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0000930413-07-003771.txt : 20070425
0000930413-07-003771.hdr.sgml : 20070425
20070425163439
ACCESSION NUMBER: 0000930413-07-003771
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20070523
FILED AS OF DATE: 20070425
DATE AS OF CHANGE: 20070425
EFFECTIVENESS DATE: 20070425
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: KNOT INC
CENTRAL INDEX KEY: 0001062292
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-NONSTORE RETAILERS [5960]
IRS NUMBER: 133895178
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-28271
FILM NUMBER: 07788012
BUSINESS ADDRESS:
STREET 1: 462 BROADWAY 6TH FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10013
BUSINESS PHONE: 2122198555
MAIL ADDRESS:
STREET 1: 462 BROADWAY, 6TH FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10013
DEF 14A
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c48120_def14a.htm
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Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
THE KNOT,
INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate
box):
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THE KNOT, INC.
462 Broadway, 6th Floor
New York, New York 10013
April 25, 2007
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 The Knots subsidiary, WeddingChannel.com,
Inc., 700 South Flower Street, Suite 600, Los Angeles, California 90017 on Wednesday,
May 23, 2007 at 9:30 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.
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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).
THE KNOT, INC.
462 Broadway, 6th Floor
New York, New York 10013
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2007
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 The Knots subsidiary, WeddingChannel.com, Inc., 700 South Flower
Street, Suite 600, Los Angeles, California 90017 on Wednesday, May 23,
2007 at 9:30 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) nominees to the class of directors whose terms expire in 2010.
The Board has nominated the following persons for re-election at the Annual
Meeting: Sandra Stiles and Charles Baker;
2.
To ratify the appointment of Ernst & Young LLP as The Knots independent
registered public accounting firm for the calendar year ending December 31,
2007; and
3.
To transact such other business as may properly come before the Annual Meeting
or any adjournment or postponement 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 April 2, 2007 will be entitled to vote at the Annual Meeting and at any adjournment
or postponement thereof. The stock transfer books of The Knot will remain open
between May 13, 2007 and the date of the meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available for inspection at the Annual
Meeting and, while the transfer books remain open prior thereto, at our offices
during regular business hours.
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By Order of the Board of Directors |
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RICHARD SZEFC Chief Financial Officer, Treasurer and Secretary |
April 25, 2007
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.
THE KNOT, INC.
462 Broadway, 6th Floor
New York, New York 10013
PROXY STATEMENT
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 and at any adjournment or postponement of the annual meeting
(the Annual Meeting). The Annual Meeting will be held at the offices
of the The Knots subsidiary, WeddingChannel.com, Inc., 700 South Flower
Street, Suite 600, Los Angeles, California 90017 on Wednesday, May 23, 2007
at 9:30 a.m. All stockholders of record on April 2, 2007 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 May 2, 2007.
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
April 2, 2007, the record date for determination of stockholders entitled to
vote at the Annual Meeting, there were 31,284,028 shares of Common Stock outstanding
held by stockholders of record. A list of stockholders eligible to vote at the
Annual Meeting will be available for inspection at the Annual Meeting and, while
the stock transfer books remain open 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 on April 2,
2007.
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 as present for purposes of
determining whether a quorum is present at the Annual Meeting. Broker
non-votes are shares held by brokers or nominees which are present in
person or represented by proxy, but which are not voted because instructions
have not been received from the beneficial owner with respect to a particular
matter for which the broker or nominee does not have discretionary power to
vote.
If
a quorum is present, the two nominees who receive the greatest number of votes
properly cast (in person or by proxy) will be elected as directors for terms
expiring in 2010. Neither abstentions nor broker non-votes will have any effect
on the outcome of voting with respect to the election of directors. Stockholders
may not cumulate votes for the election of directors.
Proposals
other than for the election of directors shall be approved by the affirmative
vote of the holders of a majority of the shares of the Common Stock present
at the Annual Meeting, in person or by proxy, and entitled to vote thereon.
Abstentions will be counted towards the tabulations of votes cast on these proposals
presented to the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of determining whether
such a proposal has been approved.
Under
the General Corporation Law of the State of Delaware, stockholders are not entitled
to dissenters rights with respect to any matter to be considered and voted
on at the Annual Meeting, and The Knot will not independently provide stockholders
with any such right.
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 ratification of Ernst & Young LLP as The
Knots independent registered public accounting firm, and as the proxy
holders deem advisable for all other matters as may properly come before the
Annual Meeting.
Any person giving a Proxy has the power to revoke it at any time before its exercise. It may be revoked by:
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notifying the Secretary of The Knot in writing before the Annual Meeting; |
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delivering to the Secretary of The Knot before the Annual Meeting a signed proxy with a later date; or |
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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
Knots 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 2010 annual meeting of stockholders
or until a successor has been duly elected and qualified.
The
Board has nominated Sandra Stiles and Charles Baker to stand for re-election
to the class of directors whose terms expire at the 2010 annual meeting of stockholders
or until a successor is elected and has qualified. Each person nominated for
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
are unable or decline 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 2010
Sandra
Stiles (57) has been our Chief Operating Officer since November 1998 and Assistant
Secretary since September 1999. From November 1998 to May 1999, she served as
our Chief Financial
2
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 Childrens 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. Ms. Stiles received a B.S. in Accounting from
New York University.
Charles
Baker (40) has served as one of our directors since November 2005. Mr. Baker
has been the Senior Vice President and Chief Financial Officer of Monster Worldwide,
Inc. since 2005. From 1993 to 2005, Mr. Baker held various positions at Salomon
Brothers (subsequently Smith Barney) and was a Managing Director in the Equity
Research Department just prior to joining Monster Worldwide, Inc. Mr. Baker
holds the Chartered Financial Analyst designation and is a former Chairman of
the Media and Entertainment Analysts of New York Investment Society. Mr. Baker
earned a B.A. from Yale College.
Business Experience of Continuing Directors with Terms Expiring in 2008
David
Liu (41) 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, our Editor-in-Chief. Prior to January
1993, Mr. Liu was the Director of Production at VideOvation, a subsidiary of
Readers Digest. Mr. Liu received a B.F.A. in Film and Television from
New York University. Mr. Liu is married to Ms. Roney.
Lisa
Gersh (48) has served as one of our directors since June 2005. Ms. Gersh has
been the President, Chief Operating Officer and co-founder of Oxygen Network
since 1998. From 1986 to 1998, Ms. Gersh served as a founding partner of the
New York law firm Kaplan & Seiler LLP. Ms. Gersh received a B.A. in Political
Science and Economics from the State University of New York at Binghamton and
earned her J.D. from Rutgers Law School.
Business Experience of Continuing Directors with Terms Expiring in 2009
Eileen
Naughton (49) has served as one of our directors since October 2006. Ms. Naughton
has been a Regional Director of Google since September 2006. From 2002 to 2006,
Ms. Naughton served as president of the TIME Group and as VP of Investor Relations
for Time Warner from 2000 to 2002. Ms. Naughton received a B.A. in International
Relations and an M.B.A. in Finance from the University of Pennsylvania.
Ira
Carlin (59) has served as one of our directors since October 2006. Mr. Carlin
has been Chairman-International of MAGNA Worldwide, a division of the Interpublic
Group of Companies (IPG), since 2002. Mr. Carlin began his advertising career
at Grey Advertising and has been with IPG since 1974. From 1990 to 2002, Mr.
Carlin served as Chairman and CEO of Universal McCann. Mr. Carlin received a
B.A. in Physics from Hebrew University.
Corporate Governance
Overview.
The Board of Directors has implemented a number of corporate governance enhancements
to further strengthen the Boards capacity to oversee The Knot and to serve
the long-term interests of its stockholders. In March 2007, the Board of Directors
adopted Corporate Governance Guidelines for The Knot. These guidelines, as well
as Board committee charters, codes of conduct and other documents setting forth
The Knots corporate governance practices, can be accessed in the Investor
RelationsCorporate Governance section of The Knots website
at www.theknot.com.
Director
Independence. In April 2007, the Board of Directors undertook its annual
review of director independence. As a result of this review, the Board affirmatively
determined that a majority of its directors (Mr. Baker, Mr. Carlin, Ms. Gersh
and Ms. Naughton) are independent as defined by rule 4200 of the NASDAQ Stock
Market (the NASDAQ) and rule 10A-3 promulgated by the Securities
and Exchange Commission (the SEC). Rule 10A-3 provides a safe harbor
position that a person who is not the beneficial owner, directly or indirectly,
of more than 10% of our common stock, and who is
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not one
of our executive officers, will not be deemed to be an affiliate of The Knot
for purposes of satisfying the audit committee member independence rules.
Presiding
Director. The Presiding Directors primary responsibilities include
presiding over periodic executive sessions of the non-employee members of the
Board of Directors and performing other duties that the Board may from time
to time delegate to assist it in the fulfillment of its responsibilities. The
non-employee members of the Board have determined that they will each serve
in this position on a rotating basis from meeting to meeting.
Codes
of Conduct. The Board has adopted a Code of Business Conduct and Ethics
that applies to all officers, directors and employees, and a Code of Ethics
for the Chief Executive Officer and Senior Financial Officers. Both codes of
conduct can be accessed in the Investor RelationsCorporate Governance
section of The Knots website at www.theknot.com, as well as any
amendments to, or waivers under, the Code of Ethics for the Chief Executive
Officer and Senior Financial Officers. Copies may be obtained by writing to
The Knot, Inc. at 462 Broadway, 6th Floor, New York, New York 10013, Attention:
Investor Relations. The purpose of these codes of conduct and ethics is to promote
honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships; to promote
full, fair, accurate, timely and understandable disclosure in periodic reports
required to be filed by The Knot; and to promote compliance with all applicable
rules and regulations that apply to The Knot and its officers, directors and
employees.
