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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, AS AMENDED.
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE KNOT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
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THE KNOT, INC.
462 BROADWAY, 6TH FLOOR
NEW YORK, NEW YORK 10013
April 12, 2001
To the Stockholders of
THE KNOT, INC.:
You are cordially invited to attend the Annual Meeting of Stockholders of
The Knot, Inc., to be held at the offices of Brobeck, Phleger & Harrison LLP,
1633 Broadway, 46th Floor, New York, New York 10019 on Tuesday, May 15, 2001 at
9:00 a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement which you are urged to
read carefully.
If you do not plan to attend the Annual Meeting, please sign, date, and
return the enclosed proxy promptly in the accompanying reply envelope. If you
decide to attend the Annual Meeting and wish to change your proxy vote, you may
do so automatically by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
/s/ David Liu
DAVID LIU
President, Chief Executive Officer and
Chairman of the Board
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
AND RETURN IT IN THE ENCLOSED ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES).
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THE KNOT, INC.
462 BROADWAY, 6TH FLOOR
NEW YORK, NEW YORK 10013
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2001
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To the Stockholders of
THE KNOT, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The Knot,
Inc. ("The Knot") will be held at the offices of Brobeck, Phleger & Harrison
LLP, 1633 Broadway, 46th Floor, New York, New York 10019 on Tuesday, May 15,
2001 at 9:00 a.m. (the "Annual Meeting") to consider and vote upon the following
matters, which are more fully described in the accompanying Proxy Statement:
1. To elect two (2) directors to the class of directors whose term
expires in 2004. The Board has nominated the following persons for
re-election at the Annual Meeting: Alexander Lynch and Sandra Stiles;
2. To approve an amendment to The Knot's 1999 Stock Incentive Plan (the
"1999 Plan") that increases the number of shares of The Knot's common
stock authorized for issuance under the 1999 Plan by 1,000,000
shares;
3. To ratify the appointment of Ernst & Young LLP as The Knot's
independent auditors for the fiscal year ending December 31, 2001;
and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. All stockholders of record at the close of
business on March 30, 2001 will be entitled to vote at the Annual Meeting and at
any adjournment thereof. The stock transfer books of The Knot will remain open
between the record date and the date of the meeting. A list of stockholders
entitled to vote at the Annual Meeting will be available for inspection at our
offices.
By Order of the Board of Directors
/s/ Richard Szefc
RICHARD SZEFC, Secretary
April 12, 2001
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
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THE KNOT, INC.
462 BROADWAY, 6TH FLOOR
NEW YORK, NEW YORK 10013
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PROXY STATEMENT
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GENERAL
This Proxy Statement is furnished to the holders of common stock, par value
$0.01 per share (the "Common Stock") of The Knot, Inc., a Delaware corporation
("The Knot") in connection with the solicitation by the Board of Directors (the
"Board") of The Knot for use at the annual meeting of stockholders to be held on
May 15, 2001, and at any adjournment or postponement of the annual meeting (the
"Annual Meeting"). The Annual Meeting will be held at the offices of Brobeck,
Phleger & Harrison LLP, 1633 Broadway, 46th Floor, New York, New York 10019 on
Tuesday, May 15, 2001 at 9:00 a.m. All stockholders of record on March 30, 2001
will be entitled to notice of and to vote at the Annual Meeting. We intend to
mail this Proxy Statement and the accompanying proxy (the "Proxy") to our
stockholders on or about April 17, 2001.
The mailing address of our principal executive office is 462 Broadway, 6th
Floor, New York, New York 10013.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders (collectively, the "Proposals"). Each Proposal is described in more
detail in this Proxy Statement.
VOTING
On March 30, 2001, the record date for determination of stockholders
entitled to vote at the Annual Meeting, there were 14,700,518 shares of Common
Stock outstanding held by 59 stockholders of record. A list of stockholders
eligible to vote at the Annual Meeting will be available for inspection at the
Annual Meeting and, prior thereto, during regular business hours at our
principal executive office at the address specified above. You are entitled to
one vote for each share of Common Stock you hold.
The holders of a majority of the stock issued and outstanding and entitled
to vote, present in person or by proxy, shall constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes will be counted for purposes of
determining whether a quorum is present at the Annual Meeting, and abstentions
will have the effect of negative votes. "Broker non-votes" are shares held by
brokers or nominees which are present in person or represented by proxy, but
which are not voted on a particular matter because instructions have not been
received from the beneficial owner.
PROXIES
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the Proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the directors proposed by the Board, FOR the approval of the amendment to The
Knot's 1999 Stock Incentive Plan proposed by the Board and FOR the approval of
Ernst & Young LLP as The Knot's independent auditors.
Any person giving a Proxy has the power to revoke it at any time before its
exercise. It may be revoked by:
- notifying the Secretary of The Knot in writing before the Annual Meeting;
- delivering to the Secretary of The Knot before the Annual Meeting a
signed Proxy with a later date; or
- attending the Annual Meeting and voting in person.
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SOLICITATION
We will bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this Proxy Statement, the Proxy and any
additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward the solicitation materials to such beneficial owners.
In addition, we may reimburse such persons for their costs of forwarding the
solicitation materials to such beneficial owners. The original solicitation of
proxies by mail may be supplemented by solicitation by telephone or other means
by our directors, officers, employees or agents. No additional compensation will
be paid to these individuals for any such services. Except as described above,
we do not presently intend to solicit proxies other than by mail.
PROPOSAL 1
ELECTION OF DIRECTORS
The Knot's Amended and Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), provides for a classified Board consisting
of three classes of directors serving staggered three year terms. These classes
are required to be as nearly equal in number as possible. Our Amended and
Restated Bylaws provide for a Board consisting of such number of directors as
may be fixed from time to time by resolution of the members of the Board or by
our stockholders at an annual meeting of stockholders. Two directors are to be
elected at the Annual Meeting for a term expiring at the 2004 annual meeting of
stockholders or until their successors have been duly elected and qualified.
The Board has nominated Alexander Lynch and Sandra Stiles to stand for
re-election to the class of directors whose term expires at the 2004 annual
meeting of stockholders or until their successors are elected and have
qualified. Each person nominated for re-election has agreed to serve if elected,
and management has no reason to believe that any nominee will be unavailable to
serve. In the event any of the nominees is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who may be designated by the present Board to fill the vacancy. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
"FOR" the nominees named below.
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2004
Alexander Lynch (39) has served as one of The Knot's directors since
November 2000. Mr. Lynch has been a partner in the New York office of Wilson
Sonsini Goodrich & Rosati since March 2001. From July 2000 to March 2001, he was
a partner in the New York office of Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian, LLP. From February 2000 to June 2000, Mr. Lynch was Vice President
of Strategic Development at TradeOut, Inc. From January 1995 to February 2000,
he was a partner in the New York office of Brobeck, Phleger & Harrison LLP.
Prior to January 1995, Mr. Lynch was an associate in the New York office of
Brobeck Phleger & Harrison LLP. Mr. Lynch received a B.S. from Tulane University
and a J.D. from Columbia University.
Sandra Stiles (51) has been The Knot's Chief Operating Officer since
November 1998 and Assistant Secretary since September 1999. From November 1998
to May 1999, she served as our Chief Financial Officer. Ms. Stiles has served as
one of our directors since May 1998. From September 1994 to October 1998, she
was the Senior Vice President and Director of Operations for the Children's Book
and Value Publishing division of Random House. She also served as a Vice
President and the Corporate Controller of Random House from October 1990 to
August 1994. Prior to October 1990, Ms. Stiles held various positions at
OmniCorp Holdings, Inc., Bertelsmann Inc. and Arthur Andersen & Co. She received
a B.S. in Accounting from New York University.
BUSINESS EXPERIENCE OF CONTINUING DIRECTOR WITH TERM EXPIRING IN 2002
David Liu (35) is a co-founder of The Knot and has been our Chief Executive
Officer and a director since our inception in May 1996. From January 1993 to May
1996, Mr. Liu served as Director of Production of RunTime Inc., a CD-ROM
development firm that he co-founded with Carley Roney. Prior to January 1993,
Mr. Liu was the Director of Production at VideOvation, a subsidiary of Reader's
Digest. Mr. Liu
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received a B.F.A. in Film and Television from New York University. Mr. Liu is
married to Ms. Roney, our Editor-in-Chief.
