EXHIBIT 10.3
Share Allotment Agreement
This Share Allotment Agreement ("Share Agreement") is effective as of November
24, 2003 (the "Effective Date") by and between IP Learn, LLC, a California
limited liability company ("IpLearn"), and Xxxxxx X. Mount, an individual, on
the one hand, and DigitalThink, Inc., a Delaware corporation ("DigitalThink" or
"Licensee"), on the other hand. IpLearn, Xxxxxx X. Mount and Licensee are
sometimes referred to in this Share Agreement as a "Party" and collectively as
the "Parties."
RECITALS
WHEREAS, IpLearn and DigitalThink have entered into a Settlement And License
Agreement dated November 21, 2003 (the "Settlement Agreement"); and
WHEREAS, as partial consideration for certain licenses and releases granted by
IpLearn to DigitalThink under the Settlement Agreement, DigitalThink has agreed
to issue a certain amount of shares of its common stock to IpLearn and its
designees, as set forth herein;
NOW, THEREFORE, in consideration of the Settlement Agreement and the terms and
conditions set forth below, the Parties agree as follows:
1. Current Capitalization of DigitalThink; Authority of DigitalThink.
DigitalThink represents that, as of the date immediately preceding the Effective
Date, DigitalThink has issued and has outstanding a total of 49,223,353 shares
of common stock. DigitalThink has the power and authority to execute, deliver
and perform the terms and provisions of this Share Agreement and has taken all
action necessary to authorize the execution, delivery and performance of the
transactions contemplated in this Share Agreement. No other corporate proceeding
on the part of DigitalThink will be necessary for such authorization, execution,
delivery and consummation. DigitalThink has duly executed and delivered this
Share Agreement. This Share Agreement constitutes a legal, valid and binding
obligation of DigitalThink, enforceable against DigitalThink in accordance with
their respective terms, except as rights to indemnity and contribution may be
limited by federal or state securities laws and except as enforcement (a) may be
limited by the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors generally; (b) is subject to general
principles of equity and similar principles, including without limitation,
concepts of materiality, reasonableness, unconscionability, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether considered in a
proceeding in equity or law; or (c) is subject to the effect of public policy.
2. Issuance of DigitalThink Shares. As soon as possible, and in any event no
later than thirty (30) days after the Effective Date, DigitalThink shall issue
to IpLearn and its designees identified below 287,784 shares of DigitalThink
common stock (the "DigitalThink Shares"). In accordance with IpLearn's request,
the DigitalThink Shares will be issued as follows:
(a) 178,427 of the DigitalThink Shares to IpLearn, and
(b) 109,357 of the DigitalThink shares to Xxxxxx X. Mount.
The DigitalThink Shares when issued will be fully paid and non-assessable.
3. Sale of DigitalThink Shares. Upon the effectiveness of a registration
statement filed by Licensee under the Securities Act of 1933, as amended (the
"Securities Act"), covering the sale of the DigitalThink Shares by IpLearn and
Xxxxxx X. Mount (the "Registration Effective Date"), IpLearn and Xxxxxx X. Mount
may sell the DigitalThink Shares pursuant to the following schedule:
(a) 28,548 of the DigitalThink Shares issued to IpLearn and 17,497 of the
DigitalThink Shares issued to Xxxxxx X. Mount may be sold after the later
of (i) December 15, 2003 or (ii) the Registration Effective Date.
(b) 24,979 of the DigitalThink Shares issued to IpLearn and 15,309 of the
DigitalThink Shares issued to Xxxxxx X. Mount may be sold, on or after the
15th of each month, for each subsequent month following the month in which
IpLearn and Xxxxxx X. Mount were first able to sell DigitalThink Shares
pursuant to Section 3(a), up to and including June 15, 2004.
To the extent that the maximum number of shares that can be sold in a given
month is not sold by either IpLearn or Xxxxxx X. Mount, such unsold shares may
be added to the number of shares permitted to be sold in the following month.
4. Registration of DigitalThink Shares.
(a) As soon as is practicable, but in no event later than thirty (30) days from
the Effective Date of this Share Agreement, DigitalThink will take
appropriate action to file with the SEC a registration statement in respect
of the DigitalThink Shares (the "Registration Statement") pursuant to the
Securities Act and qualify the DigitalThink Shares under all other
applicable securities or Blue Sky laws of the United States on behalf of
IpLearn and Xxxxxx X. Mount. Upon filing the Registration Statement,
DigitalThink will use commercially reasonable efforts to (i) cause the
Registration Statement to be declared effective by the SEC as expeditiously
as possible after filing and (ii) keep the Registration Statement effective
with the SEC for the period beginning on the date that the Registration
Statement is declared effective by the SEC and ending on the one (1) year
anniversary of the date the DigitalThink Shares were delivered to IpLearn
and Xxxxxx X. Mount (the "Effective Period"). IpLearn and Xxxxxx X. Mount
acknowledge and agree that DigitalThink shall promptly notify them within
three (3) business days upon the happening of any event as a result of
which the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and that while DigitalThink is correcting such prospectus
included in the Registration Statement, each of IpLearn and Xxxxxx X. Mount
shall abstain from distributing the DigitalThink Shares pursuant to such
Registration Statement. DigitalThink shall correct such prospectus by
filing with the SEC an amended prospectus within thirty (30) days of such
notification to IpLearn and Xxxxxx X. Mount and shall use its commercially
reasonable efforts to cause the amended prospectus to be declared effective
by the SEC within sixty (60) days after filing. IpLearn's and Xxxxxx X.