Communicating with the Board of Directors
In
order to communicate with the Board of Directors as a whole, with non-employee
directors or with specified individual directors, correspondence may be directed
to The Knot, Inc. at 462 Broadway, 6th Floor, New York, New York 10013, Attention:
Corporate Secretary. All such correspondence will be forwarded to the appropriate
director or group of directors.
Board Meetings and Committees
The
Board met a total of seven times and acted by written consent three times during
the year ended December 31, 2006. The Board has a Nominating and Corporate Governance
Committee, a Compensation Committee and an Audit Committee.
Nominating and Corporate Governance Committee
The
Nominating and Corporate Governance Committee was established by the Board in
March 2007 and is currently composed of Mr. Carlin and Mr. Baker. The Nominating
and Corporate Governance Committee will review and recommend changes to The
Knots Corporate Governance Guidelines and select director nominees to
the Board consistent with criteria approved by the Board. This committee will
also make recommendations to the Board concerning the structure and membership
of the Board committees and will oversee the annual evaluation of the Board
and Board committee performance. The Nominating and Corporate Governance Committee
also performs other duties and responsibilities as set forth in a Charter approved
by the Board of Directors.
In
March 2007, the Board of Directors determined that the Nominating and Corporate
Governance Committee will consider director candidates that are recommended
by stockholders. This Committee will evaluate nominees for director recommended
by stockholders in the same manner as nominees recommended by other sources.
The general qualifications and specific qualities and skills established by
the Board for directors are set forth in Section B of The Knots Corporate
Governance Guidelines. Stockholders wishing to bring a nomination for a director
candidate before a stockholders meeting must give written notice to The Knots
Corporate Secretary, pursuant to the procedures set forth under Communicating
with the Board of Directors and subject to the deadline set forth under
Deadline for Stockholder Proposals. The stockholders notice
must set forth all information relating to each person whom the stockholder
proposes to nominate that is required to be disclosed under applicable rules
and regulations of the SEC and The Knots bylaws. The Knots bylaws
can be accessed in the Investor RelationsCorporate Governance
section of The Knots website at www.theknot.com.
4
Compensation Committee
The
Compensation Committee is currently composed of Mr. Carlin, Ms. Gersh and Ms.
Naughton. The Compensation Committee met once and acted by written consent two
times during the year ended December 31, 2006. The Compensation Committee evaluates
performance and establishes and oversees executive compensation policy and makes
decisions about base pay, incentive pay and any supplemental benefits for the
Chief Executive Officer and our other Executive Officers. The Compensation Committee
also administers our stock incentive plans and approves the grant of stock options
and restricted stock, the timing of the grants, the price at which options are
to be offered and the number of shares for which options and restricted stock
are to be granted to our executive officers, directors and other employees.
The Compensation Committee also performs other duties and responsibilities as
set forth in a Charter approved by the Board of Directors.
In
making its determinations with respect to executive compensation, the Compensation
Committee has not historically engaged the services of a compensation consultant.
The Compensation Committee has the authority to retain, terminate and set the
terms of The Knots relationship with any outside advisors who assist the
Committee in carrying out its responsibilities.
Audit Committee
The
Audit Committee is currently composed of Mr. Baker, Ms. Gersh and Ms. Naughton.
The Audit Committee met seven times in 2006. The Audit Committee appoints our
independent auditors, subject to ratification by our stockholders, reviews the
plan for and the results of the independent audit, approves the fees of our
independent auditors, reviews with management and the independent auditors our
quarterly and annual financial statements and our internal accounting, financial
and disclosure controls, reviews and approves transactions between The Knot
and its officers, directors and affiliates and performs other duties and responsibilities
as set forth in a Charter approved by the Board of Directors.
Each
member of the Nominating and Corporate Governance Committee, Compensation Committee
and the Audit Committee is independent, as independence is defined by the listing
standards of the NASDAQ and the applicable rules and regulations of the SEC.
The Board has also determined that each member of the Audit Committee has the
ability to read and understand financial statements and that Mr. Baker and Ms.
Gersh qualify as Audit Committee financial experts as defined by the rules of
the SEC. In addition, the Board has determined that Mr. Baker and Ms. Gersh
each satisfy the NASDAQ rule requiring that at least one member of the Audit
Committee have past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience
or background which results in the members financial sophistication, including
being, or having been, a chief executive officer, chief financial officer or
other senior officer with financial oversight responsibilities. The Nominating
and Corporate Governance Committee, Compensation Committee and Audit Committee
Charters can be accessed in the Investor RelationsCorporate Governance
section of The Knots website at www.theknot.com.
In addition to the meetings of the committees of the Board of Directors, our non-employee members of the Board of Directors met twice in executive session in 2006.
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, that were held in 2006. The Knots policy
on director attendance at annual meetings calls for directors to be invited
but not required to attend annual meetings of stockholders. Two directors, Mr.
Liu, our Chairman of the Board and Ms. Stiles, attended the 2006 Annual Meeting
of Stockholders.
Compensation Committee Interlocks and Insider Participation
The
members of our Compensation Committee during the year ended December 31, 2006
were Mr. Carlin, Ms. Gersh, Ms. Naughton, Matthew Strauss and Ann Winblad. Mr.
Strauss and Ms. Winblad resigned from the Board and the Compensation Committee
in October 2006. Mr. Carlin, Ms. Gersh and Ms. Naughton were appointed to the
Compensation Committee in October 2006.
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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 nominees for the class of directors whose
terms expire at the 2010 annual meeting of stockholders receiving the highest
number of affirmative votes of the stockholders entitled to vote at the Annual
Meeting will be elected a director of The Knot. Pursuant to applicable Delaware
law, abstentions and broker non-votes will have no effect on the outcome of
the vote. Unless otherwise instructed, the proxyholders will vote each returned
Proxy FOR the nominees named above.
Recommendation of the Board
The Board of Directors recommends a vote FOR the nominees listed above.
PROPOSAL 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of The Board of Directors has reappointed the firm of Ernst
& Young LLP, the independent registered public accounting firm for The Knot
during the calendar year ended December 31, 2006, to serve in the same capacity
for the calendar year ending December 31, 2007, and is asking the stockholders
to ratify this appointment. 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.
The
appointment of independent auditors is made annually by the Audit Committee
and subsequently submitted to the stockholders for ratification. Before making
its appointment of Ernst & Young LLP, the Audit Committee carefully considered
that firms qualifications as the independent registered public accounting
firm for the Company. This included a review of its performance in prior years,
as well as its reputation for integrity and competence in the fields of accounting
and auditing. The Committee has expressed its satisfaction with Ernst &
Young LLP in all of these respects.
Fees
Audit
Fees. The aggregate fees billed by Ernst & Young LLP for professional
services rendered for the audit of our annual financial statements, the reviews
of the financial statements included in our quarterly reports on Form 10-Q and
for other attest services, primarily consents related to SEC registration statements,
were $1,108,000 and $475,863 for 2006 and 2005, respectively.
Tax
Fees. The aggregate fees billed by Ernst & Young LLP for tax compliance,
tax consulting and tax planning services were $132,390 and $89,940 for 2006
and 2005, respectively.
AuditRelated
Fees. The aggregate fees billed by Ernst & Young LLP for services rendered
related to due diligence for the WeddingChannel acquisition during 2006 were
$286,695. No audit-related services were rendered during 2005.
All
Other Fees. The aggregate fees billed by Ernst & Young LLP for other
services, primarily Sarbanes-Oxley consultation, were $8,500 during 2005. No
other services were rendered by Ernst & Young LLP during 2006 and 2005 other
than those described above.
Pre-Approval
Policies and Procedures
The
Audit Committee pre-approves all audit and permissible non-audit services and
has considered whether the provision of the services covered by the categories
Tax Fees and All Other Fees are compatible with maintaining
the independence of Ernst & Young LLP. The Audit Committee has authorized
each of its members to pre-approve audit, audit-related, tax and non-audit services,
provided that such approved service is reviewed with the full Audit Committee
at its next meeting.
As
early as practicable in each fiscal year, Ernst & Young provides to the
Audit Committee a schedule of the audit and other services that they expect
to provide or may provide during the year. The schedule will be specific as
to the nature of the proposed services, the proposed fees, and other details
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that the
Audit Committee may request. The Audit Committee will by resolution authorize
or decline the proposed services. Upon approval, this schedule will serve as
the budget for fees by specific activity or service for the year.
A
schedule of additional services proposed to be provided by Ernst & Young
or proposed revisions to services already approved, along with associated proposed
fees, may be presented to the Audit Committee for their consideration and approval
at any time. The schedule will be specific as to the nature of the proposed
service, the proposed fee, and other details that the Audit Committee may request.
The Audit Committee will by resolution authorize or decline authorization for
each proposed new service.
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 appointment, the Audit
Committee will reconsider its selection. Even if the selection is ratified,
the Audit Committee, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Audit Committee
believes that such a change would be in The Knots and our stockholders
best interests.
Recommendation
of the Board
The
Board of Directors recommends a vote FOR the ratification of the
selection of Ernst & Young LLP to serve as The Knots independent registered
public accounting firm for the year ending December 31, 2007.