BUSINESS EXPERIENCE OF CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2003
John Link (59) has served as one of The Knot's directors since June 1999.
Mr. Link has been the Executive Vice President of Information Technology of QVC
since January 1991 and Chief Information Officer of QVC since March 1994. He
also served as Senior Vice President of Information Technology of QVC from June
1989 to March 1994. Prior to June 1989, Mr. Link held various senior technical
management positions at Sun Company. Mr. Link received a B.A. in physics from
the University of Delaware, a Master of Science in computer science from the
University of Pennsylvania and completed the Program for Management Development
at Harvard Business School. He is a member of the Society for Information
Management.
Ann Winblad (50) has served as one of The Knot's directors since April
1998. Ms. Winblad has been a general partner of Hummer Winblad Venture Partners,
a venture capital investment firm, since 1989. She is a member of the board of
trustees of the University of St. Thomas and is an advisor to numerous
entrepreneurial groups such as the Software Development Forum, the Stanford/MIT
Venture Forum and the Massachusetts Computer Software Council, Software Industry
Business Practices. Ms. Winblad also serves on the boards of directors of Net
Perceptions Inc., a provider of real time personalization and precision
marketing software solutions for the Internet and multi-channel retailers,
Liquid Audio Inc., a provider of an open platform that enables the digital
delivery of music over the Internet, and several private companies. Ms. Winblad
received a B.S. in Mathematics and Business Administration from the University
of St. Thomas and an M.A. in education with an economics focus from the
University of St. Thomas.
BOARD MEETINGS AND COMMITTEES
Our Board met a total of 11 times and acted by written consent twice during
the year ended December 31, 2000. The Board has a Compensation Committee and an
Audit Committee.
The Compensation Committee is currently composed of Mr. Link and Ms.
Winblad. The Compensation Committee met five times and acted by written consent
once in 2000. The Compensation Committee recommends, reviews and oversees the
salaries, benefits and stock option plans for our employees, consultants,
directors and other individuals whom we compensate. The Compensation Committee
also administers our compensation plans.
The Audit Committee is currently composed of Mr. Link, Mr. Lynch and Ms.
Winblad. Each member of the Audit Committee is independent, as independence is
defined in Rule 4200(a)(15) of the National Association of Securities Dealers'
listing standards. The Audit Committee met five times in 2000. The Audit
Committee reviews, acts on and reports to the Board on various auditing and
accounting matters, including the recommendation of our auditors, the scope of
the annual audits, fees to be paid to the auditors, the performance of our
independent auditors and the accounting practices of The Knot. A copy of our
Audit Committee Charter is attached as Appendix A to this proxy statement.
Each director attended at least 75% of the aggregate of (i) the total
meetings of the Board and (ii) the total number of meetings held by all
committees of the Board on which he or she served, with respect to the Board
meetings and Committee meetings, respectively, held in that portion of 2000
during which the director was serving as a member of the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 2000, the Compensation Committee consisted of Mr. Link and Ms. Winblad.
Mr. Link is the Chief Information Officer of QVC, and Ms. Winblad is a
general partner of Hummer Winblad Equity Partners II, L.P., the general partner
of each of the Hummer Winblad funds. See "Certain Relationships and Related
Party Transactions."
DIRECTOR COMPENSATION
The Knot reimburses our directors for travel and other out-of-pocket costs
incurred in connection with the attendance at meetings of the Board. In
addition, our 1999 Stock Incentive Plan (the "1999 Plan")
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provides that each eligible non-employee director will automatically receive an
option to purchase 15,000 shares of Common Stock upon such director's initial
election or appointment to the Board. Each 15,000-share option will vest in a
series of three (3) successive annual installments upon the optionee's
completion of each year of Board service over the three-year period measured
from the option grant date. The 1999 Plan also provides that, on the date of
each annual meeting of stockholders, each non-employee Board member who is to
continue to serve as a non-employee Board member will automatically be granted
an option to purchase 5,000 shares of Common Stock. Each annual 5,000-share
option will vest upon the optionee's completion of one (1) year of Board service
measured from the option grant date. The exercise price per share in effect for
options granted under the 1999 Plan is the closing sale price of the Common
Stock on the grant date as reported by the Nasdaq National Market.
Under the Automatic Option Grant Program of the 1999 Plan, on November 29,
2000 (the date the Board appointed Alexander Lynch to the Board), Mr. Lynch
received an automatic option grant to purchase 15,000 shares of Common Stock.
The exercise price per share in effect under the option is $0.94, the fair
market value per share of the Common Stock on the grant date. The option grant
will vest in a series of three (3) successive annual installments upon Mr.
Lynch's completion of each year of Board service over the three-year period
measured from the grant date.
VOTE REQUIRED
The affirmative vote of a plurality of the shares of Common Stock present
in person or represented by proxy and entitled to vote at the Annual Meeting is
required for the election of directors. The two candidates for the class of
directors whose terms expire at the 2004 annual meeting of stockholders
receiving the highest number of affirmative votes of the stockholders entitled
to vote at the Annual Meeting will be elected directors of The Knot. Unless
otherwise instructed, the proxyholders will vote each returned Proxy "FOR" the
nominees named above, or for as many nominees of the Board as possible, such
votes to be distributed among such nominees in the manner as the proxyholders
see fit.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE
1999 STOCK INCENTIVE PLAN
Our stockholders are being asked to approve an amendment to our 1999 Plan
that will increase the number of shares of Common Stock available for issuance
under the 1999 Plan by 1,000,000 shares. The Board of Directors adopted the
amendment on March 27, 2001, subject to stockholder approval at the Annual
Meeting.
The Board believes that increasing the number of shares of Common Stock
reserved for issuance under the 1999 Plan is necessary to insure that a
sufficient reserve of Common Stock remains available for issuance to allow The
Knot to continue to utilize equity incentives to attract and retain the services
of key individuals essential to The Knot's long-term growth and financial
success. The Knot relies significantly on equity incentives in the form of stock
option grants in order to attract and retain key employees and believes that
such equity incentives are necessary for The Knot to remain competitive in the
marketplace for executive talent and other key employees. Option grants made to
newly-hired or continuing employees will be based on both competitive market
conditions and individual performance. The Board does not have any specific
current plans to utilize the additional shares of Common Stock that would become
available under the 1999 Plan if this Proposal 2 is approved by The Knot's
stockholders.
The following is a summary of the principal features of the 1999 Plan, as
most recently amended. Any stockholder who wishes to obtain a copy of the actual
plan document may do so upon written request to the Corporate Secretary at our
principal offices in New York City, New York.
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EQUITY INCENTIVE PROGRAMS
The Plan consists of five (5) separate equity incentive programs: (i) the
Discretionary Option Grant Program, (ii) the Salary Investment Option Grant
Program, (iii) the Stock Issuance Program, (iv) the Automatic Option Grant
Program for non-employee Board members and (v) the Director Fee Option Grant
Program. The principal features of each program are described below. The
Compensation Committee of the Board has the exclusive authority to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
option grants and stock issuances made to our executive officers and
non-employee Board members and also has the authority to make option grants and
stock issuances under those programs to all other eligible individuals. However,
the Board may at any time appoint a secondary committee of one or more Board
members to have separate but concurrent authority with the Compensation
Committee to make option grants and stock issuances under those two programs to
individuals other than our executive officers and non-employee Board members.
The Compensation Committee has complete discretion to select the individuals who
are to participate in the Salary Investment Option Grant Program, but all grants
made to the selected individuals are governed by the express terms of that
program.
The term Plan Administrator, as used in this summary, will mean the
Compensation Committee and any secondary committee, to the extent each such
entity is acting within the scope of its administrative jurisdiction under the
1999 Plan. However, neither the Compensation Committee nor any secondary
committee exercises any administrative discretion under the Automatic Option
Grant Program. All grants under that program are made in strict compliance with
the express provisions of such program.
SHARE RESERVE
An aggregate of 5,143,393 shares of Common Stock have been reserved for
issuance over the term of the 1999 Plan. Such share reserve consists of (i) the
3,849,868 shares initially reserved for issuance under the 1999 Plan, (ii) the
additional 293,525 shares added to the reserve on January 2, 2001 pursuant to
the automatic share increase provisions of the 1999 Plan plus (iii) the
additional increase of 1,000,000 shares of Common Stock which forms this
Proposal. The 1999 Plan provides that, on the first trading day of each calendar
year during the term of the 1999 Plan, beginning January 2001, the number of
shares of Common Stock available for issuance under the 1999 Plan will
automatically increase by an amount equal to two percent (2%) of the shares of
our Common Stock outstanding on the last trading day of the immediately
preceding calendar year, subject to a maximum annual increase of 1,000,000
shares (or such other lesser number determined by the Board).
