Charter of the Nominating/Corporate Governance Committee

 I. Purpose

The Governance and Nominating Committee (the “Committee”) of Direct Insite Corp. (the “Company”) is appointed by the Board of Directors of the Company (the “Board”) to assist the Board in fulfilling its responsibilities relating to director nominations and corporate governance matters. The Committee’s primary responsibilities and duties are to:

  • Identify individuals qualified to become directors and recommend that the Board select such individuals for all directorships to be filled by the Board or by the shareholders;
  • Develop and recommend to the Board a set of corporate governance principles applicable to the Company; and
  • Otherwise take a leadership role in shaping the corporate governance of the Company.

The Committee shall have the ability to retain, at the Company’s expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties.

II. Composition and Meetings

      The Committee shall be comprised of such number of directors as determined by the Board, but no less than three directors, each of whom shall be an independent director as such is defined by the independence rules of the NASDAQ Stock Market, and any rule or regulation prescribed by the Securities and Exchange Commission (“SEC”), free from any relationship that would interfere with the exercise of his or her independent judgment.
     Committee members shall be appointed by and serve at the discretion of the Board. If a Committee Chair is not designated by the Board, the members of the Committee shall designate a Chair by majority vote of its membership.
     The Committee shall meet at least two times annually, or more frequently as circumstances dictate. A majority of the members of the Committee shall constitute a quorum. If a quorum is present, a majority of the members present shall decide any matter brought before the Committee. The Committee Chair or any other member of the Committee may call a meeting of the Committee upon due notice to each other member at least 72 hours prior to the meeting, which notice period may be waived in writing by any member of the Committee. To the extent possible, the Committee Chair shall prepare and/or approve an agenda in advance of each meeting. The Committee may form and delegate any of its authority to subcommittees or to one or more designated members of the Committee.

III. Responsibilities and Duties
The Committee shall have the following specific responsibilities and duties:

1. Board and Committee Composition.
        (a) Regularly reviewing, and making recommendations to the Board with respect to, the size of the Board, the classification by term of the Board and recommending to the Board the criteria, including appropriate skills, leadership qualities, diversity and experience relevant to the needs of the Company for the Board as a whole and its individual members and taking into account the requirements of Item 401(e) of Regulation S-K and the policy annexed to this Charter as Annex B.
       (b) Assisting in identifying, interviewing and recruiting candidates for the Board pursuant to the procedures annexed to this Charter as Annex A.
       (c) Selecting, or recommending to the Board, director nominees to fill vacancies on the Board by respective class or term, at the annual meeting of shareholders and when a vacancy exists between annual meetings.
       (d) Annually reviewing the composition of each committee of the Board and presenting recommendations for committee memberships and chairs to the Board.
      (e) Overseeing the submissions by shareholders of candidates for the Board and considering the recommendations contained in such submissions, as set forth in the policies annexed to this Charter as Annex C and Annex D.

2. Training, Evaluation and Succession.
     (a) Reviewing and discussing with the Board and executive officers plans for officer development and succession planning for the Chief Executive Officer (“CEO”) and other executive officers.
     (b) Conducting an annual performance review of the Board and each committee thereof; and leading the Board in such evaluation to facilitate the directors fulfilling their responsibilities in a manner that serves the interests of the Company’s shareholders.
     (c) Considering policies in respect of formal or informal director orientation and continuing education.

3. Policies and Procedures.
     (a) Developing and recommending to the Board for approval a set of corporate governance principles applicable to the Company, to be reviewed on an annual basis, and keeping abreast of developments with regard to corporate governance to enable the Committee to make recommendations to the Board in light of such developments as may be appropriate.
    (b) Formulating procedures for shareholders to send communications to the Board and for interested parties to communicate with the presiding non-management director or the non-management directors as a group.
    (c) Formulating and recommending to the Board for adoption a policy regarding attendance of directors at annual meetings of shareholders.
    (d) Overseeing the CEO’s administration of the Company’s Securities Trading Policy.

4. Miscellaneous.
    (a) Performing any other activities consistent with this Charter, the Company’s by-laws, and governing law, as the Committee or the Board deems necessary or appropriate.
    (b) Maintaining minutes of meetings and periodically reporting to the Board on significant results of the foregoing activities.
    (c) Reviewing and reassessing the adequacy of its formal written charter on an annual basis.

