SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") made as of this 21st day of
November, 2007 ("Effective Date") is between DIRECT INSITE CORP., a Delaware
corporation (the "Company") and METROPOLITAN VENTURE PARTNERS II, L.P., a
Delaware limited partnership ("MetVP") (collectively the "Parties" and each
individually, a "Party").
WHEREAS, the Company and MetVP are parties to various Stock Purchase and
Registration Rights Agreements dated September 25, 2002, December 24, 2002 and
June 3, 2003 (collectively, the "Purchase Agreements"), pursuant to which, among
other things, MetVP purchased, in the aggregate, 134,680 shares of the Company's
Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A
Preferred Stock"), in consideration for aggregate proceeds to the Company of Two
Million Seven Hundred Fifty Thousand dollars ($2,750,000.00) (the "Investment
Amount");
WHEREAS, the rights, preferences and privileges of the shares of the Series
A Preferred Stock are as set forth, among other agreements between the Parties,
in that certain Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock of the Company dated October 3, 2002, as amended on
December 20, 2002, January 2, 2003, June 4, 2003 and April 1, 2005 (as amended,
the "Certificate of Designation");
WHEREAS, the Company and MetVP agreed to defer the Dividend Payment Dates
until February 1, 2006, in exchange for which the Company agreed to pay MetVP,
in addition to the amounts otherwise due and payable in respect of accrued and
unpaid dividends, premiums on the amounts of the dividends so due and payable to
MetVP (the "Option Agreements");
WHEREAS, pursuant to the Purchase Agreements and the Option Agreements,
dividend payments had been deferred on the Series A Preferred Stock so that as
of September 25, 2005, including premiums payable by the Company as a result of
the previous deferrals of dividend payments to February 1, 2006, the aggregate
sum of One Million Sixty Thousand Five Hundred Seventy Dollars and 52 Cents
($1,060,570.52) in dividend and premium payments was due and owing to MetVP;
WHEREAS, a dispute has arisen between the Parties as to whether additional
dividend payments on the Investment Amount are due and payable for the period
from September 26, 2005 until September 25, 2008, which is the most recent
extension of the automatic conversion date; and
WHEREAS, the parties acknowledge that based on the financial statements
filed by the Company and assuming the accuracy and completeness thereof in all
material respects, prior to the Effective Date the Company did not have funds
legally available to pay cash dividends on the Series A Preferred Stock; and
WHEREAS, the Parties are mutually desirous to settle this dispute.
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NOW, THEREFORE, based upon the mutual covenants contained herein and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Parties, intending to be legally bound, agree as follows:
1. Recitals; Defined Terms. The foregoing recitals are true and correct and
are incorporated herein in their entirety. Capitalized terms used herein that
are not otherwise defined shall have the meanings given to such terms in the
Certificate of Designation as in effect on the date hereof.
2. Agreements of the Parties.
(a) The principal sum of One Million Sixty Thousand Five Hundred Seventy
Dollars and 52 cents ($1,060,570.52) is acknowledged to be due and owing on the
Series A Preferred Stock for the period through September 25, 2005, together
with accrued interest on the outstanding balance as set forth in Schedule A
annexed hereto, which amounts are (and will continue to be) due and payable as
and when funds are legally available for the payment of dividends on the Series
A Preferred Stock.
(b) In addition to the amounts required to be paid under Section 2(a), the
Parties further agree that: (i) the dividends payable on the Investment Amount
for the period from September 26, 2005 through September 25, 2008 is Five
Hundred Thousand Dollars ($500,000) and shall be due and payable on September
25, 2008; provided that if funds are not legally available to pay all or any
portion of such amount on September 25, 2008, any unpaid portion shall accrue
interest from and after September 25, 2008 until payment in full out of funds
legally available therefore at the annual interest rate of nine and one-half
(9-1/2%) percent, compounded quarterly, as set forth in Schedule A annexed
hereto; and (ii) the Company shall issue to MetVP, upon execution of this
Agreement, One Hundred Thousand (100,000) shares of restricted common stock
("Restricted Shares"). These Restricted Shares will carry "piggyback"
registration rights on the same terms and conditions as the "piggyback"
registration rights set forth in the Purchase Agreements as if the term
"Registrable Securities" (as defined therein) included the Restricted Shares.
