150 N. Radnor-Chester Road, Suite B-101, Radnor, Pennsylvania 19087.
Item 2. Identity and Background
Independence Blue Cross (“IBC” or the “Reporting Person”) is a Pennsylvania hospital plan corporation. The principal business of IBC, in conjunction with its affiliated companies, is providing health insurance and related products and services. IBC is headquartered at 1901 Market Street, Philadelphia, PA 19103.
During the last 5 years, IBC (i) has not been convicted in a criminal proceeding, and (ii) was not a party to a civil proceeding of a judicial or administrative body of competent jurisdiction the result of such proceeding being that IBC was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
IBC’s working capital was the source of funds for the purchase of the securities that are the subject of this filing.
Item 4. Purpose of Transaction
On September 30, 2010, in a private placement transaction pursuant to the terms of a Securities Purchase Agreement (the “Agreement”) by and among the Issuer and certain investors, IBC purchased from the Issuer 1,466,667 Units, each Unit consisting of one (1) share of Series B Stock and a warrant to purchase an additional ten (10) shares of Common Stock for an aggregate purchase price of $4,400,001, or $3.00 per Unit. IBC purchased the Units for investment purposes.
The Agreement provides that IBC will purchase an additional 200,000 Units for an aggregate purchase price of $600,000, subject to the Issuer’s receipt of requisite shareholder approval of an amendment to its Certificate of Incorporation increasing its authorized Common Stock. The Agreement further contemplates that such additional purchase will occur not later November 30, 2010.
In connection with the purchase of the Units, IBC entered into a letter agreement with the Issuer dated September 30, 2010 (the "Letter Agreement") pursuant to which the Issuer agreed to create one vacancy on its Board of Directors (the “Board”) by increasing the size of the Board from ten to eleven directors. The Issuer also agreed to take all necessary action to appoint a designee of IBC (the “IBC Board Designee”) as a member of the Board on or before November 30, 2010. In addition, the Issuer agreed to include the IBC Board Designee (or, in the event of his resignation or removal, such other individual as IBC may thereafter designate) on the Board’s slate of nominees for election as directors of the Issuer, and to use its best efforts to cause the election of such individuals for so long as IBC holds either (i) shares of Series B Stock in an amount equal to at least 50% of the shares of Series B Stock acquired under the Agreement or (ii) shares of the Issuer’s Common Stock in an amount equal to at least 50% shares of the Issuer’s Common Stock that IBC is entitled to receive upon conversion of the Series B Stock acquired under the Agreement.
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Item 5. Interest in the Securities of the Issuer
(a) | IBC owns 1,466,667 shares of Series B Stock, which is convertible into 29,333,340 shares of Common Stock of the Issuer, and warrants to purchase 14,666,670 shares of Common Stock of the Issuer. IBC may be deemed to beneficially own 44,000,010 shares of Common Stock (or approximately 23.6%) of the shares of Common Stock outstanding and deemed outstanding for purposes of this filing. |
(b) | See rows (7) through (10) of the cover page for the Reporting Person at the beginning of this Schedule 13D, which is incorporated herein by reference. |
(c) | The securities described in Item 5(a) above were purchased from the Issuer (in Units consisting of one share of Series B Stock and a warrant to purchase 10 shares of Common Stock) in a private placement transaction on September 30, 2010, for an aggregate purchase price of $4,400,001 ($3.00 per Unit). |
(d) | Not applicable. |
(e) | Not applicable. |
Item 6. Contracts, Arrangements, Understandings, or Relationships With Respect to Securities of the Issuer
Warrants
The terms of the Warrants permit IBC to purchase shares of Common Stock at any time prior to September 30, 2015 at an exercise price of $0.15 per share (subject to adjustment pursuant to certain anti-dilution provisions). The terms of the Warrants permit the Issuer to call the Warrants at any point after which the volume weighted average trading price per share of the Common Stock for a minimum of 20 consecutive trading days is equal to at least eight times the exercise price per share (initially $1.20, subject to adjustment) provided that certain other conditions have been satisfied.
Series B Stock
Each share of Series B Stock is convertible into 20 shares of Common Stock, subject to adjustment pursuant to certain anti-dilution provisions. The holders of Series B Stock are entitled to vote together with the holders of Common Stock as a single class, with each share of Series B Stock having 20 votes. The following actions require the vote or consent of the holders of two-thirds of the outstanding shares of the Series B Stock, voting as a class with any other series of preferred stock ranking equally with the Series B Stock and entitled to vote:
(i) | any amendment, alteration or repeal of any provision of the Issuer’s certificate of incorporation (including the certificate of designation creating the Series B Stock) or the Issuer’s by-laws that would alter or change the voting powers, preferences or special rights of the Series B Stock so as to affect them adversely; or |
(ii) | any amendment or alteration of the Issuer’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Issuer’s capital stock unless such capital stock ranks junior to the Series B Stock with respect to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding-up of the Issuer (including certain deemed liquidation events). |
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In addition, for so long as 1,000,000 shares of Series B Stock are outstanding, the vote or consent of the holders of at least two-thirds of the shares of Series B Stock at the time outstanding, voting as a class with all other series of preferred stock ranking equally with the Series B Stock and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, will be necessary for effecting or validating a "Fundamental Transaction", unless such transaction, when consummated, will provide the holders of Series B Stock with an amount per share equal to $3.00, plus any dividends declared but unpaid thereon. A "Fundamental Transaction" is (1) any merger or consolidation of the Issuer with or into another person, (2) any sale of all or substantially all of the Issuer's assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Issuer or another person) pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (4) any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.
As described in Item 4 above, at the closing of the private placement transaction, IBC entered into a Letter Agreement with the Issuer relating to the election to the Issuer’s Board of Directors of the IBC Board Designee. In furtherance thereof, IBC and another shareholder of the Issuer, The Co-Investment Fund II, L.P. (“CI2”), entered into a Voting Agreement, dated as of September 30, 2010 (the “Voting Agreement”) pursuant to which each of the parties agreed to vote all shares they currently own or may acquire for the election of the other party’s designees to the Issuer’s Board of Directors in accordance with the terms of the Letter Agreement and a similar letter agreement, dated as of March 31, 2008, by and between the Issuer and CI2 (the “CI2 Letter Agreement”).
The obligations of the Reporting Person and CI2 under the Voting Agreement terminate concurrently with the termination of the obligations of the Issuer under the Letter Agreement and the CI2 Letter Agreement.
The foregoing is a summary of the terms of the Voting Agreement and does not purport to be complete. This summary is qualified in its entirety by reference to the full text of the Voting Agreement, which is attached hereto as Exhibit 1 and is incorporated by reference herein.
Item 7. Material to be Filed as Exhibits
Exhibit 1 – Voting Agreement, dated as of September 30, 2010, by and between IBC and CI2.
The Agreement, the Warrant, the Letter Agreement, and related documentation associated with the purchase of the Units by IBC are described in, and filed as exhibits to, the Current Report on Form 8-K filed by the Issuer on October 1, 2010.
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Signature
After reasonable inquiry, and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: October 7, 2010
INDEPENDENCE BLUE CROSS | |||
By: | /s/ Alan Krigstein | ||
Name: Alan Krigstein | |||
Title: Senior Vice President & Chief Financial Officer | |||
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