Governance and Nominating Committee Procedures for Identifying and Evaluating Candidates for Director

1. The Committee will observe the following procedures in identifying and evaluating candidates for election to the Company’s Board of Directors.

2. The Company is of the view that the continuing service of qualified incumbents promotes stability and continuity in the board room, contributing to the Board’s ability to work as a collective body, while giving the Company the benefit of the familiarity and insight into the Company’s affairs that its directors have accumulated during their tenure. Accordingly, the process of the Committee for identifying nominees shall reflect the Company’s practice of re-nominating incumbent directors who continue to satisfy the Committee’s criteria for membership on the Board, whom the Committee believes continue to make important contributions to the Board and who consent to continue their service on the Board.

3. Consistent with this policy, in considering candidates for election at annual meetings of shareholders, the Committee will first determine the incumbent directors whose terms expire at the upcoming meeting and who wish to continue their service on the Board.

4. The Committee will evaluate the qualifications and performance of the incumbent directors that desire to continue their service. In particular, as to each such incumbent director, the Committee will:

  • consider if the director continues to satisfy the minimum qualifications for director candidates adopted by the Committee; and
  • determine whether there exist any special, countervailing considerations against re-nomination of the director.

5. If the Committee determines that:

  • an incumbent director consenting to re-nomination continues to be qualified and has satisfactorily performed his or her duties as director during the preceding term; and
  • there exist no reasons, including considerations relating to the composition and functional needs of the Board as a whole, why in the Committee’s view the incumbent should not be re-nominated,
    the Committee will, absent special circumstances, propose the incumbent director for re-election.

6. The Committee will identify and evaluate new candidates for election to the Board where there is no qualified and available incumbent, including for the purpose of filing vacancies arising by reason of the resignation, retirement, removal, death or disability of an incumbent director or a decision of the directors to expand the size of the Board.

7. The Committee will solicit recommendations for nominees from persons that the Committee believes are likely to be familiar with qualified candidates. These persons may include members of the Board, including members of the Committee, and management of the Company. The Committee may also determine to engage a professional search firm to assist in identifying qualified candidates; where such a search firm is engaged, the Committee shall set its fees and scope of engagement.

8. As to each recommended candidate that the Committee believes merits consideration, the Committee will:

  • cause to be assembled information concerning the background and qualifications of the candidate, including information concerning the candidate required to be disclosed in the Company’s proxy statement under the rules of the SEC and any relationship between the candidate and the person or persons recommending the candidate;
  • determine if the candidate satisfies the minimum qualifications required by the Committee of candidates for election as director;
  • determine if the candidate possesses any of the specific qualities or skills that under the Committee’s policies must be possessed by one or more members of the Board;
  • consider the contribution that the candidate can be expected to make to the overall functioning of the Board; and
  • consider the extent to which the membership of the candidate on the Board will promote diversity among the directors.

9. It may be appropriate for the Committee, in its discretion, to solicit the views of the CEO, other members of the Company’s senior management and other members of the Board regarding the qualifications and suitability of candidates to be nominated as directors.

10. In its discretion, the Committee may designate one or more of its members (or the entire Committee) to interview any proposed candidate.

11. Based on all available information and relevant considerations, the Committee will select, a candidate who, in the view of the Committee, is most suited for membership on the Board.

12. In making its selection, the Committee will evaluate candidates proposed by shareholders under criteria similar to the evaluation of other candidates, except that the Committee may consider, as one of the factors in its evaluation of shareholder recommended nominees, the size and duration of the interest of the recommending shareholder or shareholder group in the equity of the Company. The Committee may also consider the extent to which the recommending shareholder intends to continue holding its interest in the Company, including, in the case of nominees recommended for election at an annual meeting of shareholders, whether the recommending shareholder intends to continue holding its interest at least through the time of such annual meeting.

