-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q3dV289KvBFbGp0ZEUdLQnfb4JCFJXsTTgLibGQojJB6UHXXdhW/PuuNZ6fOJCou 9lblYSvlyxRkIwcX5ol0GQ== 0000950117-03-005201.txt : 20031210 0000950117-03-005201.hdr.sgml : 20031210 20031210162210 ACCESSION NUMBER: 0000950117-03-005201 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20031210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNOT INC CENTRAL INDEX KEY: 0001062292 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 133895178 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-111060 FILM NUMBER: 031047596 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 S-3 1 a36658.txt THE KNOT, INC. AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 2003 REGISTRATION NO. 333- ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- THE KNOT, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------- DELAWARE 462 BROADWAY, FLOOR 6 13-3895178 (STATE OR OTHER JURISDICTION OF NEW YORK, NEW YORK 10013 (I.R.S. EMPLOYER IDENTIFICATION INCORPORATION OR ORGANIZATION) (212) 219-8555 NUMBER) (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------- DAVID LIU PRESIDENT AND CHIEF EXECUTIVE OFFICER THE KNOT, INC. 462 BROADWAY, 6TH FLOOR NEW YORK, NEW YORK 10013 (212) 219-8555 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------- COPIES OF COMMUNICATIONS TO: BRIAN B. MARGOLIS, ESQ. PROSKAUER ROSE LLP 1585 BROADWAY NEW YORK, NEW YORK 10036 TELEPHONE: (212) 969-3000 ------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At such time or times after the effective date of this Registration Statement as the selling stockholders shall determine. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [x] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------- CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE - ---------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 per share.............. 2,800,000(1) $4.00(2) $11,200,000.00(2) $906.08(2) - ----------------------------------------------------------------------------------------------------------------------
(1) All of the shares of common stock offered hereby are being sold for the account of selling stockholders. (2) Estimated solely for purposes of the registration fee for this offering in accordance with Rule 457(c) of the Securities Act of 1933, as amended, on the basis of the average of the high and low prices of the Registrant's common stock on the OTC Bulletin Board as of December 4, 2003. ------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED DECEMBER 10, 2003 PROSPECTUS 2,800,000 SHARES [THE KNOT LOGO] COMMON STOCK ------------------- This prospectus relates to the resale of 2,800,000 shares of common stock of The Knot, Inc. that may be offered and sold from time to time by the selling stockholders named in this prospectus. We will not receive any proceeds from the sale of the shares of common stock covered by this prospectus. The selling stockholders may offer their shares through public or private transactions at prevailing market prices or at privately negotiated prices. The selling stockholders may make sales directly to purchasers or through brokers, agents, dealers or underwriters or through a combination of these methods. The selling stockholders will bear all commissions and other compensation paid to brokers in connection with the sale of their shares. Our common stock is quoted on the OTC Bulletin Board under the symbol 'KNOT.OB'. On December 4, 2003, the closing sale price of our common stock was $4.00 per share. ------------------- INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE 'RISK FACTORS' BEGINNING ON PAGE 3. ------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- THE DATE OF THIS PROSPECTUS IS DECEMBER 10, 2003. TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUMMARY.......................................... 1 RISK FACTORS................................................ 3 FORWARD-LOOKING STATEMENTS.................................. 14 USE OF PROCEEDS............................................. 14 DILUTION.................................................... 14 SELLING STOCKHOLDERS........................................ 14 PLAN OF DISTRIBUTION........................................ 16 LEGAL MATTERS............................................... 17 EXPERTS..................................................... 17 WHERE YOU CAN FIND MORE INFORMATION......................... 18
------------------- You should rely only on the information contained in this prospectus. We have not, and the selling stockholders have not, authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholders are not making an offer to sell or seeking offers to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is complete and accurate as of the date of this prospectus, but the information may have changed since that date. Unless the context otherwise indicates, references in this prospectus to the terms 'The Knot,' 'we,' 'our' and 'us' refer to The Knot, Inc. and The Knot's subsidiaries. This prospectus contains other product names, trade names, service marks and trade marks of The Knot and of other organizations. i PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus or incorporated by reference in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read carefully the entire prospectus, including 'Risk Factors' and the other information contained or incorporated by reference in this prospectus, before making an investment decision. OUR BUSINESS The Knot is the leading wedding resource providing products and services to couples planning their weddings and future lives together. Weddings are major milestone events, and consumers tend to allocate significant budgets to their weddings and related purchases. According to an independent research report, the domestic wedding market generates approximately $70 billion in retail sales annually. We offer both online and offline services to the wedding market. Our online sites provide future brides and grooms with a searchable database that draws on thousands of articles on wedding planning and numerous interactive wedding planning tools including a gown search, wedding checklists, a budgeter, a guest list manager and personal wedding Web pages. We offer access to the local wedding market through 60 online city guides that host profiles for thousands of local vendors, such as reception halls, bands, florists and caterers. Our online sites generate a high degree of member involvement through chats, message boards and personalized interactive services. We also provide consumers a convenient place to purchase a broad range of wedding-related items through our online gift registry or our online shops which offer a comprehensive array of wedding supplies. Our subsidiary, Weddingpages, Inc. publishes regional wedding magazines in 18 markets in the United States. These Knot Weddingpages magazines feature the look and feel of The Knot brand and combine the editorial expertise of The Knot with up-to-date, region-specific information. Also, we publish The Knot Magazine, a comprehensive, searchable shopping guide providing directories of wedding gowns, fine jewelry, china, home products, invitations, wedding supplies and honeymoon packages. We sell The Knot Magazine through newsstands and bookstores across the nation and on our website. Through integrated media programs, we provide national and local advertisers with targeted access to couples actively seeking information and advice and making meaningful spending decisions relating to all aspects of their weddings. National online advertisers can sponsor entire editorial areas or special content and participate in newsletter and direct e-mail programs. Local vendors can purchase profiles or badges within their appropriate online city guide and reach their market areas through targeted local emails. National and local advertisers can supplement their online programs with offline print advertising in our national or local magazines. These programs offer advertisers and sponsors an opportunity to establish brand loyalty with first-time purchasers of many products and services. RECENT DEVELOPMENT On September 19, 2003, WeddingChannel.com, Inc. ('WeddingChannel') filed a complaint against The Knot in the United States District Court for the Southern District of New York. The complaint alleges that The Knot has violated U.S. Patent 6,618,753 ('Systems and Methods for Registering Gift Registries and for Purchasing Gifts'), and further alleges that certain actions of The Knot give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If The Knot is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This complaint was served on The Knot on September 22, 2003. Based on information currently available, The Knot believes that the claims are without merit and is vigorously defending itself against all claims. On October 14, 2003, The Knot filed an 1 answer and counterclaims against WeddingChannel. The Knot's answer raises various defenses to the counts alleged by WeddingChannel. Additionally, The Knot has brought counterclaims including a request that the court declare the patent-in-suit is invalid, unenforceable and not infringed. The Knot's counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. ------------------- Our principal executive offices are located at 462 Broadway, 6th Floor, New York, New York, 10013. Our telephone number is (212) 219-8555. The address of our Web site is www.theknot.com. We are also located on America Online (keywords 'Knot' and 'weddings'). Our Web site address and America Online keywords are provided for information purposes only and the information contained on our website or on America Online does not constitute part of this prospectus. 2 RISK FACTORS An investment in our common stock involves a high degree of risk. You should consider carefully the risks described below, together with the other information contained in this prospectus, before deciding to invest in our common stock. These risks could have a material and adverse impact on our business, results of operations and financial condition. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment. RISKS RELATED TO OUR BUSINESS WE HAVE AN UNPROVEN BUSINESS MODEL, AND IT IS UNCERTAIN WHETHER ONLINE WEDDING-RELATED SITES CAN GENERATE SUFFICIENT REVENUES TO SURVIVE. Our model for conducting business and generating revenues is unproven. Our business model depends in large part on our ability to generate revenue streams from multiple sources through our online sites, including online sponsorship and advertising fees from third parties and online sales of wedding gifts and supplies. It is uncertain whether wedding-related online sites that rely on attracting sponsors and advertisers, as well as people to purchase wedding gifts and supplies, can generate sufficient revenues to survive. For our business to be successful, we must provide users with an acceptable blend of products, information, services and community offerings that will attract wedding consumers to our online sites frequently. In addition, we must provide sponsors, advertisers and vendors the opportunity to reach these wedding consumers. We provide our services to users without charge, and we may not be able to generate sufficient revenues to pay for these services. Moreover, we face many of the risks and difficulties frequently encountered in new and rapidly evolving markets, including the online advertising and e-commerce markets. These risks include our ability to: o increase the audience on our sites; o broaden awareness of our brand; o strengthen user-loyalty; o offer compelling content; o maintain our leadership in generating traffic; o maintain our current, and develop new, strategic relationships; o attract a large number of advertisers from a variety of industries; o respond effectively to competitive pressures; o continue to develop and upgrade our technology; and o attract, integrate, retain and motivate qualified personnel. These risks could negatively impact our financial condition if left unaddressed. Accordingly, we are not certain that our business model will be successful or that we can sustain revenue growth or profitability. WE HAVE A HISTORY OF SIGNIFICANT LOSSES SINCE OUR INCEPTION AND MAY INCUR SIGNIFICANT LOSSES IN THE FUTURE. We have only recently achieved profitability in the second and third quarters of this year, and have incurred significant accumulated losses. As of September 30, 2003, our accumulated deficit was $47.7 million. We expect to continue to incur significant operating expenses and, as a result, we will need to generate significant revenues to maintain profitability. We cannot assure you that we can sustain or increase profitability on a quarterly or annual basis in the future. Failure to maintain profitability may materially and adversely affect our business, results of operations and financial condition and the market price of our common stock. 3 WE LACK SIGNIFICANT REVENUES AND MAY BE UNABLE TO ADJUST SPENDING QUICKLY ENOUGH TO OFFSET ANY UNEXPECTED REVENUE SHORTFALL. Our revenues for the foreseeable future will remain dependent on online user traffic levels, advertising activity both online and offline and the expansion of our e-commerce activity. In addition, we plan to expand and develop content and to continue to upgrade and enhance our technology and infrastructure. We incur a significant percentage of our expenses, such as employee compensation, prior to generating revenues associated with those expenses. Moreover, our expense levels are based, in part, on our expectation of future revenues. We may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall. If we have a shortfall in revenues or if operating expenses exceed our expectations or cannot be adjusted accordingly, then our results of operations would be materially and adversely affected. IF SALES TO SPONSORS OR ADVERTISERS FORECASTED IN A PARTICULAR PERIOD ARE DELAYED OR DO NOT OTHERWISE OCCUR, OUR RESULTS OF OPERATIONS FOR A PARTICULAR PERIOD WOULD BE MATERIALLY AND ADVERSELY AFFECTED. The time between the date of initial contact with a potential sponsor or advertiser and the execution of a contract with the sponsor or advertiser is often lengthy, typically ranging from six weeks for smaller agreements and longer for larger agreements, and is subject to delays over which we have little or no control, including: o the occurrence of extraordinary events, such as the attacks on September 11, 2001; o customers' budgetary constraints; o customers' internal acceptance reviews; o the success and continued internal support of advertisers' o and sponsors' own development efforts; and o the possibility of cancellation or delay of projects by advertisers or sponsors. During the sales cycle, we may expend substantial funds and management resources in advance of generating sponsorship or advertising revenues. Accordingly, if sales to advertisers or sponsors forecasted in a particular period are delayed or do not otherwise occur, we would generate less sponsorship and advertising revenues during that period, and our results of operations may be adversely affected. OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATION, AND THESE FLUCTUATIONS MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR COMMON STOCK. Our quarterly revenues and operating results have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control. These factors include: o the level of online usage and traffic on our Web sites; o seasonal demand for e-commerce; o the addition or loss of advertisers; o the advertising budgeting cycles of specific advertisers; o the regional and national magazines publishing cycle; o the amount and timing of capital expenditures and other costs relating to the expansion of our operations, including those related to acquisitions; o the introduction of new sites and services by us or our competitors; o changes in our pricing policies or the pricing policies of our competitors; and o general economic conditions, as well as economic conditions specific to the Internet, online and offline media and electronic commerce. 