<PAGE> 1
SCHEDULE 14A (RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14A-11(c) or Rule 14A-12
DIGITALTHINK, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
DIGITALTHINK, INC.
1098 HARRISON STREET
SAN FRANCISCO, CALIFORNIA 94103
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 28, 2000
------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
DigitalThink, Inc., a Delaware corporation (the "Company"), will be held on
Friday July 28, 2000 at 9:00 a.m. local time at the Sheraton Fisherman's Wharf
Hotel, 2500 Mason Street, San Francisco, CA 94133 (the telephone number at the
meeting location is (415) 627-6505) for the following purposes (as more fully
described in the Proxy Statement accompanying this Notice):
1. To elect two (2) Class I directors to serve for terms of three years
expiring upon the 2003 Annual Meeting of Stockholders or until their
successors are elected.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending March 31, 2001.
5. To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 9, 2000 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a Proxy.
FOR THE BOARD OF DIRECTORS
/s/ Adam D. Levy
Adam D. Levy
Secretary
San Francisco, California
June 19, 2000
YOUR VOTE IS IMPORTANT
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 3
DIGITALTHINK, INC.
------------------------
PROXY STATEMENT FOR THE 2000
ANNUAL MEETING OF STOCKHOLDERS
JULY 28, 2000
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
DigitalThink, Inc. (the "Company" or "DigitalThink") for use at the Annual
Meeting of Stockholders to be held Friday July 28, 2000 at 9:00 a.m. local time
at the Sheraton Fisherman's Wharf Hotel, 2500 Mason Street, San Francisco, CA
94133, or at any postponement or adjournment thereof (the "Annual Meeting"), for
the purposes set forth herein and in the accompanying Notice of Annual Meeting
of Stockholders. The telephone number at the meeting location is (415) 627-6505.
These proxy solicitation materials and the Annual Report to Stockholders
for the fiscal year ended March 31, 2000, including financial statements, were
first mailed on or about June 19, 2000 to all stockholders entitled to vote at
the meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on June 9, 2000 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 33,899,067 shares of the Company's Common Stock were issued and
outstanding and held of record by approximately 189 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company, or to the Inspector of Elections at the Annual Meeting a written notice
of revocation or a duly executed proxy bearing a later date or by attending the
meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share held as of the
Record Date. Stockholders will not be entitled to cumulate their votes in the
election of directors.
The cost of soliciting proxies will be borne by the Company. The Company
expects to reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers, and regular employees, without additional compensation,
personally or by telephone or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") appointed for the meeting and will
determine whether or not a quorum is present.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
<PAGE> 4
While there is not definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for purposes of
determining the presence of absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, the Company intends to treat broker non-votes
in this manner. Thus, a broker non-vote will not affect the outcome of the
voting on a proposal.
Any proxy which is returned using the form of proxy enclosed and which is
not marked as to a particular item will be voted for the election of the two
Class I directors, for the confirmation of the appointment of the designated
independent auditors, and as the proxy holders deem advisable on other matters
that may come before the meeting, as the case may be, with respect to the items
not marked.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 2001 Annual Meeting must be received by the
Company no later than February 28, 2001 in order that such proposals may be
considered for possible inclusion in the proxy statement and form of proxy
relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
Pursuant to the Company's Restated Certificate of Incorporation, the
Company's Board of Directors currently consists of seven persons, divided into
three classes serving staggered terms of three years. Currently, there are two
directors in Class I, two directors in Class II and three directors in Class
III. Two Class I directors are to be elected at the Annual Meeting. The Class II
and Class III directors will be elected at the Company's 2001 and 2002 Annual
Meetings of Stockholders, respectively. Each of the Class I directors elected at
the Annual Meeting will hold office until the 2003 Annual Meeting of
Stockholders or until a successor has been duly elected and qualified.
In the event that any of such persons becomes unavailable or declines to
serve as a director at the time of the Annual Meeting, the proxy holders will
vote the proxies in their discretion for any nominee who is designated by the
current Board of Directors to fill the vacancy. It is not expected that any of
the nominees will be unavailable to serve.