13. The Committee shall maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board.


Governance and Nominating Committee Policy Regarding Qualifications of Directors

The Committee believes that members of the Company’s Board must possess certain basic personal and professional qualities in order to properly discharge their fiduciary duties to shareholders, provide effective oversight of the management of the Company and monitor the Company’s adherence to principles of sound corporate governance. It is therefore the policy of the Committee that all persons nominated to serve as a director of the Company should possess the minimum qualifications described in this policy. These are only threshold criteria, however, and the Committee will also consider the contributions that a candidate can be expected to make to the collective functioning of the Board based upon the totality of the candidate’s credentials, experience and expertise, the composition of the board at the time, and other relevant circumstances.

1. Integrity. All candidates must be individuals of personal integrity and ethical character, and who value and appreciate these qualities in others.

2. Absence of Conflicts of Interest. Candidates should not have any interests that would materially impair his or her ability to (i) exercise independent judgment, or (ii) otherwise discharge the fiduciary duties owed as a director to the Company and its shareholders.

3. Fair and Equal Representation. Candidates must be able to represent fairly and equally all shareholders of the Company without favoring or advancing any particular shareholder or other constituency of the Company.

4. Achievement. Candidates must have demonstrated achievement in one or more fields of business, professional, governmental, communal, scientific or educational endeavor.

5. Oversight. Candidates are expected to have sound judgment, borne of management or policy-making experience (which may be as an advisor or consultant), that demonstrates an ability to function effectively in an oversight role.

6. Business Understanding. Candidates must have a general appreciation regarding major issues facing public companies of a size and operational scope similar to the Company. These include:

  • contemporary governance concerns;
  • regulatory obligations of a public issuer;
  • strategic business planning;
  • competition in a global economy; and
  • basic concepts of corporate finance.

7. Available Time. Candidates must have, and be prepared to devote, adequate time to the Board and its committees. It is expected that each candidate will be available to attend substantially all meetings of the Board and any committees on which the candidate will serve, as well as the Company’s annual meeting of shareholders, after taking into consideration their other business and professional commitments, including service on the boards of other companies.

8. Limited Exceptions. Under exceptional and limited circumstances, the Committee may approve the candidacy of a nominee who does not satisfy all of these requirements if it believes the service of such nominee is in the best interests of the Company and its shareholders.

9. Additional Qualifications. In approving candidates for election as director, the Committee will also assure that:

  • if the Company’s stock is listed for trading on a national securities exchange, at least a majority of the directors serving at any time on the Board are independent, as defined under the rules of such stock exchange;
  • if the Company’s stock is listed for trading on a national securities exchange, at least three of the directors satisfies the financial literacy requirements required for service on the audit committee under the rules of such exchange
  • at least one of the independent directors has experience as a senior executive of a public or substantial private company; and
  • at least one of the independent directors has general familiarity with an industry or industries in which the Company conducts a substantial portion of its business or in related industries.

10. Diversity. The Committee will seek to promote through the nominations process as an appropriate diversity on the Board of professional background, experience, expertise, perspective, age, gender, ethnicity and country of citizenship

Governance and Nominating Committee Policy on Security Holder Recommendation of Candidates for Election as Directions

1. It is the policy of the Committee on behalf of the Board to consider recommendations for the nomination of directors submitted by holders of the Company’s shares entitled to vote generally in the election of directors.

2. The Committee will give consideration to these recommendations for positions on the Board where the Committee has not determined to re-nominate a qualified incumbent director.

3. For each annual meeting of shareholders, the Committee will accept for consideration only one recommendation from any shareholder or affiliated group of shareholders. An affiliated group of shareholders means shareholders constituting a group under SEC Regulation 13D.

4. While the Committee has not established a minimum number of shares that a shareholder must own in order to present a nominating recommendation for consideration, or a minimum length of time during which the shareholder must own its shares, the Committee will take into account the size and duration of a recommending shareholder’s ownership interest in the Company.

5. The Committee will also consider the extent to which the shareholder making the nominating recommendation intends to maintain its ownership interest in the Company.

6. The Committee will only consider recommendations of nominees who satisfy the minimum qualifications prescribed by the Committee for board candidates, including that a director must represent the interests of all shareholders and not serve for the purpose of favoring or advancing the interests of any particular shareholder group or other constituency.

7. Only those recommendations whose submission complies with the procedural requirements adopted by the Committee will be considered by the Committee.