No participant in the 1999 Plan may receive option grants, separately
exercisable stock appreciation rights or direct stock issuances for more than
500,000 shares (1,000,000 shares in the year of initial hire) of Common Stock in
the aggregate per calendar year. Stockholder approval of this Proposal will also
constitute a reapproval of this share limitation for purposes of Internal
Revenue Code Section 162(m).
The shares of Common Stock issuable under the 1999 Plan may be drawn from
shares of our authorized but unissued shares of such common stock or from shares
of such common stock reacquired by us, including shares repurchased on the open
market.
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without our receipt of consideration, appropriate adjustments will be made to
the securities issuable (in the aggregate, annually and per participant) under
the 1999 Plan and the securities and the exercise price per share in effect
under each outstanding option.
ELIGIBILITY
Officers and employees, non-employee Board members and independent
consultants in the service of The Knot or our parent and subsidiaries (whether
now existing or subsequently established) are eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. Executive officers and
other highly paid employees are also eligible to participate in the Salary
Investment Option Grant Program. Participation in the Automatic Option Grant
Program and the Director Fee Option Grant Program will be limited to
non-employee members of the Board.
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As of March 30, 2001, four (4) executive officers, three (3) non-employee
Board members and approximately 270 other employees and consultants were
eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs. The four (4) executive officers were also eligible to participate in
the Salary Investment Option Grant Program, and the three (3) non-employee Board
members were also eligible to participate in the Automatic Option Grant Program
and the Director Fee Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1999 Plan will be deemed to be equal to the closing selling price per share
on that date on the Nasdaq National Market. On March 30, 2001 the fair market
value per share determined on such basis was $0.69.
DISCRETIONARY OPTION GRANT PROGRAM
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants, the time or times when those grants are to be made, the number of
shares subject to each such grant, the status of any granted option as either an
incentive stock option or a non-statutory option under the federal tax laws, the
vesting schedule (if any) to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.
Unless otherwise determined by the Plan Administrator, each granted option
will have an exercise price per share equal to the fair market value of the
shares on the date of grant. No option will have a term in excess of ten (10)
years, and the option will generally become exercisable in one or more
installments over a specified period of service measured from the grant date.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The Plan Administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
The Plan Administrator is authorized to issue tandem stock appreciation
rights under the Discretionary Option Grant Program, which provide the holders
with the right to surrender their options for an appreciation distribution from
The Knot equal to the excess of (i) the fair market value of the vested shares
of Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such shares. Such appreciation distribution may, at
the discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
SALARY INVESTMENT OPTION GRANT PROGRAM
The Compensation Committee has complete discretion in implementing the
Salary Investment Option Grant Program for one or more calendar years and in
selecting the executive officers and other eligible individuals who are to
participate in the program for those years. As a condition to such
participation, each selected individual must, prior to the start of the calendar
year of participation, file with the Compensation Committee an irrevocable
authorization directing The Knot to reduce his or her base salary for the
upcoming calendar year by a specified dollar amount not less than $5,000 nor
more than $50,000 and to apply that amount to the acquisition of a special
option grant under the program.
Each selected individual who files such a timely election will
automatically be granted a non-statutory option on the first trading day in
January of the calendar year for which that salary reduction is to be in effect.
The number of shares subject to each such option will be determined by
dividing the salary reduction amount by two-thirds of the fair market value per
share of Common Stock on the grant date, and the exercise price will be equal to
one-third of the fair market value of the option shares on the grant date. As a
result, the total spread on the option shares at the time of grant (the fair
market value of the option shares on the grant date less the aggregate exercise
price payable for those shares) will be equal to the amount by which the
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optionee's salary is to be reduced for the calendar year. In effect, the salary
reduction serves as an immediate prepayment, as of the time of the option grant,
of two thirds of the then current market price of the shares of common stock
subject to the option.
The option will become exercisable in a series of twelve equal monthly
installments upon the optionee's completion of each month of service in the
calendar year for which such salary reduction is in effect and will become
immediately exercisable for all the option shares on an accelerated basis should
The Knot experience certain changes in ownership or control. Each option will
remain exercisable for any vested shares until the earlier of (i) the expiration
of the ten-year option term or (ii) the end of the three-year period measured
from the date of the optionee's cessation of service.
The Knot has not yet implemented the Salary Investment Option Grant
Program.
STOCK ISSUANCE PROGRAM
Shares of Common Stock may be issued under the Stock Issuance Program at a
price per share equal to the fair market value of the shares unless otherwise
determined by the Plan Administrator and for such valid consideration under the
Delaware General Corporation Law as the Plan Administrator deems appropriate,
including cash and promissory notes. The shares may also be issued as a bonus
for past services without any cash outlay required of the recipient. The shares
issued may be fully vested upon issuance or may vest upon the completion of a
designated service period or the attainment of pre-established performance
goals. The Plan Administrator will, however, have the discretionary authority at
any time to accelerate the vesting of any and all unvested shares outstanding
under the Stock Issuance Program.
The Knot has not yet implemented the Stock Issuance Program.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, eligible non-employee Board
members receive a series of option grants over their period of Board service.
Each non-employee Board member will, at the time of his or her initial election
or appointment to the Board, receive an option grant for 15,000 shares of Common
Stock. In addition, on the date of each Annual Stockholders Meeting, each
individual who is to continue to serve as a non-employee Board member will
automatically be granted an option to purchase 5,000 shares of Common Stock.
There will be no limit on the number of such 5,000-share option grants any one
eligible non-employee Board member may receive over his or her period of
continued Board service.
Each option made pursuant to the automatic grant will have an exercise
price per share equal to the fair market value per share of Common Stock on the
grant date and will have a maximum term of 10 years, subject to earlier
termination following the optionee's cessation of Board service. Each automatic
option will be immediately exercisable. However, any shares purchased under the
option shall be subject to repurchase by us at the exercise price paid per
share, upon termination of Board service. Each 15,000-share automatic option
shall vest, and our repurchase right shall lapse, in a series of three annual
installments measured from the grant date. Each 5,000-share-automatic option
shall vest, and our repurchase right shall lapse, upon completion of one year of
Board service.
Stockholder approval of this Proposal will also constitute pre-approval of
each option granted under the Automatic Option Grant Program on or after the
date of the Annual Stockholders Meeting and the subsequent exercise of that
option in accordance with the terms of the program summarized above.
DIRECTOR FEE OPTION GRANT PROGRAM
Under the Director Fee Option Grant Program, each eligible non-employee
Board member may elect to apply all or a portion of any cash retainer fee for
the year to the acquisition of a below-market option grant by filing with The
Knot an election prior to the first day of the calendar year for which the
election is to be in effect. The option grant will automatically be made on the
first trading day in January in the year for which the eligible non-employee
Board member would otherwise be paid the cash retainer fee in the absence of his
or her election. The option will have an exercise price per share equal to
one-third of the fair market value of the
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option shares on the grant date, and the number of shares subject to the option
will be determined by dividing the amount of the retainer fee applied to the
program by two-thirds of the fair market value per share of our common stock on
the grant date. Accordingly, the fair market value of the option shares on the
grant date less the exercise price payable for those shares will be equal to the
portion of the retainer fee applied to that option. The option will become
exercisable in a series of twelve equal monthly installments over the calendar
year for which the election is in effect. However, the option will become
immediately exercisable for all the option shares upon the death or disability
of the optionee while serving as a Board member.
The Knot has not yet implemented the Director Fee Option Grant Program.
Stockholder approval of this Proposal will also constitute pre-approval of
each limited stock appreciation right granted under the Salary Investment Option
Grant Program, the Automatic Option Grant Program and the Director Fee Option
Grant Program and the subsequent exercise of those rights in accordance with the
foregoing terms.