4 We do not believe that period-to-period comparisons of our operating results are necessarily meaningful and you should not rely upon these comparisons as indicators of our future performance. Due to the foregoing factors, it is also possible that our results of operations in one or more future quarters may fall below the expectations of investors and/or securities analysts. In such event, the trading price of our common stock is likely to decline. BECAUSE THE FREQUENCY OF WEDDINGS VARY FROM QUARTER TO QUARTER, OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONALITY. Seasonal and cyclical patterns may affect our revenues. In 2002, according to the National Center of Health Statistics, 19% of weddings in the United States occurred in the first quarter, 27% occurred in the second quarter, 30% occurred in the third quarter and 24% occurred in the fourth quarter. We have limited experience generating merchandise revenues. Based upon our limited experience, we believe merchandise revenues generally are lower in the first and fourth quarters of each year. WE DEPEND ON OUR STRATEGIC RELATIONSHIPS WITH OTHER WEB SITES. We depend on establishing and maintaining distribution relationships with high-traffic Web sites such as AOL, MSN and Yahoo! for a portion of our traffic. There is intense competition for placements on these sites, and we may not be able to continue to enter into such relationships on commercially reasonable terms, if at all. Even if we enter into distribution relationships with these Web sites, they themselves may not attract a significant number of users. Therefore, our sites may not receive additional users from these relationships. Moreover, we may be required to pay significant fees to establish and maintain these relationships. Our business, results of operations and financial condition could be materially and adversely affected if we do not establish and maintain strategic relationships on commercially reasonable terms or if any of our strategic relationships do not result in increased use of our Web sites. THE MARKET FOR INTERNET ADVERTISING IS STILL DEVELOPING, AND IF THE INTERNET FAILS TO GAIN FURTHER ACCEPTANCE AS A MEDIA FOR ADVERTISING, WE WOULD EXPERIENCE SLOWER REVENUE GROWTH THAN EXPECTED OR A DECREASE IN REVENUE AND WOULD INCUR GREATER THAN EXPECTED LOSSES. Our future success depends, in part, on a significant increase in the use of the Internet as an advertising and marketing medium. Sponsorship and advertising revenues constituted 20% of our net revenues for the year ended December 31, 2001, 23% of our net revenues for the year ended December 31, 2002 and 31% of our net revenues for the nine months ended September 30, 2003. Our national online sponsorship and advertising revenue was approximately $1.7 million for the year ended December 31, 2001, $1.9 million for the year ended December 31, 2002 and $3.1 million for the nine months ended September 30, 2003. The Internet advertising market is still developing, and it cannot yet be compared with traditional advertising media to gauge its effectiveness. As a result, demand for and market acceptance of Internet advertising solutions are uncertain. Many of our current and potential customers have little or no experience with Internet advertising and have allocated only a limited portion of their advertising and marketing budgets to Internet activities. The adoption of Internet advertising, particularly by entities that have historically relied upon traditional methods of advertising and marketing, requires the acceptance of a new way of advertising and marketing. These customers may find Internet advertising to be less effective for meeting their business needs than traditional methods of advertising and marketing. Furthermore, there are software programs that limit or prevent advertising from being delivered to a user's computer. Widespread adoption of this software by users would significantly undermine the commercial viability of Internet advertising. 5 WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE KNOT BRAND NAME WHICH WOULD NEGATIVELY IMPACT OUR BUSINESS AND CAUSE OUR REVENUES TO DECLINE. Building recognition of our brand is critical to attracting and expanding our online user base and our offline readership. Because we plan to continue building brand recognition, we may find it necessary to accelerate expenditures on our sales and marketing efforts or otherwise increase our financial commitment to creating and maintaining brand awareness. Our failure to successfully promote and maintain our brand would adversely affect our business and cause us to incur significant expenses in promoting our brand without an associated increase in our net revenues. OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO SUCCESSFULLY INTEGRATE ANY FUTURE ACQUISITIONS OR SUCCESSFULLY OPERATE UNDER OUR STRATEGIC PARTNERSHIPS. In the future, we may acquire, or invest in, complementary companies, products or technologies or enter into new strategic partnerships. Acquisitions, investments and partnerships involve numerous risks, including: o difficulties in integrating operations, technologies, products and personnel; o diversion of financial and management resources from existing operations; o risks of entering new markets; o potential loss of key employees; and o inability to generate sufficient revenues to offset acquisition or investment costs. THE COSTS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR STRATEGIC ALLIANCES COULD DILUTE YOUR INVESTMENT OR ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. To pay for an acquisition or to enter into a strategic alliance, we might use equity securities, debt, cash, or a combination of the foregoing. If we use equity securities, our stockholders may experience dilution. In addition, an acquisition may involve non-recurring charges, including writedowns of significant amounts of goodwill. The related increases in expenses could adversely affect our results of operations. Any such acquisitions or strategic alliances may require us to obtain additional equity or debt financing, which may not be available on commercially acceptable terms, if at all. IF WE CANNOT PROTECT OUR DOMAIN NAMES, IT WILL IMPAIR OUR ABILITY TO SUCCESSFULLY BRAND THE KNOT. We currently hold various Web domain names, including www.theknot.com. The acquisition and maintenance of domain names generally is regulated by Internet regulatory bodies. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names in all countries in which we conduct business. Furthermore, it is unclear whether laws protecting trademarks and similar proprietary rights will be extended to protect domain names. Therefore, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. We may not successfully carry out our business strategy of establishing a strong brand for The Knot if we cannot prevent others from using similar domain names or trademarks. This could impair our ability to increase market share and revenues. OUR BUSINESS AND PROSPECTS WOULD SUFFER IF WE ARE UNABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS. We rely upon copyright, trade secret and trademark law, assignment of invention and confidentiality agreements and license agreements to protect our proprietary technology, processes, content and other intellectual property to the extent that protection is sought or secured at all. The steps we might take may not be adequate to protect against infringement and 6 misappropriation of our intellectual property by third parties. Similarly, third parties may be able to independently develop similar or superior technology, processes, content or other intellectual property. The unauthorized reproduction or other misappropriation of our intellectual property rights could enable third parties to benefit from our technology without paying us for it. If this occurs, our business and prospects would be materially and adversely affected. In addition, disputes concerning the ownership or rights to use intellectual property could be costly and time-consuming to litigate, may distract management from other tasks of operating the business, and may result in our loss of significant rights and the loss of our ability to operate our business. OUR PRODUCTS AND SERVICES MAY INFRINGE ON INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES AND ANY INFRINGEMENT COULD REQUIRE US TO INCUR SUBSTANTIAL COSTS AND DISTRACT OUR MANAGEMENT. Although we avoid knowingly infringing intellectual rights of third parties, including licensed content, we may be subject to claims alleging infringement of third-party proprietary rights. If we are subject to claims of infringement or are infringing the rights of third parties, we may not be able to obtain licenses to use those rights on commercially reasonable terms, if at all. In that event, we would need to undertake substantial reengineering to continue our online offerings. Any effort to undertake such reengineering might not be successful. Furthermore, a party making such a claim could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from selling our products. Any claim of infringement could cause us to incur substantial costs defending against the claim, even if the claim is invalid, and could distract our management from our business. WE DEPEND UPON QVC TO PROVIDE US WAREHOUSING, FULFILLMENT AND DISTRIBUTION SERVICES, AND SYSTEM FAILURES OR OTHER PROBLEMS AT QVC COULD CAUSE US TO LOSE CUSTOMERS AND REVENUES. We have a services agreement with QVC to warehouse, fulfill and arrange for distribution of approximately 31% of our products, excluding products sold through our retail partners. Our agreement with QVC expires in December 2003 and can be extended by us for up to an additional six months. QVC does not have any obligation to renew this agreement. If QVC's ability to provide us with these services in a timely fashion or at all is impaired, whether through labor shortage, slow down or stoppage, deteriorating financial or business condition, system failures or for any other reason, or if the services agreement is not renewed, we would not be able, at least temporarily, to sell or ship certain of our products to our customers. We may be unable to engage alternative warehousing, fulfillment and distribution services on a timely basis or upon terms favorable to us. INCREASED COMPETITION IN OUR MARKETS COULD REDUCE OUR MARKET SHARE, THE NUMBER OF OUR ADVERTISERS, OUR ADVERTISING REVENUES AND OUR MARGINS. The Internet advertising and online wedding markets are still developing. Additionally, both the Internet advertising and online wedding markets and the wedding magazine publishing markets are intensely competitive, and we expect competition to intensify in the future. We face competition for members, users, readers and advertisers from the following areas: o online services or Web sites targeted at brides and grooms as well as the online sites of retail stores, manufacturers and regional wedding directories; o bridal magazines, such as Bride's and Modern Bride (both part of the Conde Nast family); and o online and retail stores offering gift registries, especially from retailers offering specific bridal gift registries. We expect competition to increase because of the business opportunities presented by the growth of the Internet and e-commerce. Our competition may also intensify as a result of industry consolidation and a lack of substantial barriers to entry. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition and substantially larger user, membership or readership bases 7 than we have and, therefore, have significant ability to attract advertisers, users and readers. In addition, many of our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in Internet user requirements, as well as devote greater resources than we can to the development, promotion and sale of services. There can be no assurance that our current or potential competitors will not develop products and services comparable or superior to those that we develop or adapt more quickly than we do to new technologies, evolving industry trends or changing Internet user preferences. Increased competition could result in price reductions, lower margins or loss of market share. There can be no assurance that we will be able to compete successfully against current and future competitors. OUR POTENTIAL INABILITY TO COMPETE EFFECTIVELY IN OUR INDUSTRY FOR QUALIFIED PERSONNEL COULD HINDER THE SUCCESS OF OUR BUSINESS. Competition for personnel in the Internet and wedding industries is intense. We may be unable to retain employees who are important to the success of our business. We may also face difficulties attracting, integrating or retaining other highly qualified employees in the future. If we cannot attract new personnel or retain and motivate our current personnel, our business may not succeed. TERRORISM AND THE UNCERTAINTY OF WAR MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATING RESULTS. Terrorist attacks, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other acts of violence or war may affect the market on which our common stock will trade, the markets in which we operate or our operating results. Further terrorist attacks against the United States or U.S. businesses may occur. The potential near-term and long-term effect these attacks may have for our customers, the market for our common stock, the markets for our services and the U.S. economy are uncertain. The consequences of any terrorist attacks, or any armed conflicts which may result, are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business. WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING NECESSARY TO EXECUTE OUR BUSINESS STRATEGY. We currently believe that our current cash and cash equivalents will be sufficient to fund our working capital and capital expenditure requirements for at least the next twelve months. Our ability to meet our obligations in the ordinary course of business is dependent upon our ability to maintain profitable operations and/or raise additional financing through public or private equity financings, or other arrangements with corporate sources, or other sources of financing to fund operations. However, there is no assurance that we will maintain profitable operations or that additional funding, if required, will be available to us in amounts or on terms acceptable to us. SYSTEMS DISRUPTIONS AND FAILURES COULD CAUSE ADVERTISER OR USER DISSATISFACTION AND COULD REDUCE THE ATTRACTIVENESS OF OUR SITES. The continuing and uninterrupted performance of our computer systems is critical to our success. Our advertisers and sponsors, users and members may become dissatisfied by any systems disruption or failure that interrupts our ability to provide our services and content to them. Substantial or repeated system disruption or failures would reduce the attractiveness of our online sites significantly. Substantially all of our systems hardware required to run our sites are located at Globix Corporation's facilities in New York, New York. Globix emerged from bankruptcy protection in April 2002. Fire, floods, earthquakes, power loss, telecommunications failures, break-ins, acts of terrorism and similar events could damage these systems. Our operations depend on the ability of Globix to protect its own systems and our systems in its data center against damage from fire, power loss, water damage, telecommunications failure, vandalism and similar unexpected adverse events. Although Globix provides comprehensive facilities management services, Globix does not guarantee that our Internet access will be uninterrupted, error-free or secure. In addition, computer viruses, electronic break-ins or other similar disruptive problems could also adversely 8 affect our online sites. Our business could be materially and adversely affected if our systems were affected by any of these occurrences. We do not presently have any secondary 'off-site' systems or a formal disaster recovery plan. Our sites must accommodate a high volume of traffic and deliver frequently updated information. Our sites have in the past experienced slower response times. These types of occurrences in the future could cause users to perceive our sites as not functioning properly and therefore cause them to use another online site or other methods to obtain information or services. In addition, our users depend on Internet service providers, online service providers and other site operators for access to our online sites. Many of them have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system disruptions or failures unrelated to our systems. Although we carry general liability insurance, our insurance may not cover any claims by dissatisfied advertisers or customers or may not be adequate to indemnify us for any liability that may be imposed in the event that a claim were brought against us. Any system disruption or failure, security breach or other damage that interrupts or delays