Governance and Nominating Committee Procedures for Security Holders Submitting Nominating Recommendations

1. Security Holders Entitled to Make Submissions. The Committee of the Company’s Board of Directors will accept for consideration submissions from shareholders of recommendations for the nomination of directors. Acceptance of a recommendation for consideration does not imply that the Committee will nominate the recommended candidate.

2. Manner and Address for Submission. All shareholder nominating recommendations must be in writing, addressed to the Committee care of the Company’s corporate secretary at the Company’s principal headquarters. Submissions must be made by mail, courier or personal delivery. E-mailed submissions will not be considered.


3. Information Concerning the Recommending Shareholders. A nominating recommendation must be accompanied by the following information concerning each recommending shareholder:

  • The name and address, including telephone number, of the recommending shareholder;
  • The number and class of the Company’s shares owned by the recommending shareholder and the time period for which such shares have been held;
  • If the recommending shareholder is not a shareholder of record, a statement from the record holder of the shares (usually a broker or bank) verifying the holdings of the shareholder and a statement from the recommending shareholder of the length of time that the shares have been held. (Alternatively, the shareholder may furnish a current Schedule 13D, Schedule 13G, Form 3, Form 4 or Form 5 filed with the Securities and Exchange Commission reflecting the holdings of the shareholder, together with a statement of the length of time that the shares have been held); and
  • A statement from the shareholder as to whether the shareholder has a good faith intention to continue to hold the reported shares through the date of the Company’s next annual meeting of shareholders.


4. Information Concerning the Proposed Nominee. A nominating recommendation must be accompanied by the following information concerning the proposed nominee:

  • the information required by Item 401 of SEC Regulation S-K (generally providing for disclosure of the name, address, any arrangements or understanding regarding nomination and five year business experience of the proposed nominee, as well as information regarding certain types of legal proceedings within the past ten years involving the nominee);
  • the information required by Item 403 of SEC Regulation S-K (generally providing for disclosure regarding the proposed nominee’s ownership of securities of the Company); and
  • the information required by Item 404 of SEC Regulation S-K (generally providing for disclosure of transactions between the Company and the proposed nominee valued in excess of $120,000 and certain other types of business relationships with the Company).

5. Relationships Between the Proposed Nominee and the Recommending Shareholder. The nominating recommendation must describe all relationships between the proposed nominee and the recommending shareholder and any agreements or understandings between the recommending shareholder and the nominee regarding the nomination.

6. Other Relationships of the Proposed Nominee. The nominating recommendation shall describe all relationships between the proposed nominee and any of the Company’s competitors, customers, suppliers, labor unions or other persons with special interests regarding the Company.

7. Qualifications of the Proposed Nominee. The recommending shareholder must furnish a statement supporting its view that the proposed nominee possesses the minimum qualifications prescribed by the Nominating Committee for nominees, and briefly describing the contributions that the nominee would be expected to make to the board and to the governance of the Company.

8. Ability to Represent All Shareholders. The recommending shareholder must state whether, in the view of the shareholder, the nominee, if elected, would represent all shareholders and not serve for the purpose of advancing or favoring any particular shareholder or other constituency of the Company.

9. Consent to be interviewed by the Committee and, if nominated and elected, to serve. The nominating recommendation must be accompanied by the consent of the proposed nominee to be interviewed by the Committee, if the Committee chooses to do so in its discretion (and the recommending shareholder must furnish the proposed nominee’s contact information for this purpose), and, if nominated and elected, to serve as a director of the Company.

10. Timing for Submissions Regarding Nominees for Election at Annual Meetings. A shareholder (or group of shareholders) wishing to submit a nominating recommendation for an annual meeting of shareholders must ensure that it is received by the Company, as provided above, not later than 120 calendar days prior to the first anniversary of the date of the proxy statement for the prior annual meeting of shareholders. In the event that the date of the annual meeting of shareholders for the current year is more than 30 days following the first anniversary date of the annual meeting of shareholders for the prior year, the submission of a recommendation will be considered timely if it is submitted a reasonable time in advance of the mailing of the Company’s proxy statement for the annual meeting of shareholders for the current year.

11. Shareholder Groups. If a recommendation is submitted by a group of two or more shareholders, the information regarding recommending shareholders must be submitted with respect to each shareholder in the group.

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