GENERAL PROVISIONS
In the discretion of the Plan Administrator, awards issued under the 1999
Plan may provide that, in the event that we are acquired by merger, asset sale
or sale by the stockholders of more than 50% of our outstanding voting stock
recommended by the Board, outstanding options under the Discretionary Option
Grant Program that are not to be assumed or replaced by the successor
corporation or otherwise continued in effect will automatically accelerate in
full, and unvested shares outstanding under the Discretionary Option Grant and
Stock Issuance Programs will immediately vest, except to the extent The Knot's
repurchase rights with respect to those shares are to be assigned to the
successor corporation or otherwise continued in effect.
The Plan Administrator has the authority under the Discretionary Option
Grant Program to provide that those options will automatically vest in full (i)
upon an acquisition of us, whether or not those options are assumed or replaced,
(ii) upon a hostile change in control of us effected through a tender offer for
more than 50% of our outstanding voting stock or by proxy contest for the
election of Board members, or (iii) in the event of certain terminations of
service (including forced terminations) following an acquisition or a hostile
change in control. The vesting of outstanding shares under the Stock Issuance
Program may be accelerated upon similar terms and conditions. The options
granted under the Salary Investment Option Grant Program, the Automatic Option
Grant Program and the Director Fee Option Grant Program will automatically
accelerate and become exercisable in full upon any acquisition or change in
control transaction.
The acceleration of vesting in the event of a change in the ownership or
control of The Knot may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts to
gain control of The Knot.
Each option granted under the Salary Investment Option Grant Program, the
Automatic Option Grant Program and the Director Fee Option Grant Program will
include a limited stock appreciation right so that upon the successful
completion of a hostile tender offer for more than fifty percent (50%) of our
outstanding voting securities or a change in a majority of the Board as a result
of one or more contested elections for Board membership, the option may be
surrendered to us in return for a cash distribution from us. The amount of the
distribution per surrendered option share will be equal to the excess of (i) the
fair market value per share at the time the option is surrendered or, if
greater, the tender offer price paid per share in the hostile take-over over
(ii) the exercise price payable per share under such option.
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program through full-recourse interest-bearing promissory notes.
However, the maximum amount of financing provided any participant may not exceed
the cash consideration payable for the issued shares plus all applicable taxes
incurred in connection with the acquisition of those shares. The Plan
Administrator may provide one or more holders of non-statutory options or
unvested share issuances under the Plan with the right to have The Knot withhold
a portion of the shares otherwise issuable to such individuals in satisfaction
of the withholding taxes to which such individuals become subject in connection
with the exercise
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of those options or the vesting of those shares. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such withholding tax liability.
AMENDMENT AND TERMINATION
The Board may amend or modify the 1999 Plan at any time, subject to any
required stockholder approval pursuant to applicable laws and regulations.
Unless sooner terminated by the Board, the 1999 Plan will terminate on the
earliest of (i) November 2, 2009, (ii) the date on which all shares available
for issuance under the 1999 Plan have been issued as fully-vested shares or
(iii) the termination of all outstanding options in connection with certain
changes in control or ownership of The Knot.
STOCK AWARDS
The table below shows, as of March 30, 2001 and as to each of our executive
officers named in the Summary Compensation Table and the various indicated
individuals and groups, the aggregate number of shares of our common stock
subject to options granted under the 1999 Plan (including those granted under
its predecessor plan, our 1997 Long Term Incentive Plan), together with the
weighted average exercise price payable per share. The Knot has not made any
direct stock issuances to date under the 1999 Plan.
OPTION TRANSACTIONS
WEIGHTED
AVERAGE
NUMBER OF EXERCISE PRICE
NAME OPTION SHARES PER SHARE
---- ------------- --------------
Executive Officers:
David Liu................................................. 125,000 $0.94
Sandra Stiles............................................. 435,000 0.63
Richard Szefc............................................. 375,000 1.31
Carlos Manuel Abreu....................................... 175,000 0.69
All current executive officers as a group (4 persons)....... 1,110,000 0.90
Directors:
John Link................................................. -- --
Alexander Lynch........................................... 15,000 0.94
Ann Winblad............................................... -- --
All employees, including current officers who are not
executive officers as a group (256 persons)............... 1,962,067 2.79
As of March 30, 2001, we had outstanding options to purchase 3,072,067
shares and 15,000 shares under the Discretionary Option Grant Program and the
Automatic Option Grant Program, respectively. As of March 30, 2001, 231,929
options had been exercised under the Discretionary Option Grant Program.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS. Options granted under the 1999 Plan may be either incentive
stock options which satisfy the requirements of Section 422 of the Internal
Revenue Code or non-statutory options which are not intended to meet such
requirements. The Federal income tax treatment for the two types of options
differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee
at the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. The optionee will, however, recognize
taxable income in the year in which the purchased shares are sold or otherwise
disposed of. For Federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. A qualifying disposition
occurs if the sale or other disposition is made after the optionee has held the
shares for
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more than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then we will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the option exercise date over (ii) the exercise price paid for
the shares. In no other instance will we be allowed a deduction with respect to
the optionee's disposition of the purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by us in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when our repurchase right lapses, an amount equal to
the excess of (i) the fair market value of the shares on the date the repurchase
right lapses over (ii) the exercise price paid for the shares. The optionee may,
however, elect under Section 83(b) of the Internal Revenue Code to include as
ordinary income in the year of exercise of the option an amount equal to the
excess of (i) the fair market value of the purchased shares on the exercise date
over (ii) the exercise price paid for such shares. If the Section 83(b) election
is made, the optionee will not recognize any additional income as and when the
repurchase right lapses.
The Knot will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year in which such ordinary income is recognized by the optionee.
DIRECT STOCK ISSUANCE. The tax principles applicable to direct stock
issuances under the 1999 Plan will be substantially the same as those summarized
above for the exercise of non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. We anticipate that any
compensation deemed paid by The Knot in connection with disqualifying
dispositions of incentive stock option shares or exercises of non-statutory
options granted with exercise prices equal to the fair market value of the
option shares on the grant date will qualify as performance-based compensation
for purposes of Code Section 162(m) and will not have to be taken into account
for purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of The
Knot. Accordingly, all compensation deemed paid with respect to those options is
expected to remain deductible by us without limitation under Code Section
162(m).
2000 NON-OFFICER STOCK ISSUANCE PLAN
On June 8, 2000, the Board adopted the 2000 Non-Officer Stock Issuance Plan
in order to provide employees (other than officers and directors) and
consultants with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in The Knot. The maximum number of shares
of Common Stock available for issuance over the term of this plan may not exceed
435,000 shares.
ACCOUNTING TREATMENT
Option grants under the Discretionary Option Grant and Automatic Option
Grant Programs with exercise prices equal to the fair market value of the option
shares on the grant date will not result in any direct charge our reported
earnings. However, the fair value of those options is required to be disclosed
in the notes to our financial statements, and we must also disclose, in
footnotes to our financial statements, the pro-forma impact those options would
have upon our reported earnings were the fair value of those options at the time
of grant treated as a compensation expense. In addition, the number of
outstanding options may be a factor in determining our earnings per share on a
fully-diluted basis.
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Option grants or stock issuances made under the 1999 Plan with exercise or
issue prices less than the fair market value of the shares on the grant or issue
date will result in a direct compensation expense to us in an amount equal to
the excess of such fair market value over the exercise or issue price. The
expense must be amortized against our earnings over the period that the option
shares or issued shares are to vest.
In March 2000, the Financial Accounting Standards Board issued an
interpretation of APB Opinion No. 25 governing the accounting principles
applicable to equity incentive plans. Under the interpretation, option grants
made to non-employee consultants (but not non-employee Board members) will
result in a direct charge to our reported earnings based upon the fair value of
the option measured initially as of the grant date and then subsequently on the
vesting date of each installment of the underlying option shares. Such charge
will accordingly include the appreciation in the value of the option shares over
the period between the grant date of the option and the vesting date of each
installment of the option shares.
Should one or more individuals be granted tandem stock appreciation rights
under the 1999 Plan, then such rights would result in a compensation expense to
be charged against our reported earnings. Accordingly, at the end of each fiscal
quarter, the amount (if any) by which the fair market value of the shares of
Common Stock subject to such outstanding stock appreciation rights has increased
from the prior quarter-end would be accrued as compensation expense, to the
extent such fair market value is in excess of the aggregate exercise price in
effect for those rights.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding voting shares of The
Knot present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendment to the 1999 Plan. Should such stockholder
approval not be obtained, then the share reserve will not be increased by
1,000,000 shares. The 1999 Plan will, however, continue to remain in effect, and
option grants and stock issuances may continue to be made pursuant to the
provisions of the 1999 Plan prior to its amendment until the available reserve
of common stock under the 1999 Plan is issued.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF OUR 1999
STOCK INCENTIVE PLAN.