The names of the two Class I nominees for election to the Board of
Directors at the Annual Meeting, their ages as of the Record Date, and certain
information about them are set forth below. The names of the
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<PAGE> 5
current Class II and Class III directors with unexpired terms, their ages as of
the Record Date, and certain information about them are also stated below.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS
Steven L. Eskenazi...................... 38 General Partner, the Walden Group
Samuel D. Kingsland(2).................. 31 Founding Member of H&Q Venture Associates, LLC
CONTINUING CLASS II DIRECTORS
E. Follett Carter(2).................... 57 Retired; former President of Gartner Group
Distribution
William H. Lane, III(1)................. 62 President, Canyon Vista, Inc.
CONTINUING CLASS III DIRECTORS
Peter J. Goettner....................... 36 President, Chief Executive Officer and Chairman of
the Board
Jon C. Madonna(1)....................... 57 President and Chief Executive Officer of Carlson
Wagonlit Travel
Roderick C. McGeary(1).................. 49 President and Chief Executive Officer of Brience,
Inc.
</TABLE>
---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
There are no family relationships among any of the directors or executive
officers of the Company.
DIRECTORS TO BE ELECTED AT THE ANNUAL MEETING
Samuel D. Kingsland has been a member of our board of directors since
August 1996. Mr. Kingsland is a founding member of H & Q Venture Associates,
LLC, a venture capital firm formed in July 1998. From January 1991 to July 1998,
Mr. Kingsland held several positions, most recently as Principal, within the
venture capital group of Hambrecht & Quist, Inc., an investment banking firm.
Mr. Kingsland is a director of several private companies. Mr. Kingsland received
a B.A. from Dartmouth College.
Steven L. Eskenazi has been a member of our board of directors since June
1997. Since March 1997, Mr. Eskenazi has been a General Partner of the Walden
Group, a venture capital firm. From February 1990 to March 1997, Mr. Eskenazi
was Managing Director in charge of New Media Research for Deutsche Banc Alex.
Brown, an investment banking company. Mr. Eskenazi also serves on the board of
several private companies. Mr. Eskenazi holds a B.S. in Applied Mathematics from
Union College and an M.B.A. from the Amos Tuck School of Management at Dartmouth
College.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE ANNUAL MEETING
E. Follett Carter has been a member of our board of directors since June
1999. From October 1996 to his retirement in October 1999, Mr. Carter was the
President of Gartner Group Distribution, a subsidiary of the Gartner Group,
Inc., and Gartner Group's Chief Marketing Officer. From October 1993 to
September 1996, Mr. Carter was the Executive Vice President, Sales and Marketing
for the Gartner Group, Inc. Mr. Carter is also a director of several private
companies. Mr. Carter holds a B.A. from Case Western Reserve University and an
M.B.A. from Columbia University.
Peter J. Goettner has served as our President, Chief Executive Officer and
Chairman of our Board of Directors since he co-founded DigitalThink in April
1996. From January 1996 to April 1996, Mr. Goettner was developing the business
and financing plan for DigitalThink. From November 1993 to December 1995, Mr.
Goettner served as Director of Marketing for Knowledge Revolution, a developer
of educational and engineering software. Mr. Goettner holds a B.S. in Electrical
Engineering from the University of Michigan and an M.B.A. from the Haas School
of Business at the University of California at Berkeley.
William H. Lane, III has been a member of our board of directors since
February 1999. Since 1996, Mr. Lane has been the President of Canyon Vista,
Inc., a management consulting company. Mr. Lane retired from Intuit Inc., a
financial software company, in July 1996, having served as its Vice President,
Chief
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<PAGE> 6
Financial Officer, Secretary and Treasurer from January 1994 to April 1996. Mr.
Lane served in a similar capacity at ChipSoft, Inc., a tax preparation software
company, from July 1991 until its acquisition by Intuit in December 1993. Mr.
Lane is also a director of public companies Cyberian Outpost, Inc.,
MetaCreations Corp. and Digital Now, Inc. and several private companies. Mr.
Lane holds an A.B. from Columbia University.