REPORT
OF THE AUDIT COMMITTEE
The charter of the Audit Committee of the Board of Directors specifies that the purpose of the Committee is to assist the Board of Directors in its oversight of:
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The integrity of The Knots financial statements; |
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The adequacy of The Knots system of internal accounting and financial controls; |
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The appointment, engagement and performance of the independent registered public accounting firm and the evaluation of the independent auditors qualifications and independence; and |
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The Knots compliance with legal and regulatory requirements.
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In
discharging its responsibilities, the Committee is not itself responsible for
the planning or the performance of audits, or for any determination that The
Knots financial statements are complete and accurate, or in accordance
with generally accepted accounting principles. Management is responsible for
the preparation, presentation, and integrity of The Knots financial statements
and for the appropriateness of the accounting principles and reporting policies
that are used by The Knot. The Knots independent registered public accounting
firm, Ernst & Young, LLP (Ernst & Young) is responsible
for auditing The Knots financial statements and for reviewing The Knots
unaudited interim financial statements.
The
Committee met seven times during calendar year 2006. The Committees meetings
included separate discussions with management and Ernst & Young.
As
part of its oversight of The Knots financial statements, the Committee
reviewed and discussed with both management and Ernst & Young all annual
financial statements and quarterly operating results prior to their issuance.
Management represented to the Committee that each set of financial statements
reviewed had been prepared in accordance with generally accepted accounting
principles. The Committee discussed with Ernst & Young the matters required
to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication
with Audit Committees), including the quality of The Knots accounting
principles, the reasonableness of significant judgments and the clarity of disclosures
in the financial statements. The Committee also discussed with Ernst & Young
the critical
7
accounting
policies and practices used in the preparation of The Knots annual consolidated
financial statements and whether there were any audit problems.
The
Committee discussed with Ernst & Young that firms independence from
The Knot and management. The Committee obtained and reviewed the written disclosures
and letter required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and provided to the Committee by Ernst &
Young. The Committee also discussed with Ernst and Young:
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The firms internal quality control procedures; |
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Any material issues raised by the most recent internal quality control review (or peer review) of the firm; and |
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All relationships between the firm and The Knot.
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The
Committee reviewed and pre-approved the fees for services rendered by Ernst
& Young for calendar year 2006 and considered whether the provision of non-audit
services by Ernst & Young in 2006 was compatible with maintaining the auditors
independence.
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 consolidated
financial statements be included in The Knots Annual Report on Form 10-K
for the year ended December 31, 2006, for filing with the SEC.
The
Committee has appointed Ernst & Young as The Knots independent registered
public accounting firm for the calendar year ending December 31, 2007.
Audit Committee
Charles Baker (Chair)
Lisa Gersh
Eileen Naughton
8
OWNERSHIP OF SECURITIES
The
following table sets forth certain information regarding the beneficial ownership
of The Knots Common Stock as of April 2, 2007 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.
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Name and Address of Beneficial Owner(1) |
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Amount and Nature
of Beneficial Ownership of Common Stock(2) |
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Number |
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Percent |
David Liu(3) |
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915,196 |
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2.9 |
% |
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Sandra Stiles(4) |
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536,470 |
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1.7 |
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Richard Szefc(5) |
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618,825 |
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2.0 |
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Armando Cardenas-Nolazco(6) |
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60,417 |
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* |
Lisa Gersh(7) |
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7,500 |
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* |
Charles Baker(8) |
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10,000 |
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* |
Ira Carlin(9) |
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7,500 |
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* |
Eileen Naughton(10) |
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7,500 |
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* |
Federated Department Stores, Inc.(11) |
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3,662,487 |
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11.7 |
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AXA Financial, Inc.(12) |
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1,845,149 |
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5.9 |
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Tracer Capital Management, Inc.(13) |
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1,822,251 |
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5.8 |
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Rainier Investment Management, Inc.(14) |
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1,578,325 |
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5.0 |
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All directors and executive officers as a group (9 persons)(15) |
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2,163,408 |
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6.7 |
% |
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(1) |
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Except as otherwise indicated, the persons named in the table directly
own, and 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. Beneficial ownership is calculated pursuant
to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended. |
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(2) |
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On
April 2, 2007, 31,284,028 shares of Common Stock were issued and outstanding. |
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(3) |
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Includes
72,000 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. Includes
438,612 shares of Common Stock issuable upon the exercise of presently
exercisable options and 8,889 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days. |
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(4) |
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Includes
56,000 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. Includes
239,583 shares of Common Stock issuable upon the exercise of presently
exercisable options and 6,945 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days. |
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(5) |
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Includes
56,000 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. Includes
421,877 shares of Common Stock issuable upon the exercise of presently
exercisable options and 6,945 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days. |
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(6) |
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Includes
56,250 shares of Common Stock issuable upon the exercise of presently
exercisable options and 4,167 shares of Common Stock issuable upon the
exercise of options exercisable within 60 days. |
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(7) |
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Consists
of 5,000 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. |
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(8) |
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Consists
of 5,000 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days.
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9
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(9) |
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Consists
of 7,500 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. |
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(10) |
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Consists
of 7,500 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. |
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(11) |
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The
information in this footnote is based upon information set forth in a
Schedule 13G filed with the SEC on February 14, 2007 by Federated Corporate
Services, Inc., an indirect wholly owned subsidiary of Federated Department
Stores, Inc. Consists of 3,662,487 shares of Common Stock held of record
by Federated Corporate Services, Inc. The address of Federated Corporate
Services, Inc. is 7 West Seventh Street, Cincinnati, OH 45202. |
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(12) |
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The
information in this footnote is based upon information set forth in a
Schedule 13G filed with the SEC on February 13, 2007 by AXA Financial,
Inc.; AXA; AXA Assurances I.A.R.D Mutuelle; AXA Assurances Vie Mutuelle;
and AXA Courtage Assurance Mutuelle. AXA Assurances I.A.R.D Mutuelle;
AXA Assurances Vie Mutuelle; and AXA Courtage Assurance Mutuelle are referred
to as the Mutuelles AXA, which as a group control AXA, which
owns AXA Financial, Inc. The Schedule 13G states that: (1) AXA Rosenberg
Investment Management LLC, an entity controlled by AXA, has the sole power
to vote 92,806 shares and the sole power to dispose of 192,799 shares;
(2) AllianceBernstein L.P., a subsidiary of AXA Financial, Inc., has the
sole power to vote 1,354,810 shares and the sole power to dispose of 1,472,520
shares; and (3) AXA Equitable Life Insurance Company, a subsidiary of
AXA Financial, Inc., has the sole power to vote and dispose of 179,830
shares. The shares beneficially owed by AXA Rosenberg Investment Management
LLC and AXA Equitable Life Insurance Company were acquired solely for
investment purposes: The shares beneficially owed by AllianceBernstein
L.P. were acquired solely for investment purposes on behalf of client
discretionary investment advisory accounts: Each of the Mutuelles AXA,
as a group, and AXA expressly declared that the filing of the Schedule
13G shall not be construed as an admission that it is, for purposes of
Section 13(d) of the Exchange Act, the beneficial owner of any securities
covered by the Schedule 13G. Each of the subsidiaries of AXA Financial,
Inc. operates under independent management and makes independent decisions.
The address of each entity in the Mutuelles AXA is 26, rue Drouot, 75009
Paris, France. The address of AXA is 25, avenue Matignon, 75008 Paris,
France. The address of AXA Financial, Inc. is 1290 Avenue of the Americas,
New York, New York 10104. |
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(13) |
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The
information in this footnote is based upon information set forth in a
Schedule 13G filed with the SEC on January 26, 2007 by Tracer Capital
Management L.P. (Tracer Capital Management), Tracer Capital
Offshore Fund Ltd (Offshore), Riley McCormack and Matt Hastings.
The Schedule 13G states that the sole power to vote or direct the vote
of the entire shareholding and the sole power to dispose of or direct
the disposal of the entire shareholding has been delegated to Tracer Capital
Management for Offshore and other unregistered funds managed by Tracer
Capital Management, and that Riley McCormack and Matt Hastings, as the
sole limited partners of Tracer Capital Management and the sole managing
members of TCM and Company, LLC, the general partner of Tracer Capital
Management, control Tracer Capital Management. The address of Tracer Capital
Management L.P, Riley McCormack and Matt Hastings is 540 Madison Avenue,
33rd Floor, New York, New York 10022. The address of Offshore is P.O.
Box 896, Harbour Centre, Grand Cayman, Cayman Islands |
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(14) |
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The
information in this footnote is based upon information set forth in a
Schedule 13G filed with the SEC on February 13, 2007 by Rainier Investment
Management, Inc. The Schedule 13G states that Rainier Investment Management,
Inc. has the sole power to vote 1,520,925 shares and the sole power to
dispose of all 1,578,325 shares. The address of Rainier Investment Management,
Inc. is 601 Union Street, Suite 2801, Seattle, Washington 98101. |
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(15) |
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Includes
209,000 shares of restricted Common Stock that are subject to repurchase
rights by us, for $0.01 per share, that do not lapse within 60 days. Includes
1,183,268 shares of Common Stock issuable upon the exercise of presently
exercisable options which are currently vested or which vest within 60
days of April 2, 2006.
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10
MANAGEMENT
The
following table sets forth, as of April 2, 2007, the name, age and position
of each of our executive officers and other key employees.