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has reappointed the firm of Ernst & Young LLP,
independent auditors for The Knot during the fiscal year ended December 31,
2000, to serve in the same capacity for the year ending December 31, 2001, and
is asking the stockholders to ratify this appointment.
FEES
Audit Fees. The aggregate fees billed for professional services rendered
for the audit of our annual financial statements for our fiscal year 2000 and
the reviews of the financial statements included in our Forms 10-Q for such
fiscal year were $245,000.
Financial Information Systems Design and Implementation Fees. No fees were
billed for services rendered by Ernst & Young LLP relating to financial
information systems design and implementation.
All Other Fees. The aggregate fees billed for all other services rendered
by Ernst & Young LLP were $58,000.
VOTE REQUIRED
The affirmative vote of a majority of the stockholders represented and
voting at the Annual Meeting will be required to ratify the selection of Ernst &
Young LLP. In the event the stockholders fail to ratify the
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appointment, the Board will reconsider its selection. Even if the selection is
ratified, the Board, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
believes that such a change would be in The Knot's and our stockholders' best
interests.
Representatives of the firm of Ernst & Young LLP are expected to be present
at the Annual Meeting and will have an opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION AND
APPROVAL OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE KNOT'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2001.
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OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of The Knot's Common Stock as of March 30, 2001 by (i) each person or
group of affiliated persons known by us to beneficially own more than five
percent of our Common Stock, (ii) each of our directors and nominees for
director, (iii) our named executive officers and (iv) all of our directors and
executive officers as a group.
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
OF COMMON STOCK(2)
------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
--------------------------------------- ----------- ---------
David Liu(3)(4)(5).......................................... 681,008 4.6%
Sandra Stiles(6)............................................ 270,125 1.8%
Richard Szefc(7)............................................ 137,417 *
Carlos Manuel Abreu(8)...................................... 66,967 *
John Link(9)................................................ 5,733,590 35.0%
Alexander Lynch(10)......................................... -- --
Ann Winblad(11)............................................. 2,560,000 17.4%
Interactive Technology Holdings, LLC(12).................... 5,725,590 34.9%
Hummer Winblad Funds(11).................................... 2,560,000 17.4%
America Online, Inc.(13).................................... 1,166,667 7.7%
Special Situations Funds(14)................................ 1,550,850 10.5%
All directors and executive officers as a group (7
persons)(15).............................................. 3,723,517 24.6%
---------------
* Less than 1%.
(1) Except as otherwise indicated, (i) the persons 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 community property laws,
where applicable and (ii) the address of all employee stockholders listed
in the table is 462 Broadway, 6th Floor, New York, NY 10013. Beneficial
ownership is calculated pursuant to Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, as amended. The addresses of individual directors and
nominees for election to the Board are indicated in their corresponding
footnotes.
(2) On March 30, 2001, 14,700,518 shares of Common Stock were issued and
outstanding.
(3) Includes 14,029 shares which, as of March 30, 2001, are subject to
repurchase under a vesting agreement over the 36-month period beginning
April 28, 1998, as long as this stockholder remains an employee of The
Knot. The Knot has the right to repurchase all or any portion of the shares
subject to repurchase for $0.01 per share for a period of 60 days from the
date of early termination.
(4) Includes 10,417 shares of common stock issuable upon the exercise of
presently exercisable options and 5,208 shares of common stock issuable
upon the exercise of options exercisable within 60 days. Excludes 109,375
shares of common stock issuable upon the exercise of options that do not
vest within 60 days of March 30, 2001.
(5) Excludes 673,383 shares of common stock owned by this stockholder's spouse.
Excludes 6,250 shares of common stock issuable upon the exercise of
presently exercisable options or the exercise of options exercisable within
60 days of March 30, 2001 owned by this stockholder's spouse.
(6) Includes 209,583 shares of common stock issuable upon the exercise of
presently exercisable options and 21,042 shares of common stock issuable
upon the exercise of options exercisable within 60 days. Excludes 204,375
shares of common stock issuable upon the exercise of options that do not
vest within 60 days of March 30, 2001.
(7) Includes 119,792 shares of common stock issuable upon the exercise of
presently exercisable options and 15,625 shares of common stock issuable
upon the exercise of options exercisable within 60 days. Excludes 239,583
shares of common stock issuable upon the exercise of options that do not
vest within 60 days of March 30, 2001.
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(8) Includes 58,333 shares of common stock issuable upon the exercise of
presently exercisable options and 7,292 shares of common stock issuable
upon the exercise of options exercisable within 60 days. Excludes 109,375
shares of common stock issuable upon the exercise of options that do not
vest within 60 days of March 30, 2001
(9) Consists of 8,000 shares of common stock owned by this stockholder and
4,025,590 shares of common stock owned by Interactive Technology Holdings,
LLC, an affiliate of QVC, and 1,700,000 shares issuable to Interactive
Technology Holdings, LLC upon the exercise of a currently exercisable
warrant. Mr. Link disclaims beneficial ownership of the shares of common
stock owned by Interactive Technology Holdings, LLC, except to the extent
of his pecuniary interest therein. Mr. Link's address is c/o QVC, Studio
Park, West Chester, PA 19380.
(10) Excludes 15,000 shares of common stock issuable upon the exercise of
options that do not vest within 60 days of March 30, 2001.
(11) Consists of 2,432,000 shares of common stock owned by Hummer Winblad
Venture Partners III, L.P. and 128,000 shares of common stock owned by
Hummer Winblad Technology Fund III, L.P. (collectively, the "Hummer Winblad
Funds"). John Hummer, Ann Winblad (one of our directors) and Mark Gorenberg
are general partners of Hummer Winblad Equity Partners II, L.P. ("HWII"),
the general partner of each of the Hummer Winblad Funds. Consequently, HWII
and Mr. Hummer, Ms. Winblad and Mr. Gorenberg may each be deemed to
beneficially own all of the shares held by the Hummer Winblad Funds. HWII,
Mr. Hummer, Ms. Winblad and Mr. Gorenberg each disclaim beneficial
ownership of such shares, except to the extent of their respective
pecuniary interest therein. The address of the Hummer Winblad Funds is 2
South Park, 2nd Floor, San Francisco, CA 94107.
(12) Consists of 4,025,590 shares of common stock owned by Interactive
Technology Holdings, LLC and 1,700,000 shares issuable to Interactive
Technology Holdings, LLC upon the exercise of a currently exercisable
warrant. The address of Interactive Technology Holdings, LLC is 222
Delaware Avenue, Suite 1448, 14th Floor, Wilmington, DE 19801-1621.
(13) Consists of 800,000 shares of common stock owned by America Online, Inc.
("AOL") and 366,667 shares issuable to AOL upon the exercise of a warrant.
The address of AOL is 22000 AOL Way, Dulles, VA 20166.
(14) This figure is based on information set forth in Schedule 13G/A filed with
the SEC on February 14, 2001 by Special Situations Fund III (the "Fund"),
L.P., MGP Advisers Limited Partnership ("MGP"), Special Situations
Technology Fund, L.P. ("SST"), SST Advisers L.L.C. ("SSTA"), Special
Situations Cayman Fund, L.P. (the "Cayman Fund"), AWM Investment Company,
Inc. ("AWM"), Austin W. Marxe ("Marxe") and David M. Greenhouse
("Greenhouse"). The Schedule 13G/A states that 1,550,850 shares are
beneficially owned by Marxe and Greenhouse, of which 934,150 shares are
owned by the Fund, 297,800 shares are owned by SST and 318,900 shares are
owned by the Cayman Fund. The Schedule 13G/A further states that (i) the
principal occupation of Marxe and Greenberg is to serve as officers,
directors and members or principal shareholders of MGP, SSTA, and AWM and
(ii) these individuals have the sole power to vote and the sole power to
dispose of all 1,550,850 shares. The address of Special Situation Funds is
153 East 53rd Street, New York, NY 10022.
(15) Includes 447,292 shares of common stock issuable upon the exercise of
options which are currently vested or which vest within 60 days of March
30, 2001. Excludes 662,708 shares of common stock issuable upon the
exercise of options that do not vest within 60 days of March 30, 2001.
