Placement Agent Engagement Agreement between The Keystone Equities Group, LP and Health Benefits Direct Corporation

 Exhibit 10.3 THE KEYSTONE EQUITIES GROUP(TM) TURNING VISION INTO REALITY CONFIDENTIAL October 19, 2005 Mr. Scott Frohman Chief Executive Officer Health Benefits Direct Corporation 4800 North Federal Highway, Suite D-108 Boca Raton, FL 33431 Dear Scott: 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 TKEG's due diligence investigation and the final approval by TKEG'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 TKEG 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 TKEG. 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 1003 Egypt Road o Oaks, PA ###-###-#### o Tel: 800 ###-###-#### o Fax: 610 ###-###-#### o Int'l Tel: 1 ###-###-#### www.keystoneequities.com  TKEG - Health Benefits Direct Engagement Letter October 19, 2005 Page 2 of 7 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 Page 3 of 7 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 Montgomery 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 Page 4 of 7 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 Page 5 of 7 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: Mr. Richard A. Hansen The Keystone Equities Group 1003 Egypt Road, Box 1155 Oaks, PA ###-###-#### If to the Company: Mr. Scott Frohman Health Benefits Direct Corporation 4800 North Federal Highway, Suite D-108 Boca Raton, FL 33431 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/ Richard A. Hansen By: /S/ William B. Fretz --------------------- -------------------- Richard A. Hansen William B. Fretz Chairman President Intending to be legally bound the foregoing is Confirmed and Agreed to by: HEALTH BENEFITS DIRECT CORPORATION By /S/ Scott Frohman Date: 11/17/05 ----------------- Scott Frohman CEO  TKEG - Health Benefits Direct Engagement Letter October 19, 2005 Page 6 of 7 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 Page 7 of 7 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.