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Name |
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Age |
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Position |
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David Liu |
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41 |
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President, Chief Executive Officer and Chairman of the Board |
Sandra Stiles |
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57 |
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Chief Operating Officer, Assistant Secretary and Director |
Richard Szefc |
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57 |
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Chief Financial Officer, Treasurer and Secretary |
Armando Cardenas-Nolazco |
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45 |
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Chief Technology Officer |
Carley Roney |
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38 |
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Editor-in-Chief |
David
Liu is our President, Chief Executive Officer and Chairman of the Board.
See Business Experience of Continuing Directors with Terms Expiring in
2008 for a discussion of Mr. Lius 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 2010 for a discussion
of Ms. Stiless 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. Mr. Szefc
received a B.S. in Economics from the University of Pennsylvania.
Armando
Cardenas-Nolazco has served as our Chief Technology Officer since December
2004. From June 2003 to November 2004, he served as Senior Director of Technology
Research and Development for Harcourt Assessment, Inc. From December 2001 to
May 2003, he served as Chief Technology Officer for DEVX.com. From January 2001
to December 2001, he was a Senior Strategy Consultant and Chief Technology Officer
for BroadVision Management Consulting, LLC. From March 2000 to December 2000,
he served as Chief Technology Officer for Dean & Deluca. From October 1998
to March 2000, he served as a Managing Director supporting various web trading
sites for Charles Schwab.
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 AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
The
following Compensation Discussion and Analysis describes the elements of compensation
for our executive officers identified in the Summary Compensation Table. As
further described on page 4, the Compensation Committee of the Board (the Committee)
is responsible for determining the total direct compensation of our executive
officers including base salary, annual cash incentives, stock options and restricted
stock. The Committee is also responsible for the administration of our Employee
Stock Purchase Plan which was established to offer all of our employees the
opportunity to acquire an equity stake in The Knot. Our executive officers are
also eligible to participate in this plan.
The
design and day-to-day administration of our savings and health plans, which
are generally available to all of our employees including the executive officers,
are handled by representatives of our Human Resources departments although certain
annual modifications to provisions of these plans are approved by the Chief
Operating Officer and Chief Financial Officer. The Committee or the Board remains
responsible for material changes to the scope of these plans or the introduction
of new benefit plans.
11
Compensation Objectives
The
goal of our executive compensation program is to retain and attract top quality
management and to motivate them to contribute to the achievement of our business
objectives that are established to create long-term value for our stockholders.
The
Committee relies upon its judgment in making compensation decisions, after reviewing
the performance of The Knot and carefully evaluating each executives performance
during the year against established goals, leadership qualities, operational
performance, business responsibilities, career with The Knot, current compensation
arrangements and long-term potential to enhance stockholder value. The Committee
also considers the recommendations of the Chief Executive Officer on compensation
for other executive officers.
As
part of their process, the Committee does not utilize the assistance of independent
compensation consultants, but it does review executive compensation elements
for a select group of publicly traded internet and media companies with similar
operating characteristics and market capitalization. This information is compiled
by The Knot from proxy statements and other public reports filed by these companies.
The Committee believes this information provides a reasonable indication of
the market for executive services in which The Knot competes. The current Internet
and media companies within this group include 1-800-FLOWERS.COM, Inc, Autobytel,
Inc., Bankrate, Inc., Blue Nile, Inc., CnetTechnology Inc., InfoSpace, Inc.,
Martha Stewart Living Omnimedia, Inc., Move, Inc., PlanetOut, Inc., Priceline.com
Incorporated and WebMD Health Corp.
Elements of Executive Compensation
Executive
officers are compensated with a combination of cash payments and equity awards
designed to reward recent results and motivate long-term performance. We do
not set apportionment goals for each form of compensation. We believe the most
important indicator of whether our compensation objectives are being met is
our ability to motivate our executive officers to deliver superior performance
and retain them to continue their careers with The Knot. The primary elements
of the compensation packages for our executive officers currently include the
following:
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Base salary and benefits which are designed to attract and retain executives
over time. |
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Awards
under our Annual Incentive Plan which are designed to focus the executives
on the key objectives that are part of The Knots operating plan
for a particular year. |
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Long-term
incentives in the form of stock options and restricted common stock under
our stockholder-approved 1999 Stock Incentive Plan which are designed
to align the interest of each executive officer with those of The Knots
stockholders and provide each individual with a significant incentive
to manage The Knot from the perspective of an owner with an equity stake.
Through 2006, long- term incentives have represented the most significant
elements of compensation for our current executive officers.
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We
do not maintain any retirement plans or plans that provide for deferral of compensation
other than our 401(K) savings plan.
Base Salary
The
base salary for each executive officer is determined on the basis of a number
of factors: experience, personal performance, the median salary levels in effect
for similar positions within the comparison group of companies and internal
base salary comparability considerations. The weight given to each of these
factors may differ from individual to individual as the Committee deems appropriate.
Base salaries are generally reviewed on an annual basis, with adjustments made
effective March 1 in accordance with the factors indicated above. In addition,
in reviewing annual adjustments, the Committee takes into account The Knots
performance in the calendar year then ended. Effective March 1, 2006, the Committee
approved a base salary increase of 5% for each of the executive officers.
Annual Cash Incentive Plan
Our
executive officers are eligible for a cash bonus under our Annual Incentive
Compensation Plan based on The Knots financial performance together with
certain individual objectives that may be
12
applicable
to the executive. Each executive officer is assigned a target bonus opportunity
expressed as a percentage of base salary. The Committee considered targeted
bonus opportunities for similar positions in the comparison group of companies
as part of the process for establishing targets for our executives. For 2006,
the target bonus opportunity for each of the executive officers was 331/3%.
The maximum bonus opportunity was 100% for Mr. Liu, 85% for each of Ms. Stiles
and Mr. Szefc and 70% for Mr. Cardenas-Nolazco based upon performance above
target. There were no threshold bonus opportunities.
In
2006, the bonus opportunities were based 100% on The Knots financial performance
weighted equally between revenue and net income goals. However, 10% to 60% of
an executives actual bonus was further based upon the achievement of individual
objectives.
In
the determination of revenue and net income for purposes of establishing The
Knots financial performance for bonus purposes, the Committee can adjust
actual results to exclude the impact of certain extraordinary or unusual items
to more accurately reflect the overall performance of the executive team. In
2006, a non-cash tax benefit of $9.4 million, resulting from the reversal of
a portion of a valuation allowance against The Knots net deferred tax
assets, was excluded from net income in determining the bonus opportunity. In
addition, we acquired WeddingChannel on September 8, 2006. The results of operations
for WeddingChannel, which were included in our consolidated results of operations
since the acquisition date, were also excluded from the bonus calculations.
The
target and maximum bonus opportunities for each executive for 2006 are included
in the Grants of Plan-Based Awards in 2006 table in the columns
under the heading Estimated Future Payouts Under Non-Equity Incentive
Awards. The actual bonus amounts paid under the 2006 annual incentive
plan are included in the Summary Compensation Table in the column
Non-Equity Incentive Plan Compensation.
In
addition to the payment of a bonus under the Annual Incentive Plan, the Committee
may approve an additional discretionary bonus for exceptional performance or
for accomplishments which were not originally considered in the establishment
of individual objectives under the Annual Incentive Plan. In 2006, the Committee
approved additional discretionary bonuses to each of our executive officers
in connection with their efforts with respect to the acquisition of WeddingChannel
on September 8, 2006 and the related integration activities that took place
subsequent to that date. The discretionary bonuses awarded to Mr. Liu and Mr.
Szefc were also in consideration of their efforts in connection with both our
private placement and follow-on offering of common stock during the third quarter
of 2006. The actual discretionary bonuses paid to each of our executives for
2006 are included in the Summary Compensation Table in the column
Bonus.
Long-Term Incentives
Through
2004, our long-term incentive compensation was provided through grants of stock
options. These option grants allow the executive to acquire shares of our common
stock at a fixed price per share, which is the closing market price on the date
of grant, over a specified period of time (10 years). Each option generally
becomes exercisable in installments over periods ranging up to four years. Accordingly,
the option grant will provide a return to the executive officer only if the
executive officer remains employed during the vesting period, and then only
if the marker price of the underlying shares appreciates. We have not granted
options to our executive officers since 2004.
In
January 2006, we granted awards of service-based restricted stock of 72,000
shares to Mr. Liu and 56,000 shares to each of Ms. Stiles and Mr. Szefc. 50%
of these restricted stock awards vest on August 31, 2007 and the remaining 50%
thereafter in a series of 24 equal monthly installments.
The
Committee considers several factors when determining long-term incentive compensation
grants to an executive officer, including long-term incentive compensation awarded
within the comparative group of companies, the number of unvested stock-based
awards held by the executive, the executives performance during the prior
year, the executives expected contribution to our long-term performance
and the retention value of the award. All stock-based awards to executive officers
are approved by the Committee, and grants are made on or following the date
of the Committee approval. The Committee also approves any stock-based grants
in connection with the hiring of an executive officer.
13
Executive Severance and Change-In-Control Agreements
Mr.
Liu and Mr. Armando Cardenas-Nolazco do not have employment agreements with
the Company.
On
November 2, 1998, we entered into an employment agreement 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 years salary
plus all benefits associated with her employment.
On
May 31, 1999, we entered into an employment agreement 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 years salary plus all benefits
associated with his employment.