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MANAGEMENT
The following table sets forth, as of March 30, 2001, the name, age and
position of each of our executive officers and other key employees.
NAME AGE POSITION
---- --- --------
David Liu............................ 35 President, Chief Executive Officer and Chairman of the
Board
Sandra Stiles........................ 51 Chief Operating Officer, Assistant Secretary and
Director
Richard Szefc........................ 51 Chief Financial Officer, Treasurer and Secretary
Carlos Manuel Abreu.................. 40 Chief Technology Officer
Carley Roney......................... 32 Editor-in-Chief
David Liu is our President, Chief Executive Officer and Chairman of the
Board. See "Business Experience of Continuing Director with Term Expiring in
2002" for a discussion of Mr. Liu's business experience. Mr. Liu is married to
Ms. Roney.
Sandra Stiles is our Chief Operating Officer and a director. See "Business
Experience of Nominees For Election to Terms Expiring in 2004" for a discussion
of Ms. Stiles' business experience.
Richard Szefc has served as our Chief Financial Officer since May 1999 and
our Treasurer and Secretary since September 1999. From July 1998 to May 1999,
Mr. Szefc was an independent consultant. From April 1990 to June 1998, Mr. Szefc
served as Executive Vice President and Chief Financial Officer of Random House.
Prior to April 1990, Mr. Szefc served as a partner in the audit practice of
Arthur Andersen & Co. Mr. Szefc received a B.S. in economics from the University
of Pennsylvania.
Carlos Manuel Abreu has served as our Chief Technology Officer since
February 1999. From March 1992 to January 1999, Mr. Abreu was the Chief
Executive Officer and Chief Technology Officer of Cyberphilia, Inc., a developer
of intranets, extranets and e-commerce solutions for advertising,
pharmaceutical, public relations, publishing, architectural, e-commerce and
other companies. Mr. Abreu received a B.S. in Computer Science from Rutgers
University.
Carley Roney is a co-founder of The Knot. She has served as our
Editor-In-Chief since our inception in May 1996. From May 1996 to September
1999, she also served as Vice President of Creative Development. From January
1994 to May 1996, she served as President at RunTime Inc., a CD-ROM development
firm that she co-founded with David Liu. Ms. Roney received a M.A. in Cultural
Studies and a B.F.A. in Film and Television from New York University. Ms. Roney
is married to Mr. Liu.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the aggregate
compensation paid by The Knot to our Chief Executive Officer and other executive
officers (the "Named Executive Officers") for services rendered in all
capacities to us for the years ended December 31, 2000, 1999 and 1998:
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
------------------ ------------
SECURITIES
UNDERLYING
SALARY BONUS OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
--------------------------- ---- ------- ------- ------------
David Liu.......................................... 2000 210,348 75,000 125,000
President, Chief Executive Officer 1999 139,167 100,000 --
and Chairman of the Board 1998 94,833(5) 30,000 --
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LONG TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
------------------ ------------
SECURITIES
UNDERLYING
SALARY BONUS OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
--------------------------- ---- ------- ------- ------------
Sandra Stiles(2)................................... 2000 200,932 75,000 125,000
Chief Operating Officer, Assistant 1999 137,292 75,000 --
Secretary and Director 1998 18,333 -- 380,000
Richard Szefc(3)................................... 2000 200,000 75,000 125,000
Chief Financial Officer, Treasurer 1999 85,625 75,000 250,000
and Secretary
Carlos Manuel Abreu(4)............................. 2000 184,482 50,000 75,000
Chief Technology Officer 1999 119,167 50,000 100,000
---------------
(1) The aggregate amount of perquisites and other personal benefits, if any, did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each Named Executive Officer and has therefore been omitted.
(2) Ms. Stiles joined The Knot as Chief Operating Officer in November 1998.
(3) Mr. Szefc joined The Knot as Chief Financial Officer in May 1999.
(4) Mr. Abreu joined The Knot as Chief Technology Officer in February 1999.
(5) During the first quarter of 1998, Mr. Liu received $21,500 of this amount
from Element Studios, a corporation formed in connection with The Knot's
inception.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to each of the Named Executive Officers during the year ended December 31,
2000. We did not grant any stock appreciation rights to the Named Executive
Officers during the year ended December 31, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL OPTIONS/ ASSUMED ANNUAL RATE OF
SECURITIES SARS GRANTED STOCK PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES EXERCISE OR OPTION TERM(4)
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ------------------------------
NAME GRANTED(1) YEAR(%)(2) ($/SH)(3) DATE 0%($) 5%($) 10%($)
---- ------------ -------------- ----------- ---------- -------- -------- --------
David Liu(5)................. 125,000 6.0% 0.94 11/29/10 -- 73,386 186,454
Sandra Stiles(5)............. 125,000 6.0% 0.94 11/29/10 -- 73,386 186,454
Richard Szefc(5)............. 125,000 6.0% 0.94 11/29/10 -- 73,386 186,454
Carlos Manuel Abreu(5)....... 75,000 3.6% 0.94 11/29/10 -- 44,032 111,873
---------------
(1) All options were granted under our 1999 Stock Incentive Plan. Unless
otherwise indicated, each option vests and becomes exercisable in a series
of 48 equal monthly installments.
(2) We granted options to acquire an aggregate of 2,076,750 shares of Common
Stock to our officers and employees in 2000.
(3) The exercise price may be paid in cash or in shares of Common Stock valued
at fair market value on the exercise date or a combination of cash or shares
or any other form of consideration approved by the Board.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 0%, 5%
and 10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent our
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estimate or a projection of our future common stock prices. These amounts
represent assumed rates of appreciation in the value of our common stock
from the deemed fair market value for accounting purposes on the date of
grant. Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock and overall stock market conditions.
The amounts reflected in the table may not necessarily be achieved.
(5) The fair market value of the underlying shares of Common Stock on November
29, 2000, the date the options were granted, was $0.94 per share.
The following table provides information concerning the value of
unexercised options held by each of the Named Executive Officers as of December
31, 2000. No options or stock appreciation rights were exercised during the year
ended December 31, 2000.
OPTION EXERCISES AND HOLDINGS
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR END(#) FISCAL YEAR END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
David Liu................... -- -- 2,604 122,396 -- --
Sandra Stiles............... -- -- 178,021 256,979 76,745 58,880
Richard Szefc............... -- -- 101,563 273,437 -- --
Carlos Manuel Abreu......... -- -- 47,396 127,604 20,052 23,698
---------------
(1) Value is defined as the fair market price of our Common Stock at December
31, 2000 less the exercise price. On December 31, 2000, the closing selling
price of a share of our Common Stock on the Nasdaq National Market was
$0.94.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
On April 12, 1999, The Knot entered into an employment contract with Mr.
Liu, our Chief Executive Officer, for three years. The contract provides for
salary and the payment of one or more annual bonuses at the sole discretion of
the Board. In the event of his termination without cause before the end of the
contract term, Mr. Liu is entitled to one year's salary plus certain benefits.
The contract also contains a covenant by Mr. Liu not to compete for the term of
the contract and for one year after the term expires. As of March 30, 2001, Mr.
Liu's annual salary was $250,000.
On November 2, 1998, The Knot entered into an employment contract with Ms.
Stiles, our Chief Operating Officer, which is terminable at any time. In the
event of her termination without cause, Ms. Stiles is entitled to one year's
salary plus certain benefits. As of March 30, 2001, Ms. Stiles' annual salary
was $235,000.
On May 31, 1999, The Knot entered into an employment contract with Mr.
Szefc, our Chief Financial Officer, which is terminable at any time. In the
event of his termination without cause, Mr. Szefc is entitled to one year's
salary plus certain benefits. In addition, in the event an individual or related
group of persons acquires 50% or more of our voting stock, at least 50% of Mr.
Szefc's initial options will vest immediately. As of March 30, 2000, Mr. Szefc's
salary was $235,000.