our operations could cause us to lose users, sponsors and advertisers and adversely affect our business and results of operations. WE MAY NOT BE ABLE TO DELIVER VARIOUS SERVICES IF THIRD PARTIES FAIL TO PROVIDE RELIABLE SOFTWARE, SYSTEMS AND RELATED SERVICES TO US. We are dependent on various third parties for software, systems and related services in connection with our hosting, placement of advertising, accounting software, data transmission and security systems. Several of the third parties that provide software and services to us have a limited operating history and have relatively new technology. These third parties are dependent on reliable delivery of services from others. If our current providers were to experience prolonged systems failures or delays, we would need to pursue alternative sources of services. Although alternative sources of these services are available, we may be unable to secure such services on a timely basis or on terms favorable to us. As a result, we may experience business disruptions if these third parties fail to provide reliable software, systems and related services to us. WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE OUR USERS' PERSONAL INFORMATION. If third parties were able to penetrate our network security or otherwise misappropriate our users' personal or credit card information, we could be subject to liability. Our liability could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims as well as for other misuses of personal information, such as for unauthorized marketing purposes. These claims could result in costly and time-consuming litigation which could adversely affect our financial condition. In addition, the Federal Trade Commission and state agencies have been investigating various Internet companies regarding their use of personal information. We could have additional expenses if new regulations regarding the use of personal information are introduced or if our privacy practices are investigated. OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER STOCKHOLDERS EXERCISE SIGNIFICANT CONTROL OVER ALL MATTERS REQUIRING A STOCKHOLDER VOTE. As of November 28, 2003, our executive officers and directors and stockholders who each owned greater than 5% of our common stock, and their affiliates, in the aggregate, beneficially owned approximately 80% of our outstanding common stock. As a result, these stockholders are able to exercise control over all matters requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership could also have the effect of delaying or preventing a change in control. ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE US. Provisions of our certificate of incorporation, our bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. 9 RISKS RELATED TO THE SECURITIES MARKETS THE DELISTING OF OUR COMMON STOCK FROM THE NASDAQ NATIONAL MARKET HAS RESULTED, AND COULD CONTINUE TO RESULT, IN A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND LARGER SPREADS IN THE BID AND ASK PRICES FOR SHARES OF OUR COMMON STOCK AND COULD RESULT IN LOWER PRICES FOR SHARES OF OUR COMMON STOCK AND MAKE OBTAINING FUTURE EQUITY FINANCING MORE DIFFICULT. On August 23, 2001, our common stock was delisted from the Nasdaq National Market. Our common stock is currently available for quotation on the OTC Bulletin Board. Selling our common stock has become, and may continue to be, more difficult because smaller quantities of shares are bought and sold on the OTC Bulletin Board, transactions could be delayed and news media coverage of us has been reduced. These factors have resulted, and could continue to result, in larger spreads in the bid and ask prices for shares of our common stock and could result in lower prices for shares of our common stock. The delisting of our common stock from the Nasdaq National Market and any further declines in our stock price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and significantly increase the dilution to stockholders caused by our issuing equity in financing or other transactions. The price at which we issue shares in such transactions is generally based on the market price of our common stock, and a decline in our stock prices could result in the need for us to issue a greater number of shares to raise a given amount of funding or acquire a given dollar value of goods or services. In addition, because our common stock is not listed on the Nasdaq National Market, we are subject to Rule 15g-9 under the Securities and Exchange Act of 1934, as amended. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell the common stock and affect the ability of holders to sell their shares of our common stock in the secondary market. OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE AND IS LIKELY TO EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS IN THE FUTURE THAT COULD REDUCE THE VALUE OF YOUR INVESTMENT AND SUBJECT US TO LITIGATION. The market price of our common stock has fluctuated in the past and is likely to continue to be highly volatile, with extreme price and volume fluctuations. These broad market and industry factors may harm the market price of our common stock, regardless of our actual operating performance, and for this or other reasons, we could continue to suffer significant declines in the market price of our common stock. In the past, companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we were to become the object of securities class action litigation, it could result in substantial costs and a diversion of our management's attention and resources. SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY ADVERSELY AFFECT OUR STOCK PRICE. Sales of substantial numbers of shares of our common stock in the public market, or the perception that significant sales are likely, could adversely affect the market price of our common stock. The number of shares of common stock subject to this registration statement is much greater than the average weekly trading volume for our shares. No prediction can be made as to the effect, if any, that market sales of these or other shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock in the public market could adversely affect the market price of our common stock. 10 RISKS RELATED TO THE INTERNET INDUSTRY IF THE USE OF THE INTERNET AND COMMERCIAL ONLINE SERVICES AS MEDIA FOR COMMERCE DOES NOT CONTINUE TO GROW, OUR BUSINESS AND PROSPECTS WOULD BE MATERIALLY AND ADVERSELY AFFECTED. We cannot assure you that a sufficiently broad base of consumers will adopt, and continue to use, the Internet and commercial online services as media for commerce, particularly for purchases of wedding gifts and supplies. Even if consumers adopt the Internet or commercial online services as a media for commerce, we cannot be sure that the necessary infrastructure will be in place to process such transactions. Our long-term viability depends substantially upon the widespread acceptance and the development of the Internet or commercial online services as effective media for consumer commerce and for advertising. Use of the Internet or commercial online services to effect retail transactions and to advertise is at an early stage of development. Convincing consumers to purchase wedding gifts and supplies online may be difficult. Demand for recently introduced services and products over the Internet and commercial online services is subject to a high level of uncertainty. Few proven services and products exist. The development of the Internet and commercial online services into a viable commercial marketplace is subject to a number of factors, including: o continued growth in the number of users of such services; o concerns about transaction security; o continued development of the necessary technological infrastructure; o consistent quality of service; o availability of cost-effective, high speed service; o uncertain and increasing government regulation; and o the development of complementary services and products. If users experience difficulties because of capacity constraints of the infrastructure of the Internet and other commercial online services, potential users may not be able to access our sites, and our business and prospects would be harmed. To the extent that the Internet and other online services continue to experience growth in the number of users and frequency of use by consumers resulting in increased bandwidth demands, there can be no assurance that the infrastructure for the Internet and other online services will be able to support the demands placed upon them. The Internet and other online services have experienced outages and delays as a result of damage to portions of their infrastructure, power failures, telecommunication outages, network service outages and disruptions, natural disasters and vandalism and other misconduct. Outages or delays could adversely affect online sites, e-mail and the level of traffic on all sites. We depend on online access providers that provide our users with access to our services. In the past, users have experienced difficulties due to systems failures unrelated to our systems. In addition, the Internet or other online services could lose their viability due to delays in the development or adoption of new standards and protocols required to handle increased levels of Internet or other online service activity or to increased governmental regulation. Insufficient availability of telecommunications services to support the Internet or other online services also could result in slower response times and negatively impact use of the Internet and other online services generally, and our sites in particular. If the use of the Internet and other online services fails to grow or grows more slowly than expected, if the infrastructure for the Internet and other online services does not effectively support growth that may occur or if the Internet and other online services do not become a viable commercial marketplace, it is possible that we will not be able to maintain profitability. WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN THE INTERNET INDUSTRY AND THIS MAY HARM OUR BUSINESS. If we are unable, for technological, legal, financial or other reasons, to adapt in a timely manner to changing market conditions or customer requirements, we could lose users and market 11 share to our competitors. The Internet and e-commerce are characterized by rapid technological change. Sudden changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices could render our existing online sites and proprietary technology and systems obsolete. The emerging nature of products and services in the online wedding market and their rapid evolution will require that we continually improve the performance, features and reliability of our online services. Our success will depend, in part, on our ability: o to enhance our existing services; o to develop and license new services and technology that address the increasingly sophisticated and varied needs of our prospective customers and users; and o to respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of online sites and other proprietary technology entails significant technological and business risks and requires substantial expenditures and lead time. We may be unable to use new technologies effectively or adapt our online sites, proprietary technology and transaction-processing systems to customer requirements or emerging industry standards. Updating our technology internally and licensing new technology from third parties may require significant additional capital expenditures. IF WE BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATED TO DOING BUSINESS ONLINE, OUR SPONSORSHIP, ADVERTISING AND MERCHANDISE REVENUES COULD DECLINE AND OUR BUSINESS AND PROSPECTS COULD SUFFER. Laws and regulations directly applicable to Internet communications, commerce and advertising are becoming more prevalent. Laws and regulations may be adopted covering issues such as user privacy, pricing, content, taxation and quality of products and services. Any new legislation could hinder the growth in use of the Internet and other online services generally and decrease the acceptance of the Internet and other online services as media of communications, commerce and advertising. The governments of states and foreign countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities. The laws governing the Internet remain largely unsettled, even in areas where legislation has been enacted. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and taxation apply to the Internet and Internet advertising services. In addition, the growth and development of the market for e-commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, which may impose additional burdens on companies conducting business online. The adoption or modification of laws or regulations relating to the Internet and other online services could cause our sponsorship, advertising and merchandise revenues to decline and our business and prospects to suffer. WE MAY BE SUED FOR INFORMATION RETRIEVED FROM OUR SITES. We may be subject to claims for defamation, negligence, copyright or trademark infringement, personal injury or other legal theories relating to the information we publish on our online sites. These types of claims have been brought, sometimes successfully, against online services as well as other print publications in the past. We could also be subject to claims based upon the content that is accessible from our online sites through links to other online sites or through content and materials that may be posted by members in chat rooms or bulletin boards. Our insurance, which covers commercial general liability, may not adequately protect us against these types of claims. WE MAY INCUR POTENTIAL PRODUCT LIABILITY FOR PRODUCTS SOLD ONLINE. Consumers may sue us if any of the products that we sell online are defective, fail to perform properly or injure the user. To date, we have had limited experience selling products online and developing relationships with manufacturers or suppliers of such products. We sell a range of products targeted specifically at brides and grooms through The Knot Registry, The Knot Shop, 12 Bridalink.com or other e-commerce sites that we may acquire in the future. Such a strategy involves numerous risks and uncertainties. Although our agreements with manufacturers typically contain provisions intended to limit our exposure to liability claims, these limitations may not prevent all potential claims. Liability claims could require us to spend significant time and money in litigation or to pay significant damages. As a result, any such claims, whether or not successful, could seriously damage our financial results, reputation and brand name. WE MAY INCUR SIGNIFICANT EXPENSES RELATED TO THE SECURITY OF PERSONAL INFORMATION ONLINE. The need to transmit securely confidential information online has been a significant barrier to e-commerce and online communications. Any well-publicized compromise of security could deter people from using the Internet or other online services or from using them to conduct transactions that involve transmitting confidential information. Because our success depends on the acceptance of online services and e-commerce, we may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by such breaches. 