3. Representations and Warranties.
(a) The Company. The Company represents and warrants to MetVP, as of the
date hereof, as follows:
(i) The Company has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement, the performance by the
Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereby, has been duly and validly authorized
by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by
MetVP, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
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(ii) The Company has obtained all consents, authorizations or
approvals of, and has made any notices to, or filings or registrations
with, any governmental entity or any other third person, required in
connection with the execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations
hereunder.
(b) MetVP. MetVP represents and warrants to the Company, as of the date
hereof, as follows:
(i) MetVP has the limited partnership power and authority to execute
and deliver this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement, the performance by MetVP
of this Agreement, and the consummation by MetVP of the transactions
contemplated hereby, has been duly and validly authorized by all
necessary limited partnership action on the part of MetVP. This
Agreement has been duly and validly executed and delivered by MetVP
and, assuming the due authorization, execution and delivery by the
Company, constitutes a valid and binding obligation of MetVP,
enforceable against MetVP in accordance with its terms.
(ii) MetVP is acquiring the Restricted Shares for investment purposes
only, and not with a view to the resale thereof, and that it is an
Accredited Investor as that term is defined in Rule 501 of Regulation
D under the Securities Act of 1933. MetVP further acknowledges that
the Restricted Shares shall initially bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
4. Mutual Release.
(a) The Company and its affiliates, to the extent not in contravention of
applicable law, hereby waive, remit, release and forever discharge MetVP and its
affiliates, including its and their respective past, present and future members,
partners, officers, directors, stockholders, employees, agents, attorneys,
subsidiaries, servants, successors, insurers, affiliates and its and their
respective heirs, administrators, legal representations, successors and
assignees, from and against any and all manner of action, claims, liens,
demands, liabilities, causes of action, charges, complaints, suits (judicial,
administrative, or otherwise), damages, debts, demands, obligations of any other
nature, past or present, whether in law or in equity, whether founded upon
contract (expressed or implied), tort (including, but not limited to,
defamation), statute or regulation (State, Federal or local), common law and/or
any other theory or basis, from the beginning of the world to the Effective Date
in respect of any claim that the Company has asserted, now asserts or could have
asserted directly relating to the amount of accrued and unpaid dividends due and
payable to MetVP in respect of the shares of Series A Preferred Stock.
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(b) MetVP and its affiliates, to the extent not in contravention of
applicable law, hereby waive, remit, release and forever discharge the Company
and its affiliates, and its and their respective affiliates, including their
respective past, present and future members, partners officers, directors,
stockholders, employees, agents, attorneys, subsidiaries, servants, successors,
insurers, affiliates and their respective heirs, administrators, legal
representations, successors and assignees, from and against any and all manner
of action, claims, liens, demands, liabilities, causes of action, charges,
complaints, suits (judicial, administrative, or otherwise), damages, debts,
demands, obligations of any other nature, past or present, whether in law or in
equity, whether founded upon contract (expressed or implied), tort (including,
but not limited to, defamation), statute or regulation (State, Federal or
local), common law and/or any other theory or basis, from the beginning of the
world to the Effective Date in respect of any claim that MetVP has asserted, now
asserts or could have asserted directly relating to the amount of accrued and
unpaid dividends due and payable to MetVP in respect of the shares of Series A
Preferred Stock.
5. Continuance of Agreements. Except as otherwise expressly set forth or
modified in this Agreement, nothing contained herein shall be deemed to waive,
modify, supplement, amend or otherwise impact any of the rights of MetVP, or the
obligations of the Company, under the Purchase Agreements, the Certificate of
Designation or any other document, agreement or instruments between the Company
and MetVP relating to the shares of Series A Preferred Stock or otherwise.
6. Applicable Law. Any action or proceeding brought to enforce any of the
provisions of this Agreement must be instituted in a federal or state court
situated in the State of New York, New York County, to the jurisdiction of which
courts, the Parties irrevocably and unconditionally submit. This Agreement shall
be construed and governed by the laws of the State of New York, without regard
to its governing conflicts of law principles.
7. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties with respect to the specific subject matter
hereof and supersedes any prior agreements or arrangements, whether written or
oral, relating to the specific subject matter hereof. The parties represent
expressly that in signing this Agreement, they do not rely upon, nor have they
relied upon any representation or statement regarding the subject matter hereof
not set forth specifically in this Agreement.
8. Notices. Any notice to be given to the Company or to MetVP hereunder
shall be deemed given if delivered personally, telefaxed or mailed by certified
or registered mail, postage prepaid, to the other parties hereto at the
following addresses:
To the Company: Direct Insite Corp.
00 Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxxx Xxxxxxx
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Copy to: Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
To MetVP: Metropolitan Venture Partners II, L.P.
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxxxx Xxxxx
Copy to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Either party may change the address to which notice may be given hereunder by
giving notice to the other party as provided herein.
9. Binding Effect. This Agreement may not be modified or amended except by
a writing signed by both Parties. This Agreement shall be binding upon, and
inure to the benefit of, the Company and MetVP's successors, heirs, executors,
administrators and legal representatives, and permitted assigns.
10. Non-Waiver. The failure of either Party to insist on strict performance
of any provision or to exercise any right shall not be deemed a waiver of any
such provision or right thereafter. Any waiver, to be effective, must be in
writing and signed by the Party waiving compliance.
11. Severability. If any provision of this Agreement or the application of
any such provision to any Party or circumstance shall be determined by any
authority of competent jurisdiction to be invalid or unenforceable to any
extent, the remainder of this Agreement, or the application of such provision to
such Party or circumstances other than those to which it is so determined to be
invalid or unenforceable, shall not be affected thereby, and each provision
hereof shall be enforced to the fullest extent permitted by law. If any such
authority of competent jurisdiction declares that any term or provision hereof
is invalid or unenforceable, the Parties agree that the authority making the
determination of invalidity or unenforceability shall have the power to modify
the scope of the term or provision, to delete specific words or phrases and to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified. Without limiting the generality of the foregoing,
the Parties acknowledge their intention to structure and effectuate the
transaction contemplated by this Agreement in accordance with applicable law. If
any authority of competent jurisdiction shall determine that the transaction
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contemplated by this Agreement has not been structured or effectuated in
accordance with applicable law, the Parties shall modify this Agreement in good
faith to structure and effectuate a transaction that is consistent with
applicable law and comes closest to achieving the economic results of the
transaction contemplated by this Agreement.
12. Execution. This Agreement may be executed in counterparts. Each
counterpart shall be deemed an original, and when taken together with the other
signed counterpart, shall constitute one fully executed Agreement.
DIRECT INSITE CORP.
/s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
By: Xxxxxxx X. Xxxxxxx
Chief Financial Officer
METROPOLITAN VENTURE PARTNERS II, L.P.
/s/ Xxxxxxx Xxxxx
--------------------------------------
By: Xxxxxxx Xxxxx
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Schedule A
Direct Insite Corp.
Series A Dividend
Principal $2,750,000
Dividends due at 9/25/05 $1,060,570
Rate 9.5%
FINAL AGREEMENT
Accrued Cumulative
Quarterly Amount at
Quarter Ended: Amount End of Quarter
------------- ------------------- --------------
12/25/2005 25,188.54 1,085,759
3/25/2006 25,786.77 1,111,545
6/25/2006 26,399.20 1,137,945
9/25/2006 27,026.18 1,164,971
12/25/2006 27,668.05 1,192,639
3/25/2007 28,325.17 1,220,964
6/25/2007 28,997.89 1,249,962
9/25/2007 29,686.59 1,279,648
12/25/2007 30,391.65 1,310,040
3/25/2008 31,113.45 1,341,153
6/25/2008 31,852.40 1,373,006
9/25/2008 32,608.89 1,405,615
Plus $500K $ 500,000 due on September 25, 2008
------------
TOTAL THAT WOULD BE DUE ON 9/25/08 $1,905,615
============
Plus 100,000 Direct Insite common shares due on signing of the Agreement.
If funds legally available are not sufficient to pay all amounts due on or prior
to September 25, 2008, any unpaid balance shall continue to accrue interest from
and after September 25, 2008 at 9.5% per annum, compounded quarterly, until all
such unpaid amounts have been paid in full out of funds legally available.