Upon
involuntary termination for Mr. Liu and Mr. Cardenas-Nolazco or upon voluntary
termination, termination for cause, death or disability, each of our executive
officers would receive benefits available generally to all employees of The
Knot including distributions from the 401(k) plan, disability benefits if applicable
and accrued vacation pay. With the exception of termination for cause, vested
stock options held by each named executive would remain exercisable for periods
also available generally to employees of the Company. Upon termination for cause,
all outstanding stock options held by our executives would be cancelled immediately
and all unvested restricted common shares would be forfeited.
In
the event that The Knot is acquired by merger, asset sale or sale of more than
50% of our voting securities by the stockholders, all of the remaining unvested
options awarded to Mr. Liu, Ms. Stiles and Mr. Szefc during the year ended December
31, 2004 would immediately prior to the effective date of such change-in-control
become exercisable as fully-vested shares of common stock. In addition, an amount
of restricted stock granted on January 3, 2006 to these executives would also
vest equal to the greater of (i) the shares of restricted stock that would otherwise
have vested during the one year period following the change-in-control or (ii)
50% of the shares of restricted stock that are not vested on the date of the
change-in-control. For additional information regarding estimates of amounts
payable in connection with executive severance or a change-in-control, see Potential
Payments Upon Termination or Change-In-Control on page 19.
Stock Ownership Guidelines
Currently,
we have not established stock ownership guidelines for our executive officers.
Each of our executive officers retains substantial equity value in The Knot
in the form of common stock, vested and unvested stock options and unvested
restricted stock.
Potential Impact on Compensation from Executive Misconduct
If
the Board determines that an executive officer has engaged in fraudulent or
intentional misconduct, the Board would take action to remedy the misconduct,
prevent its recurrence, and impose such discipline on the wrongdoer as would
be appropriate. Discipline would vary depending on the facts and circumstances,
and may include, without limit, (1) termination of employment, (2) initiating
an action for breach of fiduciary duty, and (3) if the misconduct resulted in
a significant restatement of The Knots financial results, seeking reimbursement
of any portion of performance-based or incentive compensation paid or rewarded
to the executive that is greater than would have been paid or awarded if calculated
based on the restated financial results. These remedies would be in addition
to, and not in lieu of, any actions imposed by law enforcement agencies, regulators
or other authorities.
Policy on Stock Trading and Hedging
We
have in place a pre-clearance process for all trades in our securities which
all executive officers and other insiders must follow. Executive officers and
other insiders are also prohibited from short- selling our common stock or engaging
in transactions involving options, warrants, stock appreciation rights or similar
rights whose value is derived from the value of our common stock. This prohibition
includes, but is not limited to, trading in The Knot-based put and call option
contracts, transacting in straddles, and the like.
14
Tax Deductibility of Compensation
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 executive officers. The limitation applies only to compensation
which is not considered to be performance-based including base salaries, cash
bonuses under non-equity incentive plans which have not been approved by The
Knots stockholders and grants of service-based restricted stock. The non-performance
based compensation paid to our executive officers for 2006 did not exceed the
$1 million limit per executive. It is possible that a portion of compensation
for certain executive officers may exceed the $1 million limit in 2007 based
on the fair market value of our common stock on August 31, 2007, the vesting
date for 50% of the restricted stock awarded to certain of our executives in
January 2006. The trading range of The Knot common stock in 2007 has been significantly
higher than the fair market value of this restricted stock on the grant date.
The
Committee will consider the impact of this deductibility limit on the compensation
it intends to award in 2007. The Committee will exercise its discretion to award
compensation that does not meet the requirements of Section 162 (m) when it
considers it to be in the best interest of The Knot to do so.
Compensation Committee Report
The
Compensation Committee of the Board of Directors has furnished the following
report:
The
Committee has reviewed and discussed the Compensation Discussion and Analysis
(CD&A) with The Knots management. Based on that review and discussion,
the Committee has recommended to the Board of Directors that the CD&A be
included in The Knots Proxy Statement for the 2007 Annual Meeting of Stockholders.
Compensation Committee
Ira Carlin (Chair)
Lisa Gersh
Eileen Naughton
15
The
following table sets forth information with respect to the compensation of each
of our executive officers (the named executive officers) for services
rendered in all capacities to us for the year ended December 31, 2006.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position |
|
Year |
|
Salary ($)(1) |
|
Bonus ($)(2) |
|
Stock Awards ($)(3)(5) |
|
Option Awards ($)(4)(5) |
|
Non-Equity Incentive Plan Compensation ($)(6) |
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(7) |
|
All Other Compensation ($)(8) |
|
Total ($) |
David Liu |
|
|
|
2006 |
|
|
|
$ |
|
343,333 |
|
|
|
$ |
|
35,376 |
|
|
|
$ |
|
247,104 |
|
|
|
$ |
|
66,627 |
|
|
|
$ |
|
70,752 |
|
|
|
|
0 |
|
|
|
$ |
|
15,254 |
|
|
|
$ |
|
778,446 |
|
President, Chief Executive Officer and Chairman of the Board |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sandra Stiles |
|
|
|
2006 |
|
|
|
$ |
|
306,875 |
|
|
|
$ |
|
32,345 |
|
|
|
$ |
|
192,192 |
|
|
|
$ |
|
52,053 |
|
|
|
$ |
|
43,155 |
|
|
|
|
0 |
|
|
|
$ |
|
26,703 |
|
|
|
$ |
|
653,323 |
|
Chief Operating Officer, Assistant Secretary and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Szefc |
|
|
|
2006 |
|
|
|
$ |
|
296,417 |
|
|
|
$ |
|
28,880 |
|
|
|
$ |
|
192,192 |
|
|
|
$ |
|
52,053 |
|
|
|
$ |
|
57,760 |
|
|
|
|
0 |
|
|
|
$ |
|
16,181 |
|
|
|
$ |
|
643,483 |
|
Chief Financial Officer, Treasurer and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armando Cardenas-Nolazco |
|
|
|
2006 |
|
|
|
$ |
|
204,583 |
|
|
|
$ |
|
9,345 |
|
|
|
$ |
|
|
|
|
|
$ |
|
68,680 |
|
|
|
$ |
|
37,380 |
|
|
|
|
0 |
|
|
|
$ |
|
814 |
|
|
|
$ |
|
320,802 |
|
Chief Technology Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
The annual salary rate set by the Compensation Committee as of December
31, 2006 (effective March 1, 2006) for each of the named executive officers
was as follows: Mr. Liu, $352,800; Ms. Stiles, $315,000; Mr. Szefc, $304,500;
and Mr. Cardenas-Nolazco, $210,000. |
|
(2) |
|
|
|
Amounts
represent discretionary bonus payments outside of The Knots 2006
Annual Incentive Compensation Plan which were approved by the Compensation
Committee and paid in March 2007. |
|
(3) |
|
|
|
Amounts
represent the expense recognized in The Knots statement of income
for 2006 for service-based restricted stock awards granted in January
2006, calculated in accordance with Statement of Financial Accounting
Standards (SFAS) No. 123(R) which was allocated to service
provided by our executive officers in 2006. The January 2006 restricted
stock grants vest 50% on August 31, 2007 and the remaining 50% thereafter
in a series of 24 equal monthly installments. |
|
(4) |
|
|
|
Amounts
represent the expense recognized in The Knots statement of income
for 2006 for outstanding options awarded in 2003 and 2004, calculated
in accordance with SFAS No. 123(R), which was allocated to service provided
by our executive officers in 2006. The options awarded to Mr. Liu, Ms.
Stiles and Mr. Szefc vest in a series of 36 equal monthly installments
from the grant date. The options awarded to Mr. Cardenas-Nolazco, representing
an initial grant on the commencement of his services to The Knot, vest
25% twelve months from the date of grant and the remaining 75% in a series
of 36 equal monthly installments. |
|
(5) |
|
|
|
See
Note 11 Stock Plans, to The Knots consolidated financial
statements set forth in The Knots Form 10-K for the year ended December
31, 2006 for the assumptions made in valuing stock-based compensation
under SFAS No. 123(R). In calculating the amounts, no estimates were made
for potential forfeitures. |
|
(6) |
|
|
|
Amounts
represent payments under The Knots 2006 Annual Incentive Compensation
Plan. |
|
(7) |
|
|
|
The
Knot does not maintain any retirement plans or plans that provide for
the deferral of compensation other than our 401(k) savings plan.
|
16
|
(8) |
|
|
|
Amounts represent the value of perquisites and other personal benefits which are further detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer |
|
The Knot Leased Automobile |
|
The Knot Matched 401(k) Contribution |
|
Group Life Insurance |
|
Employee Stock Purchase Plan(a) |
|
Total |
David Liu |
|
|
$ |
|
11,962 |
|
|
|
$ |
|
2,430 |
|
|
|
$ |
|
862 |
|
|
|
$ |
|
|
|
|
|
$ |
|
15,254 |
|
Sandra Stiles |
|
|
$ |
|
14,942 |
|
|
|
$ |
|
3,750 |
|
|
|
$ |
|
862 |
|
|
|
$ |
|
7,149 |
|
|
|
$ |
|
26,703 |
|
Richard Szefc |
|
|
$ |
|
9,299 |
|
|
|
$ |
|
|
|
|
|
$ |
|
862 |
|
|
|
$ |
|
6,020 |
|
|
|
$ |
|
16,181 |
|
Armando Cardenas-Nolazco |
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
814 |
|
|
|
$ |
|
|
|
|
|
$ |
|
814 |
|
|
(a) |
|
|
|
Amounts represent the expense recognized in The Knots statement
of income for 2006 for the fair value of rights arising from elections
made by the executive under The Knots Employee Stock Purchase Plan
during 2005 and 2006, calculated in accordance with SFAS No. 123(R).
