GENERAL: DIL: Diligent to receive early prepayment of Note

12 Feb 2010 1:37 pm

DIL 12/02/2010 GENERAL

REL: 1337 HRS Diligent Board Member Services INC (NS)

GENERAL: DIL: Diligent to receive early prepayment of Note

Diligent to receive early prepayment of Note from Services Share Holding LLC 12 February, 2010

Diligent Board Member Services, Inc. ("Diligent") is pleased to announce that it has entered into a conditional agreement with Services Share Holding LLC ("Services") regarding the US$6.8 million original loan from Diligent to Services as documented by a Promissory Note dated October 1, 2007 (the "Note").

The agreement between Diligent and Services will be submitted to the Diligent shareholders for their approval at the Diligent 2010 Annual Meeting in New Zealand scheduled for May 28th.

An early prepayment will be made by Services in the amount of US$4,086,106 against the outstanding balance of the Note. The Prepayment will be delivered in two parts; US$1,010,430 cash and 11,650,000 surrendered shares transferred back to Diligent and cancelled, reducing the shares of common stock outstanding by approximately 12%.

Note background:

The Note of US$7,161,791 (principal plus accrued interest) presently provides for an annual return of 5% paid quarterly and is due for repayment on October 1, 2010. The Note is presently secured by a pledge of 21,678,597 Diligent shares. As at December 31, 2008, Diligent wrote down the carrying value of the Note by US$5,800,000 to US$1,361,791 to reflect an impairment in the value of the Diligent shares held by Services as collateral for the Note.

The main terms of the conditional agreement are as follows:

- Services will prepay in cash US$1,010,430 against the outstanding balance of the Note. Services will also transfer and surrender to Diligent 11,650,000 shares of the Diligent common stock currently pledged as security for the Note. The surrendered shares will be cancelled, and Diligent will credit Services with a prepayment against the Note of US$3,075,676 for the surrendered shares. The aggregate of the prepayments against the principal balance of the Note will therefore be US$4,086,106.

- The terms of the Note will be amended to increase the interest rate from 5% to 6.5% per annum on the outstanding principal balance of US$3,075,685, to extend the maturity date of the loan from October 1, 2010 to October 1, 2012 and to change the interest payments from quarterly in arrears to annual interest payments in arrears on January 1 of each year until the Note is paid in full. Diligent will continue to hold 5,205,597 Diligent shares as security against the balance of the Note.

If the shareholders approve the above proposal, the transaction will close on May 28, 2010 (New York time).

Benefits to Diligent and its shareholders are as follows:

- The aggregate of the prepayments will substantially exceed the written down value of the Note. The cash prepayment alone represents over 74% of the existing value of the Note currently on Diligent's balance sheet.

- The cash prepayment will also provide Diligent with additional liquidity to operate and expand its business operations;

- Diligent's shareholders will benefit from the reduction of 11,650,000 shares of Diligent common stock outstanding, which will have the effect of increasing each common stock shareholder's equity stake in Diligent by over 14%. Diligent will accomplish this share reduction with no cash outlay and without incurring any debt;

- These transactions represent a positive resolution to any uncertainties related to the prepayment of the Note and the overhang that the 21,678,597 pledged shares may have represented.

- The interest on the Note will be increased from 5% to 6.5%.

This agreement represents over US $1 million in early prepayment in cash to Diligent and over 14% increase in equity value to common stock shareholders.

For the above reasons, Diligent has entered into the foregoing agreement and the Board will recommend to shareholders that they approve the proposed transactions at the 2010 Annual Meeting. End CA:00191150 For:DIL Type:GENERAL Time:2010-02-12:13:37:20

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