13 FORWARD-LOOKING STATEMENTS This prospectus and the documents incorporated by reference herein may contain projections or other forward-looking statements regarding future events or the future financial performance of The Knot. Forward looking statements can be identified by the use of terminology such as 'may,' 'will,' 'should,' 'expect,' 'anticipate,' 'intend,' 'estimate,' 'plan' and other similar terms. These statements are only predictions and reflect the current beliefs and expectations of The Knot. Actual events or results may differ materially from those contained in the projections or forward-looking statements as a result of certain factors. The risk factors and other cautionary statements made in this prospectus under the caption 'Risk Factors' as well as in our most recent Annual Report on Form 10-K under the captions 'Business -- Competition,' 'Business -- Infrastructure, Operations and Technology,' 'Business -- Government Regulation,' 'Business -- Intellectual Property and Proprietary Rights,' and 'Quantitative and Qualitative Disclosures About Market Risk,' all of which you should review carefully, identify some of the important factors that could cause future results or events to differ from those identified in forward-looking statements. The Knot undertakes no obligation to update publicly any forward-looking statement for any reason, including to conform these statements to actual results or to changes in our expectations. USE OF PROCEEDS We will not receive any of the proceeds from the sale of the shares offered and sold pursuant to this prospectus. The selling stockholders will not pay any of the expenses that are incurred in connection with the registration of the shares, but they will pay all commissions, discounts and any other compensation to any securities broker-dealers through whom they sell any of the shares. DILUTION None of the shares offered and sold pursuant to this prospectus are being sold by us. Therefore, there will be no dilution in the net tangible book value per share as a result of the sale of the shares offered and sold pursuant to this prospectus. SELLING STOCKHOLDERS We are registering the shares of common stock offered for sale by this prospectus as required by certain registration rights obligations of agreements dated as of November 18, 2003 in connection with a private placement to the selling stockholders. The following table sets forth the name of each selling stockholder, the number of shares of common stock beneficially owned by each selling stockholder as of November 28, 2003, the number of shares of common stock that each selling stockholder may offer and sell pursuant to this prospectus, and the number of shares of common stock to be beneficially owned by each selling stockholder after completion of this offering (assuming the sale of all shares offered by this prospectus). Because each selling stockholder may offer all or a portion of the shares of common stock offered by this prospectus from time to time after the date hereof, no estimate can be made of the number of shares that each selling stockholder may retain upon completion of this offering. However, assuming all of the shares offered by this prospectus are sold by the selling stockholders, after completion of this offering, none of the selling stockholders will own more than one percent of the shares of common stock outstanding. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to shares. Unless otherwise indicated, the persons named in the table directly own the shares and have sole voting and sole investment control with respect to all shares beneficially owned. None of the selling stockholders beneficially own any shares of common stock pursuant to options or similar rights. The information with respect to beneficial ownership of common stock held by each selling stockholder is based upon record ownership data provided by our transfer agent, information as supplied or confirmed by the selling stockholders, statements filed with the Securities and Exchange Commission or our actual knowledge. 14 Within the past three years, none of the selling stockholders have held any position or office with us or any of our affiliates or had a material relationship with us or any of our affiliates.
NUMBER OF NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR TO OFFERED OWNED AFTER NAME THE OFFERING HEREBY OFFERING ---- ------------ ------ -------- T. Rowe Price Associates, Inc. (1): T. Rowe Price New Horizons Fund.................... 1,350,000 1,350,000 0 T. Rowe Price Global Technology Fund............... 14,000 10,000 4,000 T. Rowe Price Media & Telecommunications Fund...... 80,200 75,000 5,200 TD Entertainment & Communications Fund............. 16,000 15,000 1,000 NYC 457/401K Small Cap Account..................... 50,000 50,000 0 --------- --------- ------ Total.......................................... 1,510,200 1,500,000 10,200 Capital Research and Management Company (2): Smallcap World Fund, Inc........................... 1,200,000 1,200,000 0 American Funds Insurance Series -- Global Small Capitalization Fund.............................. 100,000 100,000 0 --------- --------- ------ Total.......................................... 1,300,000 1,300,000 0
- --------- (1) T. Rowe Price Associates, Inc. ('T. Rowe Price Associates') serves as investment adviser with power to direct investments and/or sole power to vote the shares owned by the funds listed under its name in the table above, as well as shares owned by certain other individual and institutional investors. For purposes of the reporting requirements of the Securities Exchange Act of 1934, T. Rowe Price Associates may be deemed to be the beneficial owner of all of the shares listed above; however, T. Rowe Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. T. Rowe Price Associates is a wholly owned subsidiary of T. Rowe Price Group, Inc., which is a publicly traded financial services holding company. (2) Capital Research and Management Company ('Capital Research') serves as investment adviser to the funds listed under its name in the table above. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Capital Research may be deemed to be the beneficial owner of all of the shares listed above; however, Capital Research expressly disclaims that it is, in fact, the beneficial owner of such securities. 15 PLAN OF DISTRIBUTION We are registering the shares of common stock offered for sale by this prospectus on behalf of the selling stockholders. As used in this section, 'selling stockholders' includes donees, pledgees, distributees, transferees, or other successors-in-interest. The selling stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. We will pay all costs, expenses and fees in connection with the registration of the shares. The selling stockholders will pay all brokerage commissions, underwriting discounts, commissions, transfer taxes and other similar selling expenses, if any, associated with the sale of the shares of common stock by them. The 2,800,000 shares of common stock registered hereby were originally issued to and purchased by the selling stockholders at a price of $3.75 per share in a private placement pursuant to agreements dated as of November 18, 2003. These shares of common stock were issued and sold pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the 'Securities Act'), as provided by Rule 506 of Regulation D promulgated thereunder. We paid Allen & Company LLC a customary fee as compensation for services as a placement agent to us. The selling stockholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares: o ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; o block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker-dealer as principal and resale by the broker-dealer for its account; o an exchange distribution in accordance with the rules of the applicable exchange; o privately negotiated transactions; o short sales; o broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; o a combination of any such methods of sale; and o any other method permitted pursuant to applicable law. The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our shares of common stock and may sell or deliver shares in connection with these trades. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act. The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock 16 from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors-in-interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors-in-interest as selling stockholders under this prospectus. The selling stockholders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be 'underwriters' within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act. The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934, as amended, may apply to sales of our common stock and activities of the selling stockholders. LEGAL MATTERS The validity of the shares of common stock offered by this prospectus will be passed upon for us by Proskauer Rose LLP, New York, New York. EXPERTS The consolidated financial statements and the related financial statement schedule of The Knot, Inc. at December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002, incorporated into this prospectus by reference to our Annual Report on Form 10-K for the year ended December 31, 2002, have been audited by Ernst & Young LLP, Independent Auditors, as set forth in their report, which is incorporated herein by reference, in reliance upon the authority of such firm as experts in accounting and auditing. 17 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (SEC). You may read and copy these reports, proxy statements and other information at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, located at http://www.sec.gov. The SEC allows us to 'incorporate by reference' the information we file with it, which means that we can disclose important information to you by referring to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the following documents we filed with, or furnished to, the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the 'Exchange Act'): o our Annual Report on Form 10-K for the fiscal year ended December 31, 2002; o our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2003, June 30, 2003 and September 30, 2003; o our Current Reports on Form 8-K dated January 6, 2003, February 25, 2003, May 13, 2003, August 13, 2003, November 13, 2003, November 19, 2003 and November 20, 2003; and o the description of our common stock in our Registration Statement on Form 8-A (registration number 000-28271) under Section 12(g) of the Exchange Act. In addition, all documents subsequently filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act before the offering of the common stock offered hereby is completed shall be deemed to be incorporated by reference into this prospectus. Any statement contained herein or in any document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or replaces such statement. Any such statement so modified or superseded shall not be deemed to constitute a part of this prospectus, except as so modified or superseded. We will provide to you at no cost a copy of any or all of the information incorporated by reference into this prospectus. You may make a request for a copy of this information in writing or by telephone. Requests should be directed to: The Knot, Inc. Attention: Investor Relations 462 Broadway, 6th Floor New York, NY 10013 (212) 219-8555 ir@theknot.com 18 ================================================================================ 2,800,000 SHARES [THE KNOT LOGO] COMMON STOCK ---------------- PROSPECTUS ---------------- DECEMBER 10, 2003 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses in connection with the issuance and distribution of the common stock being registered under the prospectus are listed below (all amounts other than Securities and Exchange Commission registration fee are estimated). We will pay all costs, expenses and fees in connection with the registration of the shares. The selling stockholders will pay all brokerage commissions, underwriting discounts, commissions, transfer taxes and other similar selling expenses, if any, associated with the sale of the shares of common stock by them, which are not listed below. Securities and Exchange Commission registration fee......... $ 1,000 Legal fees and expenses..................................... 15,000 State 'blue sky' fees and expenses.......................... 5,000 Accounting fees and expenses................................ 5,000 Printing and engraving costs................................ 5,000 Transfer agent's fees and expenses.......................... 5,000 Miscellaneous............................................... 14,000 ------- Total................................................... $50,000 ------- -------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our amended and restated certificate of incorporation provides that the liability of a director of The Knot shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware. Under the Delaware General Corporation Law, our directors have a fiduciary duty to The Knot which is not eliminated by this provision of the amended and restated certificate of incorporation and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available. Section 145 of the Delaware General Corporation Law empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers, provided that this provision shall not eliminate or limit the liability of a director: o for any breach of the director's duty of loyalty to The Knot or its stockholders; o for acts or omissions which are found by a court of competent jurisdiction to be not in good faith or which involve intentional misconduct or a knowing violation of law; o for the payment of dividends or approval of stock repurchases or redemptions that are prohibited by the Delaware General Corporation Law; or o for any transaction from which the director derived an improper personal benefit. The Delaware General Corporation Law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation's certificate of incorporation, bylaws, any agreement, a vote of stockholders or otherwise. Our amended and restated certificate of incorporation eliminates the personal liability of directors to the fullest extent permitted by Section 102(b)(7) of the Delaware General Corporation Law and provides that The Knot shall fully indemnify any person who was or is a party or is threatened to be made a part to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that that person is or was a director or officer of The Knot or is or was serving at the request of The Knot as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. This indemnification shall be against expenses including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee in connection with such action, suit or proceeding. II-1 We have entered into indemnification agreements with each of our current directors and executive officers, in addition to the indemnification provided for in The Knot's amended and restated certificate of incorporation. The Knot believes that these provisions and agreements are necessary to attract and retain qualified directors and executive officers. In addition, The Knot has obtained liability insurance for its directors and officers. ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- 4.1 -- Specimen Common Stock certificate (incorporated by reference to our Registration Statement on Form S-1, registration number 333-87345) (the 'Form S-1') 4.2 -- Provisions defining the rights of holders of common stock in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (incorporated by reference to the Form S-1) 4.4 -- Subscription Agreement by and between The Knot, Inc. and T. Rowe Price Associates, Inc. on behalf of its participating clients specified therein, dated as of November 18, 2003 4.5 -- Subscription Agreement by and between The Knot, Inc. and investment funds advised by Capital Research and Management Company, dated as of November 18, 2003 5.1 -- Opinion of Proskauer Rose LLP 10.13 -- Amendment to Common Stock Purchase Agreement between The Knot, Inc. and May Bridal Corporation, dated as of November 11, 2003 23.1 -- Consent of Ernst & Young LLP, independent auditors 23.2 -- Consent of Proskauer Rose LLP (contained in the opinion filed as Exhibit Number 5 to this registration statement) 24.1 -- Power of Attorney (contained on the signature page to this registration statement)
ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (A)(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the 'Calculation of Registration Fee' table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. provided, however, that paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement. II-2 (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (B) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 15 hereof or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (C) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (D)(1) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on December 10, 2003. THE KNOT, INC. By: /s/ DAVID LIU ......................................... NAME: DAVID LIU TITLE: PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below hereby constitutes and appoints David Liu and Richard E. Szefc, and each of them, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for and in such person's name, place and stead, in the capacities indicated below, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file or cause to be filed the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might, or could, do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each of them, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on December 10, 2003.