Mount's sole and
exclusive remedy in the event they are damaged by their inability to
distribute the DigitalThink Shares pursuant to the Registration
Statement for more than an aggregate of ninety (90) days during the
Effective Period shall be the payment by DigitalThink of an amount per
DigitalThink Share held by IpLearn or Xxxxxx X. Mount, as applicable,
equal to the difference between (i) the average of the per share
closing prices of the DigitalThink common stock over the period
beginning on the ninety-first (91st) day that IpLearn and Xxxxxx X. Mount
are unable to distribute their shares pursuant to the Registration
Statement and ending on the trading day that the amended prospectus
contained within such Registration Statement is declared effective by the
SEC ("First NoDist Period"), or the average of the per share closing prices
of the DT common stock over any subsequent period after the First NoDist
Period during which IpLearn and Xxxxxx X. Mount are unable to distribute
their shares pursuant to the Registration Statement and ending on the
trading day that the amended prospectus contained within such Registration
Statement is declared effective by the SEC ("Subsequent NoDist Period") and
(ii) the higher of the price per share at which such DigitalThink Shares
are sold, or the price per share of DigitalThink common stock on the first
trading day that the amended prospectus contained within such Registration
Statement is declared effective by the SEC respectively after the First
NoDist Period or Subsequent NoDist Period; provided that neither IpLearn
nor Xxxxxx X. Mount shall be entitled to any payment hereunder if the
amount enumerated in (i) above is lower than the amount enumerated in (ii)
above. Notwithstanding anything to the contrary contained herein, in no
event will IpLearn's and/or Xxxxxx X. Mount's inability to distribute the
DigitalThink Shares pursuant to the Registration Statement for more than an
aggregate of ninety (90) days during the Effective Period be deemed or
considered a breach by DigitalThink of the Settlement Agreement or confer
upon IpLearn any right to limit or terminate any of the rights of
DigitalThink under the Settlement Agreement. All expenses associated with
the preparation, filing and maintaining of the effectiveness of the
Registration Statement and any Blue Sky or other qualifications under this
Section will be borne by DigitalThink. DigitalThink will notify both
IpLearn and Xxxxxx X. Mount once the DigitalThink Shares have been
registered. It shall be a condition precedent to the obligations of
DigitalThink to take any action pursuant to this Section 4 that each of
IpLearn and Xxxxxx X. Mount shall furnish to DigitalThink such information
regarding itself and himself and the intended method of disposition of the
DigitalThink Shares as shall be required to effect the Registration
Statement.
(b) DigitalThink agrees to indemnify and hold harmless IpLearn and Xxxxxx X.
Mount (each, a "Beneficiary"), its officers and directors, and each person,
if any, who controls such Beneficiary, within the meaning of either Section
15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as from time to time amended, and the rules and regulations of the
SEC promulgated thereunder (the "Exchange Act"), from and against any and
all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred by such Beneficiary, any of
its officers or directors or any such controlling person in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any prospectus relating to the DigitalThink
Shares (as amended or supplemented if DigitalThink will have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by
any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished by such
Beneficiary or the plan of distribution furnished in writing to
DigitalThink by or on behalf of such Beneficiary expressly for use
therein.
(c) Each Beneficiary agrees, severally and not jointly, to indemnify and hold
harmless DigitalThink, its officers and directors, and each person, if any,
who controls DigitalThink within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from DigitalThink to such Beneficiary, but only with
reference to information furnished by such Beneficiary or the plan of
distribution furnished in writing by or on behalf of such Beneficiary
expressly for use in the Registration Statement or any prospectus relating
to the DigitalThink Shares, or any amendment or supplement thereto or any
preliminary prospectus. The obligations of any Beneficiary pursuant to this
Section will not exceed the amount of net proceeds received by such
Beneficiary for the relevant DigitalThink Shares.