|
Grants of Plan-Based Awards in 2006
The following table shows the grants of plan-based awards to our executive officers in 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Executive |
|
Grant Date |
|
Approval Date |
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
|
Estimated Future Payouts Under Equity Incentive Plan Awards |
|
All Other Stock Awards: Number of Shares of Stock or Units (#)(2) |
|
All Other Option Awards: Number of Securities Underlying Options (#) |
|
Exercise or Base Price of Option Awards ($/Sh) |
|
Market Price on Grant Date ($/Sh) |
|
Grant Date Fair Value of Stock and Option Awards ($)(3) |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
David Liu |
|
|
|
1/3/2006 |
|
|
|
|
12/20/2005 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
11.44 |
|
|
|
$ |
|
822,960 |
|
|
|
|
|
7/20/2006 |
|
|
|
|
7/20/2006 |
|
|
|
|
|
$ |
|
117,500 |
|
|
|
$ |
|
352,800 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
Sandra Stiles |
|
|
|
1/3/2006 |
|
|
|
|
12/20/2005 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
11.44 |
|
|
|
$ |
|
640,080 |
|
|
|
|
|
7/20/2006 |
|
|
|
|
7/20/2006 |
|
|
|
|
|
$ |
|
105,000 |
|
|
|
$ |
|
267,750 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
Richard Szefc |
|
|
|
1/3/2006 |
|
|
|
|
12/20/2005 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
11.44 |
|
|
|
$ |
|
640,080 |
|
|
|
|
|
7/20/2006 |
|
|
|
|
7/20/2006 |
|
|
|
|
|
$ |
|
101,000 |
|
|
|
$ |
|
258,825 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
Armando Cardenas-Nolazco |
|
|
|
7/20/2006 |
|
|
|
|
7/20/2006 |
|
|
|
|
0 |
|
|
|
$ |
|
70,000 |
|
|
|
$ |
|
147,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
(1) |
|
|
|
Amounts shown represent the threshold, target and maximum awards that
could be earned by the executive officer under The Knots 2006 Annual
Incentive Plan. Awards are based on a combination of The Knot performance
as measured by revenue and net income, as defined, and the achievement
of individual performance objectives. Actual incentives paid for 2006
are shown in the Summary Compensation Table in the Non-Equity
Incentive Plan Compensation column. |
|
(2) |
|
|
|
Represents
service-based restricted common stock awards on January 3, 2006. The awards
will vest 50% on August 31, 2007 and the remaining 50% thereafter in a
series of 24 equal monthly installments. The fair value of the awards
were $11.44 per share (the fair market value of the common stock on the
grant date). |
|
(3) |
|
|
|
The
amounts reported represent the full grant date fair value of all long-term
incentive awards (restricted stock awards) granted to our executive officers
in 2006 calculated in accordance with SFAS 123(R). The grant date fair
value for the restricted stock awarded in 2006 was calculated using the
fair value of The Knots Common Stock on the grant date.
|
17
Outstanding Equity Awards at December 31, 2006
The following table shows the outstanding equity awards for each of our executive officers as of December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Executive |
|
Option Awards |
|
Stock Awards |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date(1) |
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have not Vested (#) |
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have not Vested ($) |
David Liu |
|
|
|
125,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.94 |
|
|
|
|
11/29/2010 |
|
|
|
|
72,000 |
(5) |
|
|
|
$ |
|
1,889,280 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
6,945 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.42 |
|
|
|
|
11/30/2011 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
160,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
2.80 |
|
|
|
|
6/30/2013 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
133,333 |
|
|
|
|
26,667 |
(3) |
|
|
|
|
0 |
|
|
|
$ |
|
4.00 |
|
|
|
|
6/30/2014 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
Sandra Stiles |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.50 |
|
|
|
|
5/1/2008 |
|
|
|
|
56,000 |
(5) |
|
|
|
$ |
|
1,469,440 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.94 |
|
|
|
|
11/29/2010 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.42 |
|
|
|
|
11/30/2011 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
125,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
2.80 |
|
|
|
|
6/30/2013 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
104,166 |
|
|
|
|
20,834 |
(3) |
|
|
|
|
0 |
|
|
|
$ |
|
4.00 |
|
|
|
|
6/30/2014 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
Richard Szefc |
|
|
|
32,292 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
1.50 |
|
|
|
|
5/31/2009 |
|
|
|
|
56,000 |
(5) |
|
|
|
$ |
|
1,469,440 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
125,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.94 |
|
|
|
|
11/29/2010 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
125,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0.42 |
|
|
|
|
11/30/2011 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
125,000 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
2.80 |
|
|
|
|
6/30/2013 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
|
104,166 |
|
|
|
|
20,834 |
(3) |
|
|
|
|
0 |
|
|
|
$ |
|
4.00 |
|
|
|
|
6/30/2014 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
Armando Cardenas-Nolazco |
|
|
|
50,000 |
|
|
|
|
50,000 |
(4) |
|
|
|
|
0 |
|
|
|
$ |
|
5.05 |
|
|
|
|
12/31/2014 |
|
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
(1) |
|
|
|
For each option shown, the expiration date is the 10th anniversary of the date the option was granted. |
|
(2) |
|
|
|
Calculated by multiplying the number of restricted common shares by the closing price of The Knots stock on December 31, 2006. |
|
(3) |
|
|
|
The remaining options become exercisable in a series of six equal monthly installments through June 30, 2007. |
|
(4) |
|
|
|
The remaining options become exercisable in a series of 24 equal installments through December 31, 2008. |
|
(5) |
|
|
|
50% of the restricted stock grants vest on August 31, 2007 and the remaining 50% thereafter in a series of 24 equal monthly installments.
|
Stock Option Exercises and Restricted Stock Vested in 2006
The
following table lists the number of shares acquired and the value realized as
a result of stock option exercises by our executive officers in 2006. No restricted
common stock vested in 2006.
|
|
|
|
|
|
|
|
|
Name of Executive |
|
Option Awards |
|
Stock Awards |
|
Number of Shares Acquired on Exercise (#) |
|
Value Realized on Exercise ($)(1) |
|
Number of Shares Acquired on Vesting (#) |
|
Value Realized on Vesting ($) |
David Liu |
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
Sandra Stiles |
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
Richard Szefc |
|
|
|
217,708 |
|
|
|
$ |
|
3,323,640 |
|
|
|
|
0 |
|
|
|
|
0 |
|
Armando Cardenas-Nolazco |
|
|
|
0 |
|
|
|
$ |
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
(1) |
|
|
|
Value realized on exercise is based on the fair market price of our common
stock on the date of exercise (closing price) less the exercise price,
multiplied by the number of shares underlying the exercised options.
|
18
Potential Payments Upon Termination or Change-In-Control
As
described in the Compensation Discussion and Analysis, upon voluntary termination,
termination for cause, death or disability, each of our executive officers would
receive benefits available generally to all employees of The Knot. The tables
below describe and quantify additional compensation that would become payable
to certain of our executives in connection with an involuntary termination of
their employment or a change in control of The Knot on December 31, 2006. Where
applicable, the amounts payable assume a $26.24 fair value of our common stock
(the closing price on December 29, 2006).
Involuntary Termination
|
|
|
|
|
|
|
|
|
|
|
Name of Executive |
|
Salary ($) |
|
Health, Group Life Insurance and Related Benefits ($) |
|
The Knot Leased Automobile ($) |
|
The Knot Matched 401(k) Contribution ($) |
|
Total |
Sandra Stiles |
|
|
$ |
|
315,000 |
|
|
|
$ |
|
9,485 |
|
|
|
$ |
|
10,788 |
|
|
|
$ |
|
3,750 |
(1) |
|
|
|
$ |
|
338,423 |
|
Richard Szefc |
|
|
$ |
|
304,500 |
|
|
|
$ |
|
9,485 |
|
|
|
$ |
|
8,862 |
|
|
|
$ |
|
|
|
|
|
$ |
|
322,847 |
|
(1) |
|
|
|
Estimated to equal the 2006 The Knot matched contribution.
|
Change-In-Control
|
|
|
|
|
|
|
Name of Executive |
|
Accelerated Vesting(1) |
|
Stock Options ($)(2) |
|
Restricted Stock ($)(3) |
|
Total |
David Liu |
|
|
$ |
|
593,074 |
|
|
|
$ |
|
1,101,660 |
|
|
|
$ |
|
1,694,734 |
|
Sandra Stiles |
|
|
$ |
|
463,348 |
|
|
|
$ |
|
856,855 |
|
|
|
$ |
|
1,320,204 |
|
Richard Szefc |
|
|
$ |
|
463,348 |
|
|
|
$ |
|
856,855 |
|
|
|
$ |
|
1,320,204 |
|
|
(1) |
|
|
|
As described in the Compensation Discussion and Analysis, certain unvested
stock options and restricted stock would be subject to accelerated vesting
in connection with a change-in-control. |
|
(2) |
|
|
|
Amounts
represent the fair market value of our common stock on December 29, 2006
less the exercise price, multiplied by the number of shares underlying
the options subject to accelerated vesting. |
|
(3) |
|
|
|
Amounts
represent the fair market value of our common stock on December 29, 2006
multiplied by the number of restricted shares subject to accelerated vesting.
|
Director Compensation
In
June 2005, the Board ratified the adoption of the following policies by the
Compensation Committee for cash and equity compensation for non-employee directors:
Annual
Service. Each non-employee director will receive a grant of 7,500 restricted
shares of common stock upon initial appointment to the Board, which vest in
three equal annual installments upon the directors completion of each
year of Board service over the three-year period measured from the grant date.