SIGNATURE TITLE --------- ----- /s/ DAVID LIU President, Chief Executive Officer and .................................................. Chairman of the Board of Directors DAVID LIU (Principal Executive Officer) /s/ RICHARD E. SZEFC Chief Financial Officer, Treasurer and .................................................. Secretary (Principal Financial and RICHARD E. SZEFC Accounting Officer) /s/ SANDRA STILES Chief Operating Officer, Assistant Secretary .................................................. and Director SANDRA STILES /s/ JOSEPH C. BREHOB Director .................................................. JOSEPH C. BREHOB /s/ RANDY S. RONNING Director .................................................. RANDY S. RONNING /s/ ANN L. WINBLAD Director .................................................. ANN L. WINBLAD
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- 4.1 -- Specimen Common Stock certificate (incorporated by reference to our Registration Statement on Form S-1, registration number 333-87345) (the 'Form S-1') 4.2 -- Provisions defining the rights of holders of common stock in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (incorporated by reference to the Form S-1) 4.4 -- Subscription Agreement by and between The Knot, Inc. and T. Rowe Price Associates, Inc. on behalf of its participating clients specified therein, dated as of November 18, 2003 4.5 -- Subscription Agreement by and between The Knot, Inc. and investment funds advised by Capital Research and Management Company, dated as of November 18, 2003 5.1 -- Opinion of Proskauer Rose LLP 10.13 -- Amendment to Common Stock Purchase Agreement between The Knot, Inc. and May Bridal Corporation, dated as of November 11, 2003 23.1 -- Consent of Ernst & Young LLP, independent auditors 23.2 -- Consent of Proskauer Rose LLP (contained in the opinion filed as Exhibit Number 5 to this registration statement) 24.1 -- Power of Attorney (contained on the signature page to this registration statement)
EX-4 3 ex4-4.txt EXHIBIT 4.4 EXHIBIT 4.4 SUBSCRIPTION AGREEMENT This Subscription Agreement (this "Agreement") is entered into as of November 18, 2003 by and between The Knot, Inc., a Delaware corporation (together with its successors and permitted assigns, the "Issuer"), and the undersigned investor (together with its successors and permitted assigns, the "Investor"). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in Section 9.1. RECITALS Subject to the terms and conditions of this Agreement, the Investor, on behalf of its participating clients (the "Participating Clients") specified in Exhibit C, desires to subscribe for and purchase, and the Issuer desires to issue and sell to the Investor on behalf of the Participating Clients, certain shares of the Issuer's common stock, par value $0.01 per share (the "Common Stock"). The Board of Directors of the Issuer has authorized the Issuer to offer a maximum of 2,800,000 shares of Common Stock in a private placement to the Investor and other investors at a purchase price of $3.75 per share and on the other terms and conditions contained in this Agreement (the "Offering"); provided, that the Offering and the subsequent sale of Common Stock shall not require approval of the Issuer's stockholders and that the Issuer reserves the right to issue and sell a lesser or greater number of shares. TERMS OF AGREEMENT In consideration of the mutual representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows: 1. SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. 1.1 Subscription and Issuance of Common Stock. Subject to the terms and conditions of this Agreement, the Issuer shall issue and sell to the Investor and the Investor, on behalf of the Participating Clients, subscribes for and shall purchase from the Issuer the number of shares of Common Stock set forth on the signature page hereof (the "Shares") for the aggregate purchase price set forth on the signature page hereof, which shall be equal to the product of the number of Shares subscribed for by the Investor multiplied by the per share purchase price specified in the above Recitals to this Agreement (the "Purchase Price"). 1.2 Legend. Any certificate or certificates representing the Shares shall bear the following legend, in addition to any legend that may be required by any Requirements of Law: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION. 1.3 Use of Proceeds. The Issuer intends to apply the net proceeds from the sale of the Shares for general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in businesses, technologies or products that are complementary to our business. However, we have no present plans or commitments and are not currently engaged in any negotiations with respect to such transactions. Pending our use of the net proceeds of this offering for these purposes, we intend to invest the proceeds in short-term, interest-bearing, investment-grade securities. 1. 4 Certificating Shares. The Issuer agrees to issue certificates representing the Shares purchased by the Investor on behalf of each of the respective Participating Clients in such form and in the name of the nominee designated for each Participating Client on Exhibit C. 2. CLOSING. 2.1 Closing. The closing of the transactions contemplated herein (the "Closing") shall take place on a date designated by the Issuer, which date shall be at 10:00 a.m. on or before November 19, 2003. The Closing shall take place at the offices of Allen & Company LLC, 711 Fifth Avenue, New York, New York 10022. At the Closing, unless the Investor and the Issuer otherwise agree (a) the Investor shall pay the Purchase Price to the Issuer, by wire transfer of immediately available funds to an account designated in writing by the Issuer, (b) the Issuer shall issue to the Investor the Shares, and shall deliver or cause to be delivered to the Investor a certificate or certificates representing the Shares duly registered in the name of the Investor, as specified on the signature pages hereto, bearing the legend specified in Section 1.2 and (iii) all other actions referred to in this Agreement which are required to be taken for the Closing shall be taken and all other agreements and other documents referred to in this Agreement which are required for the Closing shall be executed and delivered. 2.2 Termination. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of the Issuer and the Investor; (b) by the Investor, upon a materially inaccurate representation or breach of any material warranty, covenant or agreement on the part of the Issuer set forth in this Agreement, in either case such that the conditions in Section 8.1 would be reasonably incapable of being satisfied on or prior to the date of the Closing; or (c) by the Issuer, upon a materially inaccurate representation or breach of any material warranty, covenant or agreement on the part of the Investor set forth in this Agreement, in either case such that the conditions in Section 8.2 would be reasonably incapable of being satisfied on or prior to the date of the Closing. 2.3 Effect of Termination. In the event of termination of this Agreement pursuant to Section 2.2, this Agreement shall forthwith become void, there shall be no liability on the part of the Issuer or the Investor to each other and all rights and obligations of any party hereto shall cease; provided, however, that nothing herein shall relieve any party from liability for the willful 2 breach of any of its representations and warranties, covenants or agreements set forth in this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. As a material inducement to the Investor entering into this Agreement and subscribing for the Shares, the Issuer represents and warrants to the Investor as follows: 3.1 Corporate Status. The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Issuer and its Subsidiaries has full corporate power and authority to own and hold its properties and to conduct its business as described in the Issuer's SEC Reports. Each of the Issuer and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business requires qualification or good standing, except for any failure to be so qualified or be in good standing that would not have a Material Adverse Effect. 3.2 Corporate Power and Authority. The Issuer has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. At or prior to the Closing, the Issuer will have taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. No further approval or authorization of any stockholder or the Board of Directors of the Issuer is required for the issuance and sale of the Shares or, except as provided in Section 6.2, the filing of the Shelf Registration Statement. 3.3 Enforceability. This Agreement has been duly executed and delivered by the Issuer and (assuming it has been duly authorized, executed and delivered by the Investor) constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, the indemnity provisions of Section 7 of this Agreement, which may not be enforceable based upon public policy considerations, and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity. 3.4 No Violation. The execution and delivery by the Issuer of this Agreement, the consummation of the transactions contemplated hereby, and the compliance by the Issuer with the terms and provisions hereof (including, without limitation, the Issuer's issuance to the Investor of the Shares as contemplated by and in accordance with this Agreement), will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate the Certificate of Incorporation or By-Laws of the Issuer or any material Contract to which the Issuer is a party (except to the extent such a default, acceleration, or violation would not, in the case of a Contract, have a Material Adverse Effect on the Issuer), or materially violate any Requirement of Law applicable to the Issuer, or result in the creation or imposition of any material Lien upon any of the capital stock, properties or assets of the Issuer or any of its Subsidiaries (except where such violations of any Requirement of Law or creations or impositions of any Liens would not have a Material Adverse Effect on the Issuer). Neither the Issuer nor any of its Subsidiaries is 3 (a) in default under or in violation of any material Contract to which it is a party or by which it or any of its properties is bound or (b) to its knowledge, in violation of any order of any Governmental Authority, which, in the case of clauses (a) and (b), could reasonably be expected to have a Material Adverse Effect. 3.5 Consents/Approvals. Except for the filing of a registration statement in accordance with Article 6 hereof and filings with the SEC, the securities commissions of the states in which the Shares are to be issued, and The OTC Bulletin Board (if any), no consents, filings, authorizations or other actions of any Governmental Authority are required to be obtained or made by the Issuer for the Issuer's execution, delivery and performance of this Agreement which have not already been obtained or made. No consent, approval, waiver or other action by any Person under any Contract to which the Issuer is a party or by which the Issuer or any of its properties or assets are bound is required or necessary for the execution, delivery or performance by the Issuer of this Agreement and the consummation of the transactions contemplated hereby, except where the failure to obtain such consents would not have a Material Adverse Effect on the Issuer. 3.6 Valid Issuance. Upon payment of the Purchase Price by the Investor and delivery to the Investor of the certificates for the Shares, such Shares will be validly issued, fully paid and non-assessable and will be free and clear of all Liens imposed by the Issuer and will not be subject to any preemptive rights or other similar rights of stockholders of the Issuer. 3.7 SEC Filings, Other Filings and OTC Bulletin Board Compliance. The Issuer has timely made all filings required to be made by it under the Exchange Act. The Issuer has delivered or made accessible to the Investor true, accurate and complete copies of (a) Issuer's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, (b) the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003 (c) the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003 (d) the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003, (e) the Issuer's definitive proxy statement dated April 10, 2003 relating to its 2003 Annual Meeting of Stockholders, and (f) the Issuer's Current Reports on Form 8-K dated May 13, 2003, August 13, 2003 and November 13, 2003 (the "SEC Reports"). The SEC Reports, when filed, complied in all material respects with all applicable requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, if and to the extent applicable, and the rules and regulations of the SEC thereunder applicable to the SEC Reports. None of the SEC Reports, at the time of filing, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in light of the circumstances in which they were made. The Issuer has filed in a timely manner all documents that the Issuer was required to file under the Exchange Act during the twelve (12) months preceding the date of this Agreement. The Issuer is currently eligible to register the resale of the Shares in a secondary offering on a registration statement on Form S-3 under the Securities Act. The Issuer has taken, or will have taken prior to the Closing, all necessary actions to ensure its continued inclusion in, and the continued eligibility of the Common Stock for trading on, The OTC Bulletin Board under all currently effective inclusion requirements. Each balance sheet included in the SEC Reports (including any related notes and schedules) fairly presents in all material respects the consolidated financial position of the Issuer as of its date, and each of the other financial statements included in the SEC Reports (including any related notes and 4 schedules) fairly presents in all material respects the consolidated results of operations of the Issuer for the periods or as of the dates therein set forth in accordance with GAAP consistently applied during the periods involved (except that the interim reports are subject to adjustments which might be required as a result of year end audit and except as otherwise stated therein). Such financial statements included in the SEC Reports were, at that time they were filed, consistent with the books and records of the Issuer in all material respects and complied as to form in all material respects with then applicable accounting requirements and with the rules and regulations of the SEC with respect thereto. The Issuer keeps accounting records in accordance with GAAP in which all material assets and liabilities, and all material transactions, including off-balance sheet transactions, of the Issuer are recorded in material conformity with applicable accounting principles and disclosed as required by Requirements of Law in the SEC Reports. 