(d) In case any proceeding or governmental investigation is instituted
involving any person in respect of which indemnity may be sought pursuant
to subsection (b) or (c) above, such person (the "Indemnified Party") will
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the
request of the Indemnified Party, will retain counsel reasonably
satisfactory to such Indemnified Party to represent such Indemnified Party
and any others the Indemnifying Party may designate in such proceeding and
will pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any Indemnified Party will have the
right to retain its own counsel (which counsel will be reasonably
accountable to the Indemnifying Party), but the fees and expenses of such
counsel will be at the expense of such Indemnified Party unless: (a) the
Indemnifying Party and the Indemnified Party will have mutually agreed in
writing to the retention of such counsel; or (b) the named parties to any
such proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party and, in the written opinion of
counsel for the Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interests between them. It is understood that the Indemnifying Party will
not, in connection with any proceeding or related proceedings involving one
or more Indemnified Parties in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition
to any local counsel required under the circumstances) at any time for all
such Indemnified Parties, and that all such fees and expenses will be
reimbursed as they are submitted in writing for payment. In the case of any
such separate firm for the Indemnified Parties, such firm will be
designated in writing by the Indemnified Parties or, if the Indemnified
Parties are exclusively Beneficiaries, by IpLearn. The Indemnifying Party
will not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent, or if there be a
final judgment for the plaintiff, the Indemnifying Party will indemnify and
hold harmless such Indemnified Parties from and against any loss or
liability (to the extent stated above) by reason of such settlement or
judgment.
(e) If the indemnification provided for in this Section is unavailable to an
Indemnified Party in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, will contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities: (a) in such proportion as is appropriate to reflect
the relative benefits received by DigitalThink and Beneficiaries from the
offering of the securities; or (b) if the allocation provided by clause (a)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(a) above but also the relative fault of DigitalThink and Beneficiaries in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by DigitalThink and
Beneficiaries will be deemed to be in the same respective proportions as
the total proceeds from the offering (before deducting expenses) received
by each of DigitalThink and Beneficiaries, in each case as set forth in the
table on the cover page of the prospectus, bear to the aggregate public
offering price of the securities. The relative fault of DigitalThink and
Beneficiaries will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by such party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(f) DigitalThink and each Beneficiary agrees that it would not be just and
equitable if contribution pursuant to this Section were determined by pro
rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in subsection (e)
above. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in this Section will
be deemed to include, subject to the limitations set forth above, any legal
or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, each Beneficiary will not
be required to contribute any amount in excess of the amount by which the
net proceeds of the offering (before deducting expenses) received by such
Beneficiary exceeds the amount of any damages which such Beneficiary has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(g) The indemnity and contribution agreements contained in this Section will
remain operative and in full force and effect regardless of: (a) any
termination of this Share Agreement or any underwriting agreement; (b) any
investigation made by or on behalf of any Indemnified Person or by or on
behalf of DigitalThink; and (c) the consummation of the sale or successive
resales of the DigitalThink Shares.
5. Representations and Warranties of IpLearn and Xxxxxx X. Mount. Each of
IpLearn and Xxxxxx X. Mount represents and warrants to DigitalThink as follows:
(a) It or he has the power and authority to execute, deliver and perform the
terms and provisions of this Share Agreement and has taken all action
necessary to authorize the execution, delivery and performance of the
transactions contemplated in this Share Agreement. With respect to IpLearn
only, no other corporate proceeding on the part of IpLearn will be
necessary for such authorization, execution, delivery and consummation. It
or he has duly executed and delivered this Share Agreement. This Share
Agreement constitutes a legal, valid and binding obligation of it or him,
enforceable against it or him in accordance with their respective terms,
except as rights to indemnity and contribution may be limited by federal or
state securities laws and except as enforcement (a) may be limited by the
effect of bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance and other similar laws relating to or affecting the
rights of creditors generally; (b) is subject to general principles of
equity and similar principles, including without limitation, concepts of
materiality, reasonableness, unconscionability, good faith and fair dealing
and the possible unavailability of specific performance, injunctive relief
or other equitable remedies, regardless of whether considered in a
proceeding in equity or law; or (c) is subject to the effect of public
policy.
(b) It or he is acquiring the DigitalThink Shares for its or his own account
for investment only, and not with a view to, or for sale in connection
with, any distribution of the DigitalThink Shares in violation of the
Securities Act of 1933 (the "Securities Act"), or any rule or regulation
under the Securities Act.
(c) It or he has had such opportunity as it has deemed adequate to obtain from
representatives of DigitalThink such information as is necessary to permit
it to evaluate the merits and risks of its acquisition of the DigitalThink
Shares.
(d) It or he has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the acquisition of the
DigitalThink Shares.
(e) It or he is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.
(f) It or he understands that, at the time of issue, (i) the DigitalThink
Shares have not been registered under the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the Securities
Act; (ii) the DigitalThink Shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities
Act or an exemption from registration is then available; and (iii) the
exemption from registration under Rule 144 is not currently available.
