| Item 1.01. | Entry into a Material Definitive Agreement. |
On June 4, 2020, Benefitfocus, Inc. (the “Company”) completed the previously announced issuance and sale of 1,777,778 shares of a newly created series of its preferred stock, par value $0.001 per share, designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”) to BuildGroup LLC, a Delaware limited liability company (the “Buyer”), pursuant to the terms of the preferred stock purchase agreement (the “Purchase Agreement”), dated as of May 22, 2020, by and between the Company and 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.
The terms of the Series A Preferred Stock have been previously disclosed in Item 1.01 to the Company’s Current Report on Form8-K filed on May 26, 2020.
The proceeds of this offering were approximately $80.0 million. The Company intends to use the proceeds for general corporate purposes, including potential acquisitions and repayments of debt.
In connection with the sale of the Series A Preferred Stock, the Company entered into the Registration Rights Agreement and the Voting Agreement, as defined and described below.
Registration Rights Agreement
Pursuant to the Registration Rights Agreement, dated June 4, 2020, by and between the Company and the Buyer (the “Registration Rights Agreement”), the Company agreed to file a registration statement registering for resale the shares of common stock issuable upon conversion of the Series A Preferred Stock within 30 calendar days from the date of the Purchase Agreement.
Co-Sale and Voting Agreement
On June 4, 2020, concurrent with the Company closing the transactions contemplated by the Purchase Agreement, the Company entered into aCo-Sale and Voting Agreement (the “Voting Agreement”) with the Buyer and Mason R. Holland, Jr., the Executive Chairman of the Company’s Board of Directors (the Buyer and Mr. Holland, collectively, the “Stockholders”). Pursuant to the Certificate of Designations (as defined below), as long as not less than 60% of the shares of the Series A Preferred Stock originally issued remain outstanding, the holders of the 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 directors if the Board consists of 10 directors (the “Preferred Stock Directors”). Pursuant to the Voting Agreement, the Stockholders agreed, among other things, to vote their shares in favor of the Preferred Stock Directors (the “Voting Provision”). Mr. Holland and his affiliates are bound by the Voting Provision as long as they continue to beneficially own a majority of the common stock beneficially owned by them on the date of the Voting Agreement.