3.8 Commissions. The Issuer has not incurred any other obligation for any finder's or broker's or agent's fees or commissions in connection with the transactions contemplated hereby, except that the Issuer will pay a five percent (5%) commission to Allen & Company LLC ("Allen"), the placement agent for the Offering, in accordance with that certain Placement Agency Agreement entered into between the Issuer and Allen. 3.9 Capitalization. As of the date of this Agreement, the authorized capital stock of the Issuer consists of 100,000,000 shares of Common Stock. All issued and outstanding shares of capital stock of the Issuer have been, and as of the Closing Date will be, duly authorized and validly issued and are fully paid and non-assessable, have been issued in compliance with all applicable state and federal securities laws in all material respects and were not issued in violation of, or subject to, any preemptive, subscription or other similar rights of any stockholder of the Issuer. As of September 30, 2003, the Issuer had issued and outstanding 18,880,191 shares of Common Stock. In addition, the authorized capital stock of the Issuer includes 5,000,000 shares of preferred stock, none of which are outstanding as of September 30, 2003. Except for outstanding options to purchase 3,434,740 shares of Common Stock and a warrant to purchase 440,958 shares of Common Stock, as of September 30, 2003, there were no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal and similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Issuer of any shares of capital stock, and the Issuer is not a party to or subject to any agreement or understanding and, to the Issuer's knowledge, there is no agreement or understanding between any Persons, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Issuer, except as set forth on Schedule 3.9. The Issuer owns, directly or indirectly, all of the capital stock of its Subsidiaries, free and clear of any Liens or equitable interests other than as reflected in the SEC Reports. The Issuer has no obligation, contingent or otherwise, to redeem or repurchase any equity security or any security that is a combination of debt and equity. 3.10 Material Changes. Except as set forth in the SEC Reports or as otherwise contemplated herein, since September 30, 2003, there has been no Material Adverse Effect in respect of the Issuer and its Subsidiaries taken as a whole. Except as set forth in the SEC Reports, since September 30, 2003, there has not been: (i) any direct or indirect redemption, purchase or other acquisition by the Issuer of any shares of the Common Stock; (ii) any declaration, setting aside or payment of any dividend or other distribution by the Issuer with respect to the Common Stock; (iii) any borrowings incurred or any material liabilities (absolute, 5 accrued or contingent) assumed, other than current liabilities incurred in the ordinary course of business, liabilities under Contracts entered into in the ordinary course of business, liabilities not required to be reflected on the Issuer's financial statements pursuant to GAAP or required to disclosed in the SEC Reports, and liabilities in connection with the matters described on Schedule 3.11; (iv) any Lien or adverse claim on any of its material properties or assets, except for Liens for taxes not yet due and payable or otherwise in the ordinary course of business, and except as set forth on Schedule 3.11; (v) any sale, assignment or transfer of any of its material assets, tangible or intangible, except in the ordinary course of business; (vi) any extraordinary losses or waiver of any rights of material value, other than in the ordinary course of business; (vii) any material capital expenditures or commitments therefor other than in the ordinary course of business; (viii) any other material transaction other than in the ordinary course of business; (ix) any material change in the nature or operations of the business of the Issuer and its Subsidiaries; (x) any default in the payment of principal or interest in any material amount, or violation of any material covenant, with respect to any outstanding debt obligations that are material to the Issuer and its Subsidiaries as a whole; (xi) any material changes to its critical accounting policies or material deviations from historical accounting and other practices in connection with the maintenance of the Issuer's books and records; or (xii) any agreement or commitment to do any of the foregoing. 3.11 Litigation. Except as disclosed on Schedule 3.11 or in the SEC Reports, there is no action, suit, proceeding or investigation pending or, to the Issuer's knowledge, currently threatened against the Issuer or any of its Subsidiaries that questions the validity of this Agreement or the right of the Issuer to enter into it, or to consummate the transactions contemplated hereby, or that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect on the Issuer or any change in the current equity ownership of the Issuer. The foregoing includes, without limitation, actions pending or, to the Issuer's knowledge, threatened involving the prior employment of any of the Issuer's employees or their use in connection with the Issuer's business of any information or techniques allegedly proprietary to any of their former employers. Neither the Issuer nor any of its Subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or Governmental Authority. There is no action, suit, proceeding or investigation by the Issuer or any of its Subsidiaries currently pending or which the Issuer or any of its Subsidiaries currently intends to initiate, which could reasonably be expected to have a Material Adverse Effect. 3.12 Rights of Registration, Voting Rights, and Anti-Dilution. Except as contemplated in this Agreement and except as disclosed on Schedule 3.12, the Issuer has not granted or agreed to grant any registration rights, including piggyback rights, to any Person and, to the Issuer's knowledge, no stockholder of the Issuer has entered into any agreements with respect to the voting of capital shares of the Issuer. Except as disclosed on Schedule 3.12, the issuance of the Shares does not constitute an anti-dilution event for any existing security holders of the Issuer, pursuant to which such security holders would be entitled to additional securities or a reduction in the applicable conversion price or exercise price of any securities. 3.13 Offerings. Subject in part to the truth and accuracy of Investor's representations and warranties set forth in this Agreement, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities 6 Act and any applicable state securities laws, and neither the Issuer nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. 3.14 Disclosure. The Disclosure Documents (as defined in Section 4.7), as of their respective dates, did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3.15 Licenses and Permits. To the Issuer's knowledge, each of the Issuer and its Subsidiaries has all Permits under applicable Requirements of Law from all applicable Governmental Authorities that are necessary to operate its businesses as presently conducted and all such Permits are in full force and effect, except where the failure to have any such Permits in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Issuer's knowledge, neither the Issuer nor any of its Subsidiaries is in default under, or in violation of or noncompliance with, any of such Permits, except for any such default, violation, or noncompliance which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Issuer's knowledge, other than as disclosed in the SEC Reports, there is no proposed change in any Requirements of Law which would require the Issuer and its Subsidiaries to obtain any Permits in order to conduct its business as presently conducted that the Issuer and its Subsidiaries do not currently possess and the lack of which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 3.16 Patents and Trademarks. To the Issuer's knowledge and except with respect to those matters described on Schedule 3.16, the Issuer and each of its Subsidiaries has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and know-how (including trade secrets or other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the "Intellectual Property Rights") that are necessary for use in connection with its business as presently conducted, except where the failure to have such Intellectual Property Rights would not reasonably be expected to have a Material Adverse Effect, and, to the Issuer's knowledge and except with respect to those matters described on Schedule 3.16, there is no existing infringement by another person or entity of any of the Intellectual Property Rights that are necessary for use in connection with the Issuer's business as presently conducted. To the Issuer's knowledge and except with respect to those matters described on Schedule 3.16, the Issuer is not infringing on, or in conflict with, any right of any other person with respect to any intangibles nor is there any claim of infringement made or threatened by a third party against or involving the Issuer. 3.17 Insurance. The Issuer maintains and will continue to maintain insurance with such insurers, and insuring against such losses, in such amounts, and subject to such deductibles and exclusions as are customary in the Issuer's industry and otherwise reasonably prudent, all of which insurance is in full force and effect. 3.18 Material Contracts. All material Contracts to which the Issuer or its Subsidiaries is a party and which are required to have been filed by the Issuer as exhibits to the SEC Reports have been filed by the Issuer with the SEC pursuant to the requirements of the Exchange Act. 7 Each such material Contract is in full force and effect, except as otherwise required pursuant to their respective terms, and is binding on the Issuer or its Subsidiaries, as the case may be, in each case, in accordance with their respective terms, and neither the Issuer or any of its Subsidiaries nor, to the Issuer's knowledge, any other party thereto is in breach of, or in default under, any such material Contract, which breach or default would reasonably be expected to have a Material Adverse Effect. There exists no actual or, to the knowledge of the Issuer, threatened termination, cancellation or limitation of, or any material adverse modification or change in, the business relationship of the Issuer or any of its Subsidiaries, or the business of the Issuer or any of its Subsidiaries, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the business of the Issuer or any of its Subsidiaries would, individually or in the aggregate, have a Material Adverse Effect. 3.19 Internal Controls/Accounting. The Issuer maintains a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 3.20 Taxes. The Issuer has filed all material federal, state and foreign income and franchise tax returns (or has duly filed extensions thereto) and has paid or accrued all taxes shown as due thereon, and the Issuer has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which is reasonably likely to have a Material Adverse Effect. 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. As a material inducement to the Issuer entering into this Agreement and issuing the Shares, the Investor represents, warrants, and covenants to the Issuer as follows: 4.1 Power and Authority. The Investor, if other than a natural person, is an entity duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation. The Investor has the corporate, partnership or other power (or capacity) and authority under applicable law to execute and deliver this Agreement and consummate the transactions contemplated hereby, and has all necessary authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The Investor has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby. 4.2 No Violation. The execution and delivery by the Investor of this Agreement, the consummation of the transactions contemplated hereby, and the compliance by the Investor with the terms and provisions hereof, will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate any charter or similar documents of the Investor, if other than a natural person, or any Contract to which the Investor is a party or by which it or its properties or 8 assets are bound, or violate any Requirement of Law applicable to the Investor, other than such violations or defaults which, individually and in the aggregate, do not and will not have a Material Adverse Effect on the Investor. The Investor will comply with any Requirement of Law applicable to it in connection with the Offering and any resale by the Investor of the Shares. 4.3 Consents/Approvals. No consents, filings, authorizations or actions of any Governmental Authority are required for the Investor's execution, delivery and performance of this Agreement. No consent, approval, waiver or other actions by any Person under any Contract to which the Investor is a party or by which the Investor or any of its properties or assets are bound is required or necessary for the execution, delivery and performance by the Investor of this Agreement and the consummation of the transactions contemplated hereby. 