A legend substantially in the following form will be placed on each certificate
representing the DigitalThink Shares:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of in the absence of an effective registration statement
under such Act or an opinion of counsel satisfactory to the corporation to the
effect that such registration is not required."
(g) It or he understands that upon registration of the DigitalThink Shares in
accordance with Section 4 above, that it or he is free to dispose of the
DigitalThink shares pursuant to Section 3 above.
6. Comprehension. Each Party acknowledges to the other Party that it has been
represented by independent legal counsel of its own choice throughout all of the
negotiations which preceded the execution of this Share Agreement. Each Party
further acknowledges that it and its counsel have had adequate opportunity to
make whatever investigation or inquiry they may deem necessary or desirable in
connection with the subject matter of this Share Agreement prior to the
execution hereof. Each Party has authorized and directed their respective
attorneys to execute and deliver such other and further documents as may be
required to carry out the terms and conditions of this Share Agreement.
7. Interpretation. The language of this Share Agreement has been approved by
counsel for the Parties. The language of this Share Agreement shall be construed
as a whole according to its fair meaning and none of the Parties (nor the
Parties' respective attorneys) shall be deemed to be the draftsman of this Share
Agreement in any action that may hereafter arise between the Parties.
8. Entire Agreement. This Share Agreement and the Settlement Agreement
constitute the entire agreement between the Parties and supersede all previous
communications, representations, agreements or understandings, either oral or
written, between the Parties with respect to the subject matter hereof. In the
case of any conflict between the terms of this Share Agreement and the terms of
the Settlement Agreement, the terms of the Settlement Agreement shall control.
This Share Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each Party hereto that specifically
refers to this Share Agreement.
9. Arbitration. Any dispute or claim arising out of, in relation to, or in
connection with this Share Agreement, including without limitation the
interpretation, making, performance, breach or termination thereof, but not
including any claims of patent infringement or invalidity, shall be finally
settled by binding arbitration in San Francisco, California, under and in
accordance with the rules and procedures of the American Arbitration
Association, by three (3) arbitrators appointed in accordance with said rules.
Judgment on the award rendered by the arbitrators may be entered in court. The
award shall be final and binding upon the parties. The arbitrators shall apply
California and Federal law to the merits of any dispute or claim, without
reference to its rules of choice of law. The arbitrators shall render an opinion
setting forth findings of fact and conclusions of law with the reasons therefore
stated. Each of Licensor and Licensee hereby irrevocably consent to the
jurisdiction of state and federal courts located in San Francisco, California.
The parties shall share the costs of the arbitration, including administrative
and arbitrators' fees, equally. Each party will bear the expense of preparing
and presenting its own case in connection with the arbitration (including, but
not limited to, its own attorneys' fees and costs of witnesses), except that the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
costs from the other party. All aspects of the arbitration shall be treated as
confidential, except as reasonably necessary for performance and enforcement of
any ruling or remedy. Notwithstanding anything to the contrary herein, each
party shall have the right to seek injunctive relief in any time and under any
circumstances provided however that any suits seeking injunctive relief
commenced prior to the termination or expiration of the Share Agreement the
prevailing party shall be entitled to recover its reasonable attorneys' fees
from the other Party for such injunctive relief.
10. Notices. Any notice or communication required or permitted to be given by
either Party hereunder, shall be deemed sufficiently given, if in writing and
(a) hand delivered, (b) deposited with a nationally recognized overnight courier
(Federal Express, UPS or the like), (c) mailed postage prepaid by certified or
registered mail, return receipt requested, or (d) sent by facsimile transmission
with verification of receipt, and will be deemed effective the day of delivery
by hand, overnight courier or mail, or the day of transmission if sent by
facsimile, and addressed to the Party to whom notice is given as follows:
If to IpLearn, to: Xxxxx Xxxx
Managing Partner
IPLearn
0000 Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
If to DigitalThink, to: Attn: Xxx Xxxxxx
Chief Financial Officer
DigitalThink, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
If to Xxxxxx X. Mount, to: Xxxxxx X. Xxxxx
Xxxxx & Xxxxxxxx
XxxxxXxxx Xxxxx, Xxxxx 0000
000 Xxxx Xxx Xxxxxx
Xxx Xxxx, XX 00000
IN WITNESS WHEREOF, intending to be legally bound, the Parties have entered into
this Share Agreement as of the Effective Date.
IP Learn, LLC DigitalThink, Inc.
By: /s/ XXXXX XXXX By: /s/ XXXXXXX XXXX
--------------------------------- ---------------------------------
Name: Xxxxx Xxxx Name: Xxxxxxx Xxxx
--------------------------------- ---------------------------------
Title: Managing Partner Title: Chief Executive Officer
--------------------------------- ---------------------------------
Date: November 24, 2003 Date: November 24, 2003
--------------------------------- ---------------------------------
Xxxxxx X. Mount
/s/ XXXXXX X. MOUNT November 24, 2003
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