Jon C. Madonna has been a member of our board of directors since January
2000. Since December 1998, Mr. Madonna has been the President and Chief
Executive Officer of Carlson Wagonlit Travel, a leading business travel and
expense management company. From January 1997 to October 1998, Mr. Madonna was
Vice Chairman of The Travelers Group, a financial services and insurance
company, and Vice Chairman of Travelers Property and Casualty and Chief
Executive Officer of the Personal Lines business. Previously, Mr. Madonna was
with KPMG Peat Marwick for 28 years, where he held numerous senior leadership
positions including Chairman, KPMG International from July 1995 to January 1998
and Chairman and Chief Executive Officer, KPMG Peat Marwick, USA from 1990 to
October 1996. Mr. Madonna is also a director of Neuberger Berman, Inc., an
independent investment advisor and Tidewater, Inc., a provider of services and
equipment to the offshore energy industry. Mr. Madonna holds a B.S. from the
University of San Francisco.
Roderick C. McGeary has been a member of our board of directors since
January 2000. Since May 2000, Mr. McGeary has been the President and Chief
Executive Officer of Brience, Inc., an e-commerce company. From 1997 to May
2000, Mr. McGeary was a national managing partner of KPMG Consulting, an
international consulting organization, a part of KPMG Peat Marwick LLP, and a
member of KPMG Consulting's management committee. Mr. McGeary joined KPMG in
1972 as an audit professional and was elected partner in 1981. In January 1994,
Mr. McGeary was named partner-in-charge of KPMG's West Coast Systems practice
and in 1997, he was named a member of a two-person executive team that directs
all KPMG Consulting services. Mr. McGeary received his B.S. from Lehigh
University.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as Class I directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect under Delaware law.
BOARD MEETINGS, COMMITTEES AND DIRECTORS COMPENSATION
The Board of Directors of the Company held a total of thirteen meetings
during the fiscal year ended March 31, 2000. All directors and nominees attended
at least 75% of the meetings held during fiscal 2000.
The Board of Directors has an audit committee and compensation committee.
It does not have a nominating committee or committee performing the functions of
a nominating committee. From time to time, the Board of Directors has created
various ad hoc committees for special purposes. No such committee is currently
functioning.
The audit committee consists of Messrs. Lane, Madonna and McGeary. The
audit committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the scope of audit and other services
by our independent auditors, reviews the charter accounting principles and
auditing practices and procedures to be used for our financial statements and
reviews the results of those audits.
The compensation committee consists of Messrs. Carter and Kingsland. The
compensation committee makes recommendations to the Board of Directors regarding
our employee benefit plans and the compensation of officers. None of the members
of the compensation committee is currently, or has ever been at any time since
our formation, one of our officers or employees. No member of the compensation
committee serves as a member of the board of directors or compensation committee
of any entity that has one or more officers serving as a member of our Board of
Directors or compensation committee.
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<PAGE> 7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee was, at any time since
our formation, an officer or employee of DigitalThink. None of our executive
officers serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving as a member of our
Board of Directors or compensation committee.
DIRECTOR COMPENSATION
We do not currently pay our directors for their services as members of the
Board of Directors. We do reimburse our directors for reasonable expenses in
connection with attending our board and committee meetings. We do not provide
additional compensation for committee participation or special assignments of
the board of directors. From time to time, we have granted our outside directors
options to purchase shares of our common stock under the DigitalThink 1996 Stock
Plan. In November 1996, we granted Mr. Lane an option to purchase 5,000 shares
at a per share exercise price of $0.05. In October 1999, we granted Mr. Lane an
option to purchase 40,000 shares at a per share exercised price of $1.50. In
July 1999, we granted Mr. Carter an option to purchase 40,000 shares at a per
share exercise price of $1.00. In January 2000, we granted Mr. Madonna an option
to purchase 40,000 shares at a per share price of $9.00. In January 2000, we
granted Mr. McGeary an option to purchase 40,000 shares at a per share price of
$9.00.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
NOMINEES SET FORTH HEREIN.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending March 31, 2001, and recommends that stockholders vote "FOR" ratification
of such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since the Company's inception. Representatives of Deloitte & Touche LLP
are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions. If stockholders fail to ratify the selection, the audit
committee and the Board of Directors will reconsider whether or not to retain
that firm. Even if the selection is ratified, the audit committee and the Board
of Directors in their discretion may direct the appointment of different
independent auditors at any time during the year.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2001.