4.4 Enforceability. This Agreement has been duly executed and delivered by the Investor and (assuming it has been duly authorized, executed, and delivered by the Issuer) constitutes a legal, valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor's rights generally, the indemnity provisions of Section 7 of this Agreement, which may not be enforceable based upon public policy considerations, and general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity. 4.5 Investment Intent. The Investor is acquiring the Shares hereunder for its own account and with no present intention of distributing or selling such Shares and further agrees not to transfer such Shares in violation of the Securities Act or any applicable state securities law, and no one other than the Investor will have any beneficial interest in the Shares (except to the extent that the Investor may have delegated voting authority to its investment advisor). The Investor agrees that it will not sell or otherwise dispose of any of the Shares unless such sale or other disposition has been registered under the Securities Act or, in the opinion of counsel acceptable to the Issuer, is exempt from registration under the Securities Act and has been registered or qualified or, in the opinion of such counsel acceptable to the Issuer, is exempt from registration or qualification under applicable state securities laws. The Investor understands that the offer and sale by the Issuer of the Shares being acquired by the Investor hereunder has not been registered under the Securities Act by reason of their contemplated issuance in transactions exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that the reliance of the Issuer on such exemption from registration is predicated in part on these representations and warranties of the Investor. The Investor acknowledges that pursuant to Section 1.2 of this Agreement a restrictive legend consistent with the foregoing has been or will be placed on the certificates for the Shares. 4.6 Accredited Investor. The Investor is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment to be made by it hereunder. 4.7 Adequate Information. The Investor has received from the Issuer, and has reviewed, such information which the Investor considers necessary or appropriate to evaluate the risks and merits of an investment in the Shares, including without limitation, the Disclosure 9 Schedule to this Agreement and the documents listed on Exhibit A, which have been received by the Investor as part of an informational packet of materials from the Issuer (the "Disclosure Documents"). The Investor acknowledges that each of the SEC Reports, including the risk factors contained therein, are specifically incorporated herein by reference and form an integral part of this Agreement. The Investor also acknowledges that the additional risk factors set forth on Exhibit A and contained in the Disclosure Documents are specifically incorporated herein by reference and form an integral part of this Agreement. 4.8 Opportunity to Question. The Investor has had the opportunity to question, and has questioned, to the extent deemed necessary or appropriate, representatives of the Issuer so as to receive answers and verify information obtained in the Investor's examination of the Issuer, including the information that the Investor has received and reviewed as referenced in Section 4.7 hereof in relation to its investment in the Shares. 4.9 No Other Representations. No oral or written material representations have been made to the Investor in connection with the Investor's acquisition of the Shares which were in any way inconsistent with the information reviewed by the Investor. The Investor acknowledges that in deciding whether to enter into this Agreement and to purchase the Shares hereunder, it has not relied on any representations or warranties of any type or description made by the Issuer or any of its representatives with regard to the Issuer, any of its Subsidiaries, any of their respective businesses, properties or prospects of the investment contemplated herein, other than the representations and warranties set forth in Section 3 hereof. 4.10 Knowledge and Experience. The Investor has such knowledge and experience in financial, tax and business matters, including substantial experience in evaluating and investing in common stock and other securities (including the common stock and other securities of speculative companies), so as to enable the Investor to utilize the information referred to in Section 4.7 hereof and any other information made available by the Issuer to the Investor in order to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision with respect thereto. 4.11 Independent Decision. The Investor is not relying on the Issuer or on any legal or other opinion in the materials reviewed by the Investor with respect to the financial or tax considerations of the Investor relating to its investment in the Shares. The Investor has relied solely on the representations and warranties, covenants and agreements of the Issuer in this Agreement (including the exhibits and schedules hereto) and on its examination and independent investigation in making its decision to acquire the Shares. 4.12 Commissions. The Investor has not incurred any obligation for any finder's or broker's or agent's fees or commissions in connection with the transactions contemplated hereby. 4.13 Underwriter Disclaimer. The Investor disclaims being an underwriter, but the Investor being deemed an underwriter by the SEC shall not relieve the Issuer of any of its obligations hereunder. 10 4.14 Independent Acquisition. The Investor is acquiring from the Issuer for its own account, and is making an independent investment decision in subscribing for, that number of shares of Common Stock set forth on the signature page hereof; the Investor is not acting in concert with any other investor or purchaser in connection with the acquisition or subsequent voting or disposition of the shares being subscribed for pursuant to this Agreement. 5. COVENANTS. 5.1 Public Announcements. The Investor agrees not to make any public announcement or issue any press release or otherwise publicly disseminate any information about the subject matter of this Agreement. Except as provided herein, the Issuer shall have the right to make such public announcements and shall control, in its sole and absolute discretion, the timing, form and content of all press releases or other public communications of any sort relating to the subject matter of this Agreement, and the method of their release, or publication thereof. The Issuer shall file within five (5) business days after the Closing Date a Current Report on Form 8-K with the SEC in respect of the transactions contemplated by this Agreement. The Issuer may issue an initial press release relating to the transactions contemplated by this Agreement, but shall not identify any Investor in such press release without the consent of such Investor, except as may be required by any Requirement of Law or rule of any exchange on which the Issuer's securities are listed. 5.2 Further Assurances. Each party shall execute and deliver such additional instruments and other documents and shall take such further actions as may be reasonably necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement and the transactions contemplated hereby. Each of the Investor and the Issuer shall make on a prompt and timely basis all governmental or regulatory notifications and filings required to be made by it with or to any Governmental Authority in connection with the consummation of the transactions contemplated hereby. The Issuer and the Investor each agree to cooperate with the other in the preparation and filing of all forms, notifications, reports and information, if any, required or reasonably deemed advisable pursuant to any Requirement of Law or the rules of The OTC Bulletin Board (if any) in connection with the transactions contemplated by this Agreement and to use their respective commercially reasonable efforts to agree jointly on a method to overcome any objections by any Governmental Authority to any such transactions. Except as may be specifically required hereunder, neither of the parties hereto or their respective Affiliates shall be required to agree to take any action that in the reasonable opinion of such party would result in or produce a Material Adverse Effect on such party. 5.3 Notification of Certain Matters. Prior to the Closing, each party hereto shall give prompt notice to the other party of the occurrence, or non-occurrence, of any event which would be likely to cause any representation and warranty herein to be untrue or inaccurate, or any covenant, condition or agreement herein not to be complied with or satisfied. 5.4 Confidential Information. The Investor agrees that no portion of the Confidential Information (as defined below) shall be disclosed to third parties, except as may be required by law, without the prior express written consent of the Issuer, and shall not be used by the Investor other than in connection with its evaluation of the transactions contemplated hereby; provided, that the Investor may share such information with such of its officers and professional advisors 11 as may need to know such information to assist the Investor in its evaluation thereof on the condition that such parties agree to be bound by the terms hereof. "Confidential Information" means the existence and terms of this Agreement, the transactions contemplated hereby, and the disclosures and other information contained herein, excluding any disclosures or other information that is publicly available. 6. REGISTRATION RIGHTS. The Investor shall have the following registration rights with respect to the Registrable Securities owned by it: 6.1 Transfer of Registration Rights. The Investor may assign the registration rights with respect to the Shares to any party or parties to which it may from time to time transfer all of the Shares; provided, that the transferee agrees in writing with the Issuer to be bound by the applicable provisions of this Agreement regarding such registration rights and indemnification relating thereto. Upon assignment of any registration rights pursuant to this Section 6.1, the Investor shall deliver to the Issuer a notice of such assignment which includes the identity and address of any assignee and such other information reasonably requested by the Issuer in connection with effecting any such registration (collectively, the Investor and each such subsequent holder is referred to as a "Holder"). 6.2 Required Registration. As promptly as practicable after the Closing, but in no event later than thirty (30) days after the date of the Closing, the Issuer agrees to file a Registration Statement on Form S-3 (the "Shelf Registration Statement") to register the resale of all of the Shares. The Issuer shall use its best efforts to cause the SEC to declare the Shelf Registration Statement effective no later than the 90th day after the date of Closing; provided, however, that not less than two days prior to the filing of the Shelf Registration Statement, the Issuer shall provide the Investor (or the investment adviser of such Investor) with a copy of the Shelf Registration Statement proposed to be filed and the Issuer agrees to consider all appropriate comments provided by such Investor with respect to the Shelf Registration Statement for inclusion in the Shelf Registration Statement. The Issuer shall thereafter maintain the effectiveness of the Shelf Registration Statement until the earlier of (a) the date on which all the Shares have been sold pursuant to the Shelf Registration Statement or Rule 144 promulgated under the Securities Act ("Rule 144"), and (b) such time as the Issuer reasonably determines, based on an opinion of counsel, that all of the Holders will be eligible to sell under Rule 144 all of the Shares then owned by the Holders within the volume limitations imposed by paragraph (e) of Rule 144 in the three month period immediately following the termination of the effectiveness of the Shelf Registration Statement. The Issuer's obligations contained in this Section 6.2 shall terminate on the second anniversary of the date of the Closing. 6.3 Registration Procedures. (a) In case of the Shelf Registration Statement effected by the Issuer subject to this Section 6, the Issuer shall keep the Investor, on behalf of Holder, advised in writing as to the initiation of such registration, and as to the completion thereof. In addition, subject to Section 6.2 above, the Issuer shall, to the extent applicable to the Shelf Registration Statement: 12 (i) prepare and file with the SEC such amendments and supplements to the Shelf Registration Statement as may be necessary to keep such registration continuously effective and free from any material misstatement or omission necessary to make the statements therein, in light of the circumstances, not misleading, and comply with provisions of the Securities Act with respect to the disposition of all securities covered thereby during the period referred to in Section 6.2; (ii) update, correct, amend and supplement the Shelf Registration Statement as necessary; (iii) notify the Holder promptly when the Shelf Registration Statement is declared effective by the SEC, and furnish such number of prospectuses, including preliminary prospectuses, and other documents incident thereto as Holder may reasonably request from time to time; (iv) use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions of the United States where an exemption is not available and as Holder may reasonably request to enable it to consummate the disposition in such jurisdiction of the Registrable Securities (provided that the Issuer will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this provision, or (B) consent to general service of process in any such jurisdiction, or (C) subject itself to taxation in any jurisdiction where it is not already subject to taxation); (v) notify Holder at any time when a prospectus relating to the Registrable Securities is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in the Shelf Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and subject to Section 6.3(d), the Issuer will promptly prepare a supplement or amendment to such prospectus, so that, as thereafter delivered to purchasers of such shares, such prospectus will not contain any untrue statements of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vi) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Issuer are then listed and obtain all necessary approvals from The OTC Bulletin Board (if any) for trading thereon; (vii) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of the Shelf Registration Statement; (viii) upon the sale of any Registrable Securities pursuant to the Shelf Registration Statement, direct the transfer agent to remove all restrictive legends from all certificates or other instruments evidencing the Registrable Securities; (ix) With a view to making available