All of the options awarded by The Knot to the Named Executive Officers
during the year ended December 31, 2000 provide that, in the event that we are
acquired by merger, asset sale or sale of more than 50% of our voting securities
by the stockholders, each outstanding option which is not to be assumed by the
successor corporation will automatically accelerate by a period of 12 months so
that the options shall, immediately prior to the effective date of such change
of control, become exercisable for all of the option shares which would
otherwise have become exercisable during the first 12 months following the
effective date
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of such change of control as if optionee remained in service with The Knot
throughout such 12-month period and may be exercised for any or all of those
option shares as fully-vested shares of Common Stock.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee offers this report regarding compensation for
The Knot's executive officers and Chief Executive Officer.
GENERAL COMPENSATION POLICY. The fundamental policy of the Compensation
Committee is to provide our executive officers with competitive compensation
opportunities based upon their contribution to The Knot's development and
financial success and their personal performance. The Compensation Committee,
with this objective in mind, recommends to the Board compensation packages for
our executive officers designed to retain and attract top quality management and
to encourage them to contribute to the achievement of our business objectives.
In addition, the Compensation Committee attempts to establish compensation
packages that are comparable to the packages received by executives of similar
companies and reasonable in light of our internal base salary comparability
considerations.
We compensate our executive officers with a combination of salary and
incentives designed to encourage efforts to achieve both the short-term and
long-term goals of The Knot. The compensation structure attempts to reward both
individual contributions as well as our overall performance. The principal
factors which the Compensation Committee considered with respect to each
executive officer's compensation package for fiscal year 2000 are summarized
below. The Compensation Committee may, however, in its discretion apply entirely
different factors in advising our Chief Executive Officer and the Board with
respect to executive compensation for future years.
The basic components of our compensation packages for our executive
officers include the following:
- Base Salary
- Annual Incentives
- Long-Term Incentives
- Benefits
BASE SALARY. The base salary for each executive officer is determined on
the basis of the following factors: experience, personal performance, the salary
levels in effect for comparable positions within and without the industry, and
internal base salary comparability considerations. The weight given to each of
these factors differs from individual to individual, as the Compensation
Committee deems appropriate. Base salaries are generally reviewed on an annual
basis, with adjustments made in accordance with the factors indicated above. In
addition, in reviewing annual adjustments, the Compensation Committee takes into
account our performance in the fiscal year then ended.
ANNUAL INCENTIVES. The incentive compensation of our executive officers is
closely related to The Knot's performance. A portion of the cash compensation of
executive officers consists of contingent compensation. Bonus awards are based
on, among other things, performance objectives and goals that are tailored to
the responsibilities and functions of key executives. The Compensation Committee
felt that our executives and key employees reached personalized performance
objectives and contributed to our growth during 2000. During 2000, we approved
bonuses to our executive officers in an aggregate amount of $275,000.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives are provided
through grants of stock options. The grants are designed to align the interests
of each executive officer with those of our stockholders and provide each
individual with a significant incentive to manage The Knot from the perspective
of an owner with an equity stake in the company. Each option grant allows the
individual to acquire shares of our Common Stock at a fixed price per share
(generally, the market price on the grant date) over a specified period of time
(up to ten years). Each option generally becomes exercisable in installments
over a 4-year period, contingent upon the executive officer's continued
employment with The Knot. Accordingly, the option grant will provide a return to
the executive officer only if the executive officer remains employed by us
during the vesting period,
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and then only if the market price of the underlying shares appreciates. During
2000, we granted to our executive officers options to purchase an aggregate of
450,000 shares of Common Stock.
BENEFITS. Benefits offered to our executive officers serve as a safety net
of protection against the financial catastrophes that can result from illness,
disability or death. Benefits offered to our executive officers are
substantially the same as those offered to all our regular employees.
CEO COMPENSATION. The plans and policies discussed above were the basis
for the 2000 compensation of our Chief Executive Officer, Mr. David Liu. In
advising the Board with respect to this compensation, the Compensation Committee
seeks to achieve two objectives: (i) establish a level of base salary
competitive with that paid by companies within the industry which are of
comparable size to The Knot and by companies outside of the industry with which
we compete for executive talent and (ii) make a significant percentage of the
total compensation package contingent upon The Knot's performance and stock
price appreciation. In accordance with these objectives, Mr. Liu received a base
salary of $210,348 and a bonus of $75,000 for fiscal year 2000. Options to
purchase 125,000 shares of common stock were granted to Mr. Liu in fiscal year
2000 and he currently holds a total of 114,583 unexercised stock options. Mr.
Liu's 2000 compensation was based on the actual financial performance of The
Knot in achieving designated corporate objectives.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly held companies for compensation exceeding $1 million paid to certain
of the corporation's executive officers. The limitation applies only to
compensation which is not considered to be performance-based. The
non-performance based compensation paid to our executive officers for the 2000
fiscal year did not exceed the $1 million limit per officer, nor is it expected
that the non-performance based compensation to be paid to our executive officers
for fiscal year 2001 will exceed that limit. Because it is very unlikely that
the cash compensation payable to any of our executive officers in the
foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to our executive officers.
The Compensation Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the $1 million level.
Compensation Committee
John Link
Ann Winblad
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REPORT OF THE AUDIT COMMITTEE
The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future filings
with the Securities and Exchange Commission, or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate it by reference into a document filed under the
Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as
amended.
The Audit Committee oversees The Knot's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of The Knot's accounting principles and
such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and The
Knot including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of nonaudit
services with the auditors' independence.
The Committee discussed with The Knot's independent auditors the overall
scope and plans for their audit. The Committee met with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of The Knot's internal controls, and the overall
quality of The Knot's financial reporting. The Committee held five meetings
during fiscal year 2000 of which four meetings were attended by all members. One
member was absent at one meeting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended, subject to
shareholder approval, the selection of The Knot's independent auditors.
Audit Committee
John Link
Alexander Lynch
Ann Winblad
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STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires us to present a graph
comparing the cumulative total stockholder return on the Common Stock with the
cumulative total stockholder return of (i) a broad equity market index and (ii)
a published industry index or peer group. Although the graph would normally be
for a five-year period, the Common Stock began trading publicly on December 2,
1999 and, as a result, the following chart commences as of such date. This chart
compares the Common Stock with (i) the Nasdaq Stock Market-United States Index
and (ii) the Russell 2000 Index.
COMPARISON OF 13 MONTH CUMULATIVE TOTAL RETURN*
AMONG THE KNOT, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE RUSSELL 2000 INDEX
[PERFORMANCE GRAPH]
-----------------------------------------------------------------------------------------------
Company/Index Name 12/2/99 12/31/99 12/31/00
-----------------------------------------------------------------------------------------------
THE KNOT, INC. $100 $ 84.38 $ 9.38
NASDAQ STOCK MARKET (U.S.) 100 121.37 73.03
RUSSELL 2000 100 111.41 108.05
---------------
* $100 invested on 12/2/99 in stock or index -- including reinvestment of
dividends. Fiscal year ending 12/31.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
RELATIONSHIP WITH QVC
On April 13, 1999, The Knot sold 4,000,000 shares of our Series B Preferred
Stock at a price of $3.75 per share to QVC. QVC paid an aggregate of $15.0
million for the shares of Series B Preferred Stock and received a warrant to
purchase 1,700,000 shares of our common stock at an exercise price of $5.00 per
share The warrant became exercisable upon our initial public offering of common
stock. In addition, QVC received registration rights in connection with their
shares of stock and the shares issuable upon the exercise of its
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warrant, and became a party to the investor rights agreement. The Series B
Preferred Stock and the warrant have been assigned to QVC Interactive Holdings,
LLC (now known as Interactive Technology Holdings, LLC). We also entered into a
services agreement with QVC, which we believe is on terms and conditions no less
favorable to us than we could have obtained from unaffiliated third parties. We
also have an agreement with QVC to sell merchandise through a co-branded site
accessible from within QVC's online site. For the years ended December 31, 2000
and 1999, we purchased merchandise and incurred warehousing, fulfillment and
distribution and billing costs under the agreements in the aggregate amounts of
$511,000 and $172,000, respectively. John Link, a member of our Board, has been
the Executive Vice President of Information Technology of QVC since January
1991.