In addition, on the date of each Annual Meeting of Stockholders, each non-employee
director who is to continue to serve as a non-employee Board member will receive
a grant of 2,500 restricted shares of common stock which vest upon the directors
completion of one (1) year of Board service measured from the grant date.
Meeting
Fees. Each non-employee director is entitled to receive $2,000 for each
Board meeting attended in person and $500 for each Board meeting attended telephonically.
Audit
Committee Chairperson. In addition to the fees set forth above, the Chairperson
of the Audit Committee is paid an annual fee of $5,000 as compensation for the
additional responsibilities and duties of the position.
19
We
also reimburse our directors for travel and other out-of-pocket costs incurred
in connection with their attendance at meetings of the Board.
The
following summarizes the annual compensation for The Knots non-employee
directors during 2006.
Non-employee Director Compensation in 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Director(1)(2) |
|
Fees Earned or Paid in Cash ($) |
|
Stock Awards ($)(3) |
|
Option Awards ($) |
|
Non-Equity Incentive Plan Compensation ($) |
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
|
All Other Compensation ($) |
|
Total ($) |
Charles Baker |
|
|
$ |
|
7,500 |
|
|
|
$ |
|
74,579 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
82,079 |
|
Ira Carlin |
|
|
$ |
|
6,000 |
|
|
|
$ |
|
12,925 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
18,925 |
|
Lisa Gersh |
|
|
$ |
|
6,000 |
|
|
|
$ |
|
43,721 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
49,721 |
|
Eileen Naughton |
|
|
$ |
|
2,500 |
|
|
|
$ |
|
12,925 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
15,425 |
|
Peter Sachse |
|
|
$ |
|
0 |
|
|
|
$ |
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0 |
|
Matthew Strauss |
|
|
$ |
|
0 |
|
|
|
$ |
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
0 |
|
Ann Winblad |
|
|
$ |
|
8,500 |
|
|
|
$ |
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
$ |
|
8,500 |
|
|
(1) |
|
|
|
Mr. Carlin, Ms. Naughton and Mr. Sachse were appointed to the Board on
October 3, 2006. Mr. Strauss and Ms. Winblad resigned from the Board on
October 4, 2006. Mr. Sachse resigned from the Board on April 11, 2007. |
|
(2) |
|
|
|
Mr.
Sachse and Mr. Strauss elected not to receive cash or equity compensation
in connection with their Board service. |
|
(3) |
|
|
|
Amounts
represent the expense recognized in The Knots statement of income
for service-based restricted stock awards granted in 2006 and 2005, calculated
in accordance with SFAS No 123(R) which was allocated to service provided
by the non-employee director in 2006. See Note 11, Stock Plans,
to The Knots Form 10-K for the year ended December 31, 2006 for
the assumptions made in valuing stock-based compensation under SFAS No.
123 (R).
On
May 24, 2006, Mr. Baker and Ms. Gersh were each granted 2,500 restricted
shares of common stock with a grant date value of $39,000. These restricted
shares will vest on May 24, 2007. On October 3, 2006, in connection with
their initial appointment to the Board, Mr. Carlin and Ms. Naughton were
each granted 7,500 restricted shares of common stock with a grant date
value of $155,000. These restricted shares will vest in three equal annual
installments over the three-year period measured from the grant date.
At
December 31, 2006, the number of unvested restricted common shares outstanding
were Mr. Baker, 7,500; Mr. Carlin, 7,500; Ms. Gersh, 7,500; and Ms. Naughton,
7,500.
2,500
restricted shares of common stock granted to Ms. Winblad on May 24, 2006
were canceled upon her resignation from the Board.
|
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship with QVC, Inc.
QVC,
Inc. (QVC) beneficially owned more than 5% of our common stock until
January 2005. Randy Ronning was a director until May 2005. Mr. Ronning is Executive
Vice President of Affiliate Relations, iQVC.
On
April 13, 1999, we sold 4,000,000 shares of our Series B Preferred Stock at
a price of $3.75 per share to QVC, Inc. (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 Series B Preferred Stock converted into Common Stock on a one-
20
for-one
basis and the warrant became exercisable upon our initial public offering of
Common Stock. The warrant expired unexercised on December 2, 2001. The Common
Stock was assigned to QVC Interactive Holdings, LLC, subsequently renamed Interactive
Technology Holdings, LLC (ITH)). On January 31, 2005, in connection
with the dissolution of ITH, the shares of our Common Stock held by ITH were
distributed to Comcast QIH, Inc., an affiliate of Comcast Corporation.
We
also entered into a services agreement with QVC, which we believe was on terms
and conditions no less favorable to us than we could have obtained from an unaffiliated
third party. Our services agreement with QVC expired in December 2003; however,
pursuant to the agreement, we had the option to continue to operate under the
services agreement for an additional l80 days. We discontinued the use of QVCs
services in May 2004. For the year ended December 31, 2004, we purchased merchandise
and incurred warehousing, fulfillment and distribution and billing costs under
the agreement in the aggregate amount of $33,000.
Relationship with Federated Department Stores, Inc. (Federated)
Peter
Sachse was a director from October 3, 2006 until April 11, 2007. Mr. Sachse
is Chairman and Chief Executive Officer of Macys.com, a division of Federated.
Federated beneficially owns more than 5% of our common stock.
On
February 19, 2002, we entered into a Common Stock Purchase Agreement (the Agreement)
with May Bridal, an affiliate of May Department Stores Company, pursuant to
which we sold 3,575,747 shares of common stock to May Bridal for $5,000,000
in cash. The Agreement provided that if we proposed to sell, transfer or otherwise
issue any common or preferred stock or other interest convertible into common
stock (equity interests) to any third party (other than shares previously
reserved or certain shares which shall be reserved for future issuance pursuant
to Stock Incentive Plans approved by the Board of Directors or stockholders
of The Knot) and which transaction would dilute May Bridals interest in
the common stock or voting power of The Knot prior to such transaction by more
than one percentage point, then we would offer May Bridal the right to acquire
a similar equity interest, on the same terms and conditions as offered to the
third party, in such amount as to preserve its percentage interest in the common
stock and voting power of The Knot. If we proposed to acquire any equity interest
from a third party, which transaction would result in May Bridals interest
in the common stock or voting power of The Knot exceeding 20%, then we would
offer to acquire equity interests from May Bridal on the same terms as offered
to the third party, to permit May Bridal to own less than 20% of the common
stock or voting power of The Knot after the transaction. In addition, under
an amendment to the Agreement dated November 11, 2003, so long as May Bridal
owned more than 10% of the common stock or voting power of The knot, May Bridal
would have the right to designate one member of the Board of Directors of The
Knot and to nominate and submit such person for election by the stockholders
of The Knot. May Bridal waived its right to acquire equity interests in connection
with the sale of common stock by The Knot in November 2003.
We
also entered into a Media Services Agreement with May pursuant to which The
Knot and May develop integrated marketing programs to promote and support those
May department store companies that offer wedding registry services. The Media
Services Agreement, as amended, had an initial term of three years expiring
in February 2005 and may be automatically extended for up to three additional
one-year terms unless terminated by May. In November 2004 and 2005, the Media
Services Agreement was automatically extended through February 2006 and February
2007, respectively.
May
Bridal was merged into May in January 2005. Federated acquired May through a
merger effective August 30, 2005. Federated waived its right to acquire equity
interests in connection with the sale of common stock by The Knot during the
three months ended September 30, 2006. Federated also elected to terminate the
Media Services Agreement as of February 2007.
For
the years ended December 31, 2006, 2005 and 2004, we recorded revenues under
the Media Services Agreement in the amounts of $401,000, $292,000 and $488,000,
respectively. In addition, we recorded revenue under other advertising agreements
with May affiliates and with certain Federated affiliates subsequent to August
30, 2005, which aggregated approximately $1.0 million, $932,000 and $535,000
for the years ended December 31, 2006, 2005 and 2004, respectively.
21
In
June 1999, WeddingChannel and Federated entered into the FDS Registry Agreement
(the Registry Agreement). The Registry Agreement, as amended and
supplemented, provides that WeddingChannel is responsible for the operation
and maintenance of the website on which all Federated bridal registries may
be accessed. WeddingChannel receives a commission from the sale of Federated
bridal registry products through this website. The Registry Agreement currently
expires in January 2011. For the period from September 8, 2006 to December 31,
2006, WeddingChannel recorded registry services revenue under the Registry Agreement
of approximately $2.0 million and recorded other service fees from Federated
of $89,000.
At
December 31, 2006 and 2005, we have accounts receivables from May, Federated
and their affiliates of $670,000 and $340,000, respectively.
On
June 5, 2006, we entered into an agreement with Federated (the Federated
Agreement) which was effective on September 8, 2006, the date of the closing
of The Knots acquisition of WeddingChannel. Pursuant to the Federated
Agreement, for so long as it owns more than 5% of the outstanding common stock
or voting power of The Knot, Federated shall (1) have the right to designate
one member of the Board of Directors of The Knot and to nominate and submit
such person for election by the stockholders of The Knot, and (2) have certain
registration rights commencing September 8, 2007 with respect to common stock
of The Knot which it acquired through the acquisition of May.