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<PAGE> 8
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the compensation paid by us during fiscal
1999 and 2000 to our Chief Executive Officer and our next four most highly
compensated executive officers who received compensation of more than $100,000
during fiscal 2000.(2)
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS(2) YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
------------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Peter J. Goettner......................... 2000 $150,000 $19,042 600,000 $ --
President and Chief Executive Officer 1999 150,000 --
Todd A. Clyde............................. 2000 140,000 43,440 75,000 7,916(1)
Vice President, Learning Solutions 1999 225,000 --
Michael W. Lodato......................... 2000 145,417 19,142 275,000 --
Vice President, Marketing and 1999 -- --
Business Development
Umberto Milletti.......................... 2000 142,500 17,871 100,000 --
Vice President, General Manager,
Products 1999 125,000 --
J. Adriaan Theron......................... 2000 160,000 3,494 250,000 60,000(1)
Vice President, Sales 1999 -- --
</TABLE>
---------------
(1) Represents sales commissions.
(2) Michael W. Pope, our Chief Financial Officer, joined DigitalThink in October
1999 at an annual salary of $175,000. Keith W. Carlson, our Chief Customer
Officer, joined DigitalThink in March 2000 at an annual salary of $150,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information relating to stock options
granted during fiscal 2000 to our Chief Executive Officer and our next four most
highly compensated executive officers who received salary compensation of more
than $100,000. In accordance with the rules of the Securities and Exchange
Commission, also shown below is the potential realizable value over the term of
the option (the period from the grant date to the expiration date) based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are mandated by the Securities and Exchange Commission and do not
represent our estimate of future stock price. Actual gains, if any, on stock
option exercises will depend on the future performance of our common stock.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK PRICE
------------------------------------------------------------------------ APPRECIATION
NUMBER OF SECURITIES PERCENT OF FOR OPTION TERM
UNDERLYING OPTIONS TOTAL OPTIONS GRANTED EXERCISE EXPIRATION -----------------------
NAME GRANTED(#) IN FISCAL 2000 PRICE($/SH.) DATE 5%($) 10%($)
---- -------------------- --------------------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Goettner.... 600,000 16.2% $1.50 10/15/09 566,005 1,434,368
Todd A. Clyde........ 75,000 2.0 1.50 10/15/09 70,751 179,296
Michael W. Lodato.... 125,000 3.4 0.50 4/16/09 39,306 99,609
75,000 2.0 0.75 6/11/09 35,375 89,648
75,000 2.0 9.00 1/17/10 424,504 1,075,776
Umberto Milletti..... 100,000 2.7 9.00 1/17/10 566,005 1,434,368
J. Adriaan Theron.... -- -- -- -- -- --
</TABLE>
In fiscal 2000, we granted options to purchase an aggregate of 3,709,550
shares of common stock to our employees, directors and consultants. Generally,
we grant options at an exercise price equal to the fair market
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<PAGE> 9
value of the underlying common stock on the date of grant, as determined by our
Board of Directors, and the options vest over four years from the date of grant.
Because we are a publicly-held company, the fair market value of our stock
equals its trading market price.
In accordance with the rules of the Securities and Exchange Commission, the
above table sets forth the potential realizable value over the ten-year period
from the grant date to the expiration date, assuming rates of stock appreciation
of 5% and 10%, compounded annually. These amounts do not represent our estimate
of future stock price performance. Actual realizable values, if any, of stock
options will depend on the future performance of our common stock.
AGGREGATE YEAR-END OPTION VALUES
The following table sets forth information for our Chief Executive Officer
and the next four most highly compensated executive officers who received salary
compensation of more than $100,000 in fiscal 2000, relating to the number and
value of securities underlying exercisable and unexercisable options held at
March 31, 2000.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
MARCH 31, 2000(#) MARCH 31, 2000($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter J. Goettner.............................. 57,812 692,187 $1,205,878 $13,619,717
Todd A. Clyde.................................. 69,270 230,729 1,422,845 4,694,625
Michael W. Lodato.............................. -- 275,000 -- 5,637,500
Umberto Milletti............................... 183,333 241,665 3,835,859 4,156,614
J. Adriaan Theron.............................. 62,500 187,500 1,281,250 3,843,750
</TABLE>
The value of unexercised in-the-money options at March 31, 2000 above is
based on a value of $39 25/64 per share, the last reported sale price of our
common stock on the Nasdaq National Market on March 31, 2000, less the per share
exercise price, multiplied by the number of shares issuable upon exercise of the
option. All options were granted under the DigitalThink 1996 Stock Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is provided to stockholders by the members of the
compensation committee of the Board of Directors:
The compensation committee of the Board of Directors (the "Committee"),
comprising two directors, neither of whom are employees of the Company, is
responsible for the administration of the Company's compensation programs. These
programs include base salary for executive officers and both annual and long-
term incentive compensation programs. The Company's compensation programs are
designed to provide a competitive level of total compensation and include
incentive and equity ownership opportunities linked to the Company's performance
and stockholder return.
Compensation Philosophy. The Company's overall executive compensation
philosophy is based on a series of guiding principles derived from the Company's
values, business strategy, and management requirements. These principles are
summarized as follows:
- Provide competitive levels of total compensation which will enable the
Company to attract and retain the best possible executive talent;
- Motivate executives to achieve optimum performance for the Company;
- Align the financial interest of executives and stockholders through
equity-based plans;
- Provide a total compensation program that recognizes individual
contributions as well as overall business results.
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<PAGE> 10
Compensation Program. The Committee is responsible for reviewing and
recommending to the Board the compensation and benefits of all officers of the
Company and establishes and reviews general policies relating to compensation
and benefits of employees of the Company. The Committee is also responsible for
the administration of the Company's 1996 Stock Plan. There are two major
components to the Company's executive compensation: base salary and potential
cash bonus, as well as potential long-term compensation in the form of stock
options. The Committee considers the total current and potential long-term
compensation of each executive officer in establishing each element of
compensation.
1. Base Salary. In setting compensation levels for executive officers, the
Committee reviews competitive information relating to compensation
levels for comparable positions at other high technology companies. In
addition, the Committee may, from time to time, hire compensation and
benefit consultants to assist in developing and reviewing overall salary
strategies. Individual executive officer base compensation may vary
based on time in position, assessment of individual performance, salary
relative to internal and external equity and critical nature of the
position relative to the success of the Company.
2. Long-Term Incentives. The Company's Stock Plan provides for the issuance
of stock options to officers and employees of the Company to purchase
shares of the Company's Common Stock at an exercise price equal to the
fair market value of such stock on the date of grant. Stock options are
granted to the Company's executive officers and other employees both as
a reward for past individual and corporate performance and as an
incentive for future performance. The Committee believes that
stock-based performance compensation arrangements are essential in
aligning the interests of management and the stockholders in enhancing
the value of the Company's equity.
3. Benefits. The Company provides benefits to the named executive officers
that are generally available to all employees of the Company. The amount
of executive level benefits and perquisites, as determined in accordance
with the rules of the Securities and Exchange Commission relating to
executive compensation, did not exceed 10% of total salary and bonus for
the fiscal year 2000 for any executive officer.
FISCAL 2000 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
In determining Mr. Goettner's salary for fiscal year 2000, the Committee
considered competitive compensation data for pre-public internet and
business-to-business e-commerce companies. The Committee also took into account
Mr. Goettner's experience and knowledge and his performance as Chief Executive
Officer. The Committee also approved the award of a cash bonus of $19,042 and
options to purchase 600,000 shares of Company Common Stock to Mr. Goettner in
recognition of his performance during fiscal 2000.
SECTION 162(m) OF THE INTERNAL REVENUE CODE LIMITATIONS ON EXECUTIVE
COMPENSATION
In 1993, Section 162(m) was added to the United States Internal Revenue
Code of 1986, as amended, (the "Code"). Section 162(m) may limit the Company's
ability to deduct for United States federal income tax purposes compensation in
excess of $1,000,000 paid to the Company's Chief Executive Officer and its four
other highest paid executive officers in any one fiscal year. No executive
officer of the Company received any such compensation in excess of this limit
during fiscal 2000.
It is the opinion of the Committee that the aforementioned compensation
policies and structures provide the necessary discipline to properly align the
Company's corporate economic performance and the interest of
8
<PAGE> 11
the Company's stockholders with progressive, balanced and competitive executive
total compensation practices in an equitable manner.
The foregoing Committee report shall not be "soliciting material" or to be
"filed" with the SEC, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent the Company specifically incorporates it by
reference into such filing.
Respectfully submitted,
The Compensation Committee of the
Board of Directors
E. Follett Carter
Samuel D. Kingsland
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return of the Nasdaq National
Market, U.S. index ("Nasdaq U.S. Index") for the period beginning on February
24, 2000, the date DigitalThink priced its initial public offering, and ending
on March 31, 2000.
<TABLE>
<CAPTION>
NASDAQ DTHK H&Q INDEX
------ ---- ---------
<S> <C> <C> <C>
24-Feb-00 100 100 100
29-Feb-00 102 291 101
31-Mar-00 99 281 110
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 31, 2000, by (i) each person or entity who is known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each of the executive officers
named in the Summary Compensation Table, and (iv) all directors and executive
officers of the Company as a group. Except as otherwise noted, the stockholders
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
applicable community property laws.
Unless otherwise indicated, the address for each beneficial owner set forth
below is c/o DigitalThink, Inc., 1098 Harrison Street, San Francisco, California
94103.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OWNED
------------------------------------ ---------------- -------------
<S> <C> <C>
Samuel D. Kingsland(1)...................................... 9,031,124 26.7
Hambrecht and Quist
One Bush Street
San Francisco, CA 94118
TI Ventures, L.P.(2)........................................ 3,085,472 9.1
c/o Samuel D. Kingsland
Hambrecht and Quist
One Bush Street
San Francisco, CA 94118
H&Q Digital Think Investors, L.P.(3)........................ 2,860,181 8.9
c/o Samuel D. Kingsland
Hambrecht and Quist
One Bush Street
San Francisco, CA 94118
Funds Associated with Adobe Systems, Inc.(4)................ 2,948,990 8.7
c/o Samuel D. Kingsland
Hambrecht and Quist
One Bush Street
San Francisco, CA 94118
The Walden Group(5)......................................... 2,700,000 8.0
750 Battery Street, Suite 700
San Francisco, CA 94111
Attn: Joanna Tieu
Steven L. Eskenazi(6)....................................... 2,700,000 8.0
1910 Jackson Street
San Francisco, CA 94109
Torstar Corporation......................................... 2,076,923 6.1
One Young Street, Sixth Floor
Toronto, Canada M5E1P9
Attn: David Wetherald
Peter J. Goettner(7)........................................ 1,613,462 4.8
E. Follett Carter........................................... 80,000 *
Jon C. Madonna.............................................. 18,000 *
Roderick C. McGeary(8)...................................... 18,692 *
William H. Lane, III........................................ 78,077 *
Keith W. Carlson(9)......................................... 30,000 *
Todd A. Clyde(10)........................................... 106,770 *
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OWNED
------------------------------------ ---------------- -------------
<S> <C> <C>
Michael W. Lodato(11)....................................... 66,426 *
Umberto Milletti(12)........................................ 1,266,075 3.7
Michael W. Pope(13)......................................... 101,322 *
J. Adriaan Theron(14)....................................... 72,916 *
All directors and executive officers as a group (13
persons).................................................. 15,182,864 44.5
</TABLE>
---------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 2,777,779 shares held by TI Ventures, L.P., 307,693 shares held by
TI Ventures II, L.P., 282,828 shares held by Adobe Ventures, L.P., 43,512
shares held by Adobe Ventures III, L.P. and 17,172 shares held by H&Q Adobe
Ventures Management, L.P., 116,667 shares held by H&Q Adobe Ventures
Management II, LLC, 2,860,181 shares held by H&Q Digital Think Investors,
L.P. and 2,642 shares held by HQVA Adobe Ventures Management III, LLC. Mr.
Kingsland disclaims beneficial ownership of such shares.
(2) Includes 2,777,779 shares held by TI Ventures, L.P., 307,693 shares held by
TI Ventures II, L.P.
(3) Includes 17,172 shares held by H&Q Adobe Ventures Management, L.P., 116,667
shares held by H&Q Adobe Ventures Management II, LLC, 2,860,181 shares held
by H&Q Digital Think Investors, L.P. and 2,642 shares held by HQVA Adobe
Ventures Management III, LLC.
(4) Includes 282,828 shares held by Adobe Ventures, L.P., 43,512 shares held by
Adobe Ventures III, L.P. and 2,622,650 shares held by Adobe Incentive
Partners.
(5) Includes 1,550,000 shares held by Walden Media Information Technology Fund,
L.P., 220,000 shares held by Walden EDB Partners, L.P., 17,600 shares held
by Walden EDB Partners II, L.P., 765,727 shares held by Walden-SBIC, L.P.
and 146,673 shares held by Walden Technology Ventures II, L.P.
(6) Includes 1,550,000 shares held by Walden Media Information Technology Fund,
L.P., 220,000 shares held by Walden EDB Partners, L.P., 17,600 shares held
by Walden EDB Partners II, L.P., 765,727 shares held by Walden-SBIC, L.P.
and 146,673 shares held by Walden Technology Ventures II, L.P. Mr. Eskenazi
disclaims beneficial ownership of such shares.
(7) Includes 64,062 stock options exercisable within 60 days of March 31, 2000
and 75,000 shares beneficially owed by the Goettner-Shmunes 1999 Children's
Trust UTA Dated July 26, 1999.
(8) Includes 10,000 stock options exercisable within 60 days of March 31, 2000.
(9) Includes 15,000 stock options exercisable within 60 days of March 31, 2000.
(10) Includes 20,829 stock options exercisable within 60 days of March 31, 2000.
(11) Includes 5,729 stock options exercisable within 60 days of March 31, 2000
and 15,385 shares held by the Lodato Family Trust.
(12) Includes 178,875 stock options exercisable within 60 days of March 31,
2000, 839,200 shares held by the Umberto Milletti and Julie Milletti Trust
Dated March 10, 1999 and 200,000 shares held by Vincent Vitiello, Trustee
of the Milletti Children's Trust UTA Dated August 13, 1999.
(13) Includes 17,187 stock options exercisable within 60 days of March 31, 2000.
(14) Includes 10,416 stock options exercisable within 60 days of March 31, 2000.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and beneficial
owners of more than 10% of the Company's Common Stock to file reports of
ownership and reports of changes in the ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
12
<PAGE> 15
Based solely on its review of the copies of such forms submitted to it
during the fiscal year ended March 31, 2000 (the "Last Fiscal Year"), the
Company believes that, during the Last Fiscal Year, all officers, directors and
beneficial owners of more than 10% of the outstanding Common Stock complied with
all section 16(a) requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with each of our directors
and executive officers.
POLICY REGARDING TRANSACTIONS WITH AFFILIATES
All future transactions with affiliates, including any loans we make to our
officers, directors, principal stockholders or other affiliates, will be
approved by a majority of our board of directors, including a majority of the
independent and disinterested members or, if required by law, a majority of
disinterested stockholders, and will be on terms no less favorable to us than we
could have obtained from unaffiliated third parties.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the shares they
represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
San Francisco, California
June 19, 2000
13
<PAGE> 16
DigitalThink Logo
<PAGE> 17
DIGITALTHINK, INC.
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY JULY 28, 2000
SHERATON FISHERMAN'S WHARF
2500 MASON STREET
SAN FRANCISCO, CA 94133
DIGITALTHINK, INC.
1098 HARRISON STREET, SAN FRANCISCO, CA 94103
PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON JULY 28, 2000
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
By signing the proxy, you revoke all prior proxies and appoint Peter J. Goettner
and Michael W. Pope, and each of them, with full power of substitution, to vote
your shares on the matters shown on the reverse side and any other matters which
may come before the Annual Meeting and all adjournments.
Company #
Control #
There are two ways to vote your proxy
Your Internet vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY INTERNET -- http://www.eproxy.com/dthk/ -- QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located in the upper right hand corner above to
obtain your records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to DigitalThink, Inc. c/o Shareowner Services(TM),
P.O. Box 64873, St. Paul, MN 55164-0873
If you vote by Internet, please do not mail your Proxy Card.
SEE REVERSE SIDE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C> <C> <C>
1. Election of directors: 01 Steven L. Eskenazi [ ] Vote FOR [ ] Vote WITHHELD
02 Samuel D. Kingsland all nominees from all nominees
(except as marked)
</TABLE>
(Instructions: To withhold authority to vote for any
indicated nominee, write the number(s) of the nominee(s) in
the box provided to the right.)
--------------------
2. Ratifying the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending March 31, 2001.
[ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL
Address Change? Mark Box [ ]
Indicate changes below: Date
--------------------------------
------------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc.
should include title and authority.
Corporations should provide full
name of corporation and title of
authorized officer signing the
proxy.