AOL ANCHOR TENANT AGREEMENT
On July 23, 1999, The Knot entered into an amended anchor tenant agreement
with AOL, which extended the term of our existing agreement with AOL through
January 6, 2003. Under the terms of the agreement, The Knot continues to be the
primary wedding content provider on AOL and on several other of AOL's leading
properties, including AOL.com, Netscape Netcenter and CompuServe. Under the
terms of the agreement, we pay carriage fees to AOL. Also under the terms of the
agreement, AOL may terminate the agreement without cause only with respect to
our carriage on AOL Hometown, Netscape and CompuServe upon 30 days' prior
notice. Advertisements and promotions are subject to AOL's approval, and the
advertisements may not promote AOL competitors such as other Internet service
providers or search engines. We believe the terms and conditions of our anchor
tenant agreement with AOL, taken as a whole, are no less favorable to us than we
could have obtained from unaffiliated third parties.
In consideration for AOL's agreement to extend the term of the agreement,
we granted to AOL a warrant, exercisable for eight years from the date of grant,
to purchase 366,667 shares of Common Stock at a price equal to $7.20 per share.
The warrant is immediately exercisable and expires in July 2007. In addition,
AOL received registration rights with respect to the shares issuable under the
warrant.
On May 1, 2000, we entered into an International Anchor Tenant Agreement
with AOL, whereby we agreed to receive distribution within AOL and its
affiliates within certain international markets in exchange for quarterly
carriage fees payable over the term of the agreement. Effective March 31, 2001,
we amended the International Anchor Tenant Agreement to limit to France the
international markets we receive distribution from AOL in exchange for a
one-time restructuring and carriage fee. Under the amended agreement, we are not
obligated to pay any continuing carriage fees to AOL. The amended agreement
expires on May 1, 2003.
For the years ended December 31, 2000 and 1999, we paid $1,845,000 and
$1,000,000, respectively, in carriage fees to AOL.
MISCELLANEOUS
The Certificate of Incorporation eliminates, subject to certain exceptions,
directors' personal liability to The Knot or our stockholders for monetary
damages for breaches of fiduciary duties. The Certificate of Incorporation does
not, however, eliminate or limit the personal liability of a director for (i)
any breach of the director's duty of loyalty to The Knot or our stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit.
Our Amended and Restated Bylaws provide that we shall indemnify our
directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law, and may indemnify our other officers,
employees and other agents as set forth in the Delaware General Corporation Law.
In addition, we have entered into indemnification agreements with our directors
and officers. The indemnification agreements contain provisions that require us,
among other things, to indemnify our directors and executive officers against
certain liabilities (other than liabilities arising from intentional or knowing
and culpable violations of law) that may arise by reason of their status or
service as our directors or executive officers or other entities to which they
provide service at our request and to advance expenses they may incur as a
result of any proceeding
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against them as to which they could be indemnified. We believe that these
provisions and agreements are necessary to attract and retain qualified
directors and officers. We have obtained an insurance policy covering our
directors and officers for claims that such directors and officers may otherwise
be required to pay or for which we are required to indemnify them, subject to
certain exclusions.
On August 14, 2000, certain Weddingpages franchisees commenced litigation
in Supreme Court, New York County, New York against us and certain of our
officers, including David Liu, our Chairman and Chief Executive Officer. The
plaintiffs seek to enjoin us from taking actions, primarily relating to the sale
of advertising in certain local markets, which plaintiffs claim will damage the
value of their Weddingpages franchises and money damages in an unspecified
amount. On October 19, 2000, we filed our initial response. On October 27, 2000
the Supreme Court of the State of New York refused to grant preliminary
injunctions sought by certain Weddingpages franchisees. The court ordered that
the parties submit their dispute to a neutral mediator. In February and March
2001, as a result of negotiations among the parties, with the assistance of the
mediator, non-monetary settlements were reached with six of the plaintiffs in
the action. Certain franchisees have not executed the settlement agreement as
negotiated. We had previously made a motion to dismiss the case, which was
stayed pending settlement discussions. It is our intention to reinstate the
motion against those plaintiffs who have refused to execute the settlement
agreement and, in any event, to continue to contest the allegations which, we
believe, are without merit.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires The Knot's officers and
directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the SEC
and the Nasdaq Stock Market. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish us with copies of all
reports they file pursuant to Section 16(a).
Based solely on a review of the copies of such reports furnished to The
Knot, we believe that, during 2000, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% stockholders were
satisfied.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented at our annual
meeting of stockholders to be held in 2002 must be received by us no later than
December 17, 2001, if such proposals are to be included in the proxy statement
and related proxy materials relating to that meeting. In addition, the proxy
solicited by the Board of Directors for the annual meeting of stockholders to be
held in 2002 will confer discretionary authority to vote on any stockholder
proposal presented at that meeting unless we receive notice of such proposal on
or before February 15, 2002.
FORM 10-K
The Knot filed an Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 with the Securities and Exchange Commission on March 30, 2001.
Stockholders may obtain a copy of this report, without charge, upon written
request, by writing to Investor Relations, at our executive offices, which are
located at 462 Broadway, 6th Floor, New York, New York 10013.
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OTHER BUSINESS
The Board knows of no other business that will be presented for
consideration at the Annual Meeting. If other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
Order of the Board of Directors
/s/ Richard Szefc
RICHARD SZEFC, Secretary
Dated: April 12, 2001
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APPENDIX A
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders and others, the
systems of internal controls which management and the Board of Directors have
established, and the Corporation's audit and financial reporting process.
The independent accountants' ultimate responsibility is to the Board of
Directors and the Audit Committee, as representatives of the shareholders. These
representatives have the ultimate authority to select, evaluate, and, where
appropriate, replace the independent accountants.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more independent
directors.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices, and at least one member of the Committee shall
have accounting or related financial management expertise.
III. MEETINGS
The Committee shall meet on a regular basis and shall hold special meetings
as circumstances require.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. Review this Charter at least annually and recommend any changes to
the Board.
B. Review the organization's annual financial statements and any
other relevant reports or other financial information.
C. Review the regular internal financial reports prepared by
management and any internal auditing department.
D. Recommend to the Board of Directors the selection of the
independent accountants and approve the fees and other compensation to be
paid to the independent accountants. On an annual basis, the Committee
shall obtain a formal written statement from the independent accountants
delineating all relationships between the accountants and the Corporation
consistent with Independence Standards Board Standard 1, and shall review
and discuss with the accountants all significant relationships the
accountants have with the Corporation to determine the accountants'
independence.
E. Review the performance of the independent accountants and approve
any proposed discharge of the independent accountants when circumstances
warrant.
F. Following completion of the annual audit, review separately with
the independent accountants, the internal auditing department, if any, and
management any significant difficulties encountered during the course of
the audit.
G. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
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PROXY CARD
THE KNOT, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David Liu and Richard Szefc, jointly and
severally, as proxies, with full power of substitution and resubstitution, to
vote all shares of stock which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of THE KNOT, INC. to be held on Tuesday, May 15, 2001,
or at any postponement or adjournment thereof, as specified on the reverse, and
to vote in his or their discretion on such other business as may properly come
before the Annual Meeting and any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR DISCRETION
AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR ANY ADJOURNMENTS
THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST
SIGN BELOW, NO BOXES NEED BE CHECKED.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
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PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
THE KNOT, INC. -- ANNUAL MEETING OF STOCKHOLDERS -- MAY 15, 2001
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS:
[ ] Vote FOR all nominees listed below (except as withheld in the space
below) [ ] Vote WITHHELD from all nominees
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE
BOX "VOTE FOR" AND WRITE THE NOMINEE'S NAME ON THE LINE BELOW.
--------------------------------------------------------------------------------
NOMINEES: ALEXANDER LYNCH AND SANDRA STILES WILL STAND FOR RE-ELECTION TO THE
BOARD FOR TERMS TO EXPIRE IN 2004.
2. APPROVAL OF AMENDMENT TO THE KNOT'S 1999 STOCK INCENTIVE PLAN:
To approve an amendment to our 1999 Stock Incentive Plan that increases the
number of shares of our common stock authorized for issuance under the plan
to 5,143,393.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF ACCOUNTANTS:
To ratify and approve the selection of Ernst & Young LLP as independent
accountants for the fiscal year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
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SIGNATURE OF STOCKHOLDER
-----------------------------------------------------
PRINTED NAME OF STOCKHOLDER
-----------------------------------------------------
TITLE (IF APPROPRIATE)
Note: Please sign exactly as name appears hereon. If
signing as attorney, executor, administrator, trustee
or guardian, please give full title as such,
and, if signing for a corporation, give your
title. When shares are in the names of more
than one person, each should sign.
Dated: --------------------- , 2001