On
April 11, 2007, Peter Sachse, Federateds designated member of the Board,
resigned. Currently, Federated is not exercising its right to designate one
member of the Board. Effective April 11, 2007, the Board approved a resolution
granting Federated the right to designate one observer to attend Board meetings
in lieu of designating one representative to the Board.
Relationship with America Online, Inc.
America
Online, Inc. (AOL) or its affiliates beneficially owned more than
5% of our common stock until August 2006.
On
July 23, 1999, we entered into an Amended and Restated Anchor Tenant Agreement
(the AOL Agreement) with AOL. Pursuant to the AOL Agreement, we
issued a warrant to purchase 366,667 shares of our common stock at $7.20 per
share, subject to certain anti-dilution provisions. As of August 16,2006, the
effect of these anti-dilution provisions was to reduce the exercise price under
the warrant to $5.64 per share and to increase the number of shares for which
the warrant may be exercised to 467,749.
On
August 16, 2006, we issued 316,859 shares of common stock upon the exercise
of the warrant in consideration of the termination of the right to purchase
an additional 150,890 shares of common stock pursuant to the warrants
net exercise provision. The warrant was exercised by TW AOL Holdings Inc. (TW
AOL), an affiliate of Time Warner Inc., following assignment of the warrant
to TW AOL by a successor of AOL.
In
September 2004, we entered into an Agreement of Settlement and Mutual Release
(the Settlement) with AOL, pursuant to which we made a cash payment
of $1.2 million to AOL constituting full and final settlement of amounts due
with respect to the Amended and Restated Anchor Tenant Agreement effective July
23, 1999. As a result of the Settlement, we reversed the portion of a previously
recorded $2.4 million liability to AOL that was in excess of the amount paid
and recorded a non-cash benefit of $1.2 million as a reduction of sales and
marketing expense.
Relationship with Comcast Corporation and Affiliates
Matthew
Strauss was a director until October 4, 2006. Mr. Strauss is Senior Vice President
of Content Acquisition at Comcast Corporation. Comcast beneficially owned more
than 5% of our common stock until August 2006.
Under
royalty-free license agreements with Comcast Cable Communications, LLC and Comcast
Online, we provide video-on-demand programming content and editorial content
for use by these
22
affiliates
of Comcast Corporation in connection with their cable and online properties.
We entered into these agreements to build further brand recognition for The
Knot.
In
August 2006, Comcast Corporation sold 4,025,590 shares of common stock of The
Knot, representing its entire investment in The Knot, as a selling shareholder
in The Knots follow-on offering.
Relationship with Oxygen Media LLC
Lisa
Gersh has served as one of our directors since June 2005. Ms. Gersh has been
the President, Chief Operating Officer and co-founder of Oxygen Network since
1998.
In
January 2003, Real Weddings from The Knot premiered on the Oxygen
Network. The Knot collaborated with Oxygen in the creation and production of
the series, which followed couples planning through their wedding process in
the weeks leading up to their nuptials. In January 2004, The Knot and Oxygen
debuted a wedding gown fashion program called Bridal Fashion Exclusive
from The Knot. Oxygen continued to renew these programs annually through
2005, with the final productions airing in January 2006. Through these shows,
we expand the awareness of our brand and services to a broad national audience.
No further shows were produced in 2006, though reruns air often. There are no
payments made by The Knot and Oxygen to each other in connection with the agreements
surrounding the programming.
Relationship with Monster Worldwide
Charles
Baker has served as one of our directors since November 2005. Mr. Baker has
been the Senior Vice President and Chief Financial Officer of Monster Worldwide,
Inc. since 2005.
During
2006, we recorded advertising revenues from Monster Worldwide in the amount
of $35,000. In addition, we utilized Monster Worldwide services in the ordinary
course of business (recruiting) and paid fees aggregating $17,000.
Relationship with Google
Eileen
Naughton has served as one of our directors since October 2006. Ms. Naughton
has been a Regional Director of Google since 2006.
During
2006, we recorded revenues generated through Google AdSense text links on our
PromSpot website totaling $7,000. In addition, during the ordinary course of
business, we utilized Google AdWords for advertising and recorded expenses of
$81,000.
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 directors 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 against them
as to which
23
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires The Knots
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. 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 (i) the copies of such reports furnished to The Knot and
(ii) the written representations received from one or more of such reporting
persons or entities that no annual Form 5 reports were required to be filed
by them for 2006, we believe that, during 2006, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% stockholders were
satisfied in a timely manner except that Federated filed a late Form 4 relating
to its acquisition of common stock in connection with the WeddingChannel transaction.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder
proposals that are intended to be presented at our annual meeting of stockholders
to be held in 2007 must be received by us no later than December 27, 2007, if
such proposals are to be included in the proxy statement and related proxy materials
relating to that meeting pursuant to Rule 14a-8 of the Securities Exchange Act
of 1934, as amended. In addition, under The Knots bylaws, any proposal
for consideration at our annual meeting of stockholders to be held in 2008 submitted
by a stockholder other than pursuant to Rule 14a-8 will be considered timely
if it is received by The Knots Secretary at our principal executive offices
between the close of business on January 24, 2008 and the close of business
on February 23, 2008, and is otherwise in compliance with the requirements set
forth in The Knots bylaws, which can be accessed in the Investor
RelationsCorporate Governance section of The Knots website
at www.theknot.com. The proxy solicited by the Board of Directors for
the annual meeting of stockholders to be held in 2008 will confer discretionary
authority to vote as the proxy holders deem advisable on any stockholder proposal
which is considered untimely.
ANNUAL REPORT
The
Knot filed an Annual Report on Form 10-K for the calendar year ended December
31, 2006 with the Securities and Exchange Commission on March 13, 2007. 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. The report is also available through our
website at www.theknot.com.
A
copy of The Knots Annual Report for the calendar year ended December 31,
2006 is being mailed concurrently with this proxy statement to all stockholders
entitled to notice of and to vote at the Annual Meeting. The Annual Report is
not incorporated into this proxy statement and is not considered proxy solicitation
material.
In
order to reduce printing and postage costs, only one Annual Report or Proxy
Statement, as applicable, will be mailed to multiple stockholders sharing an
address unless the Company receives contrary instructions from one or more of
the stockholders sharing an address. If your household has received only one
Annual Report and one Proxy Statement, the Company will deliver promptly a separate
copy of the Annual Report and the Proxy Statement to any stockholder who sends
a written request to Investor Relations at our executive offices, which are
located at 462 Broadway, 6th Floor, New York, New York 10013. If your household
is receiving multiple copies of the Companys annual reports or proxy statements
and you wish to request delivery of a single copy, you may send a written request
to Investor Relations at our executive offices, which are located at 462 Broadway,
6th Floor, New York, New York 10013.
24
INCORPORATION BY REFERENCE
Notwithstanding
anything to the contrary set forth in any of The Knots previous or future
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate by reference this Proxy Statement
or future filings made by The Knot under those statutes, the Compensation Committee
Report, the Audit Committee Report, references to the Audit Committee Charter
and references to the independence of the Audit Committee members are not deemed
filed with the Securities and Exchange Commission, are not deemed soliciting
material and shall not be deemed incorporated by reference into any of those
prior filings or into any future filings made by The Knot under those statutes,
except to the extent that The Knot specifically incorporates such information
by reference into a previous or future filing, or specifically requests that
such information be treated as soliciting material, in each case under those
statutes.
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. Discretionary authority with respect to such other matters
is granted by the execution of the accompanying proxy.
|
|
|
|
|
By Order of the Board of Directors |
|
|
RICHARD SZEFC Chief Financial Officer, Treasurer and Secretary |
Dated: April 25, 2007
25
PROXY CARD
THE KNOT, INC.
THIS PROXY IS 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 Wednesday, May 23, 2007, 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 or at any postponement or adjournment thereof.
(Continued and
to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
THE KNOT, INC.
May 23, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
ê Please
detach along perforated line and mail in the envelope provided. ê
|
|
|
|
|
20230000000000000000 0
052307
|
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE DIRECTOR NOMINEES AND FOR PROPOSAL 2. PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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1. |
Election
of Directors: The nominees listed are standing for re-election to the
Board for the term to expire in 2010. |
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NOMINEES: |
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FOR ALL
NOMINEES |
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Sandra Stiles |
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Charles Baker |
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WITHHOLD
AUTHORITY
FOR ALL NOMINEES |
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FOR
ALL EXCEPT
(See instructions below) |
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INSTRUCTION:
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To withhold
authority to vote for any individual nominee(s), mark FOR ALL
EXCEPT and fill in the circle next to each nominee you wish
to withhold, as shown here: = |
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To change the address
on your account, please check the box at right and indicate your new
address in the address space above. Please note that changes to the
registered name(s) on the account may not be submitted via this method. |
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FOR |
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AGAINST |
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ABSTAIN |
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2. |
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: To ratify the selection
of Ernst & Young LLP as independent registered public accounting
firm for the calendar year ending December 31, 2007 |
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UNLESS OTHERWISE
SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2 AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR DISCRETION AS
TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR AT ANY POSTPONEMENT
OR ADJOURNMENT THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS
RECOMMENDATIONS, JUST SIGN BELOW NO BOXES NEED BE CHECKED. |
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CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. o
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please
sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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GRAPHIC
2
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theknotlogo.jpg
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