to the Holder the benefits of certain rules and regulations of the SEC that at any time permit the sale of the Registrable Securities to the public without registration, so long as any Registrable Securities are 13 outstanding, the Issuer shall use its commercially reasonable efforts for a period of two years following the date of Closing: (1) to make and keep public information available, as those terms are understood and defined in Rule 144(c) under the Securities Act; (2) to file with the SEC in a timely manner all reports and other documents required of the Issuer under the Exchange Act; and (3) to furnish to the Holder upon any reasonable request a written statement by the Issuer as to its compliance with the public information requirements of Rule 144(c) under the Securities Act; and (x) To advise the Holder promptly after it has received notice or obtained knowledge of the existence of any stop order by the SEC delaying or suspending the effectiveness of the Shelf Registration Statement or of the initiation or threat of any proceeding for that purpose, and to make every commercially reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible time. (b) Notwithstanding anything stated or implied to the contrary in Section 6.3(a) above, the Issuer shall not be required to consent to any underwritten offering of the Registrable Securities or to any specific underwriter participating in any underwritten public offering of the Registrable Securities. (c) Each Holder agrees that upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 6.3(a)(v), and subject to Section 6.3 (d), such Holder will forthwith discontinue such Holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the Issuer, will deliver to the Issuer at the Issuer's expense all copies, other than permanent file copies, then in such Holder's possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. (d) In addition to any discontinuance of a Holder's disposition of Registrable Securities under paragraph (c) above, the Issuer, upon the happening of any pending corporate development, public filing with the SEC or similar event, that, in the good faith judgment of the Issuer's Board of Directors based on the advice of counsel, renders it advisable to suspend use of the prospectus, may, for no more than thirty (30) days in the aggregate per event (each a "Suspension Event"), suspend use of the prospectus, on written notice to each Holder (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended period of suspension, if known), in which case each Holder shall discontinue disposition of Registrable Securities covered by the registration statement related to such Registrable Securities or prospectus until copies of a supplemented or amended prospectus are distributed to the Holders or until the Holders are advised in writing by the Issuers that sales of Registrable Securities under the applicable prospectus may be resumed and have received copies of any additional or supplemental filings that are incorporated or 14 deemed incorporated by reference in any such prospectus. The suspension and notice thereof described in this Section 6.3(d) shall be subject to the confidentiality provisions of Section 5.4 herein and shall not be disclosed by the Holders. The Issuer may not utilize the suspension described in this Section 6.3(d) for more than two (2) Suspension Events in any 12-month period. The Issuer will use commercially reasonably efforts to ensure that the use of the Shelf Registration Statement and prospectus may be resumed as promptly as practicable. (e) Except as required by law, all expenses incurred by the Issuer in complying with this Section 6, including but not limited to, all registration, qualification and filing fees, printing expenses, fees and disbursements of counsel and accountants for the Issuer, blue sky fees and expenses (including fees and disbursements of counsel related to all blue sky matters) incurred in connection with any registration, qualification or compliance pursuant to this Section 6 shall be borne by the Issuer. All underwriting discounts and selling commissions applicable to a sale incurred in connection with any registration of Registrable Securities and the legal fees and other expenses of a Holder shall be borne by such Holder. (f) Further Information. If Registrable Securities owned by a Holder are included in any registration, such Holder shall furnish the Issuer such information regarding itself as the Issuer may reasonably request and as shall be required in connection with any registration (or amendment or supplement thereto), referred to in this Agreement, and Holder shall indemnify the Issuer with respect thereto in accordance with Section 7 hereof. The Investor hereby represents and warrants to the Issuer that it has accurately and completely provided the requested information and answered the questions numbered (a) through (d) on the signature pages of this Agreement, and the Investor agrees and acknowledges that the Issuer may rely on such information as being true and correct for purposes of preparing and filing the Shelf Registration Statement at the time of filing thereof and at the time it is declared effective, unless the Investor has notified the Issuer in writing to the contrary prior to such time. 6.4 Transfer of Shares. An Investor may transfer all or any part of its Shares to any Person under common management with the Investor; provided, that any such transfer shall be effected in full compliance with all applicable federal and state securities laws, including, but not limited to, the Securities Act and the rules of the SEC promulgated thereunder. The Issuer will effect such transfer of restricted certificates and will promptly amend the Prospectus forming a part of the Shelf Registration Statement to add the transferee to the selling stockholders in the Shelf Registration Statement; provided that the transferor and transferee shall be required to provide the Issuer with the information requested of the Investor in this Agreement, information reasonably necessary for the Issuer to determine that the transfer was effected in accordance with all applicable federal and state securities laws, including, but not limited to, the Securities Act and the rules of the SEC promulgated thereunder, and all other information reasonably requested by the Issuer from time to time in connection with any transfer, registration, qualification or compliance referred to in Section 6.4. 7. INDEMNIFICATION. 7.1 Indemnification by the Issuer. The Issuer will indemnify and hold harmless each Holder of Shares which are included in a registration statement pursuant to the provisions of Section 6 hereof and any underwriter (as defined in the Securities Act) for such Holder, and any 15 person who controls such Holder or such underwriter within the meaning of the Securities Act, and any officer, director, investment adviser, employee, agent, partner, member or affiliate of such Holder (each, an "Indemnified Party"), from and against, and will reimburse each such Indemnified Party with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and expenses to which such Holder or any such Indemnified Party may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any materially inaccurate representation or breach of any material warranty, agreement or covenant of the Issuer contained herein; provided, however, that the Issuer will not be liable in any such case to the extent that any such claim, action, demand, loss, damage, liability, cost or expense is caused by an untrue statement or alleged untrue statement or omission or alleged omission (1) made in conformity with information furnished by such Holder in writing specifically for use in the preparation thereof, (2) which was cured in an amendment or supplement to the prospectus (or any amendment or supplement thereto) delivered to the Holder on a timely basis to permit proper delivery thereof prior to the date on which any Shares were transferred or sold, or (3) which was caused by the failure of such Investor to comply with the covenants and agreements contained in this Agreement respecting resale of the Shares. 7.2 Indemnification by the Holder. Each Holder of Shares which are included in a registration pursuant to the provisions of Section 6 hereof will indemnify and hold harmless the Issuer, and any Person who controls the Issuer within the meaning of the Securities Act, and any officer, director, employee, agent, partner, member or affiliate of the Issuer (each, an "Issuer Indemnified Party") from and against, and will reimburse the Issuer Indemnified Parties with respect to, any and all losses, damages, liabilities, costs or expenses to which such Issuer Indemnified Parties may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or are caused by the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made solely in reliance upon and in conformity with written information furnished by such Holder specifically for use in the preparation thereof; provided, however, that the liability of any Holder pursuant to this Section 7.2 shall be limited to an amount not to exceed the net proceeds received by such Holder from the sale of Registrable Securities pursuant to the registration statement which gives rise to such obligation to indemnify. 7.3 Procedures. Promptly after receipt by a party indemnified pursuant to the provisions of Section 7.1 or Section 7.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to an 16 indemnified party otherwise than under this Section 7 and shall not relieve the indemnifying party from liability under this Section 7, except to the extent that such indemnifying party is materially prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of Section 7.1 or Section 7.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 8. CONDITIONS TO CLOSING. 8.1 Conditions to the Obligations of the Investor. The obligation of the Investor to proceed with the Closing is subject to the following conditions any and all of which may be waived by the Investor, in whole or in part, to the extent permitted by applicable law: (a) Representations and Warranties. Each of the representations and warranties of the Issuer contained in this Agreement shall be true and correct in all material respects as of the Closing as though made on and as of the Closing, except (i) for changes specifically permitted by this Agreement, (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, and (iii) such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on the Issuer. Unless the Investor receives written notice to the contrary at the Closing, Investor shall be entitled to assume that the preceding is accurate in all respects at the Closing. (b) Agreement and Covenants. The Issuer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. Unless the Investor receives written notice to the contrary at the Closing, Investor shall be entitled to assume that the preceding is accurate in all respects at the Closing. (c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement. (d) Opinion of Issuer's Counsel. The Investor shall have received an opinion of Issuer's counsel, dated the Closing Date, with respect to legal matters customary for private offerings of this type. 17 (e) Closing Certificate. The Investor shall have received a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Issuer, dated as of the Closing, to the effect that the representations and warranties of the Issuer contained in Section 3 hereof are true and correct in all material respects as of the Closing, and that all covenants, agreements and conditions required to be satisfied by the Issuer under this Agreement at or prior to the Closing have been performed, satisfied and complied with by the Issuer in all material respects. 8.2 Conditions to the Obligations of the Issuer. The obligation of the Issuer to proceed with the Closing is subject to the following conditions any and all of which may be waived by the Issuer, in whole or in part, to the extent permitted by applicable law: (a) Representations and Warranties. Each of the representations and warranties of the Investor contained in this Agreement shall be true and correct as of the Closing as though made on and as of the Closing, except (i) for changes specifically permitted by this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date. Unless the Issuer receives written notification to the contrary at the Closing, the Issuer shall be entitled to assume that the preceding is accurate in all respects at the Closing. (b) Agreement and Covenants. The Investor shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. Unless the Issuer receives written notification to the contrary at the Closing, the Issuer shall be entitled to assume that the preceding is accurate in all respects at the Closing. (c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement. (d) Agreement. The Investor shall have executed and delivered to the Issuer this Agreement (and completed the information requested on the signature page hereto). (e) Securities Exemptions. The offer and sale of the Shares to the Investor pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. (f) Closing Matters. The Investor and the Issuer shall use their respective best efforts to establish with the assistance of Allen mutually satisfactory closing procedures for delivery of the Shares and the full payment of the purchase price of the Shares. 9. MISCELLANEOUS. 9.1 Defined Terms. As used herein the following terms shall have the following meanings: 18 (a) "Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. (b) "Agreement" has the meaning specified in the preamble to this Agreement. (c) "Allen" has the meaning specified in Section 3.8 of this Agreement. (d) "Bylaws" means the Bylaws of the Issuer, as the same may be supplemented, amended, or restated from time to time. (e) "Certificate of Incorporation" means the Issuer's Certificate of Incorporation, as the same may be supplemented, amended or restated from time to time. (f) "Closing" has the meaning specified in Section 2.2 of this Agreement. (g) "Common Stock" has the meaning specified in the Recitals to this Agreement. (h) "Confidential Information" has the meaning specified in Section 5.4 of this Agreement. (i) "Contract" means any indenture, lease, sublease, loan agreement, mortgage, note, restriction, commitment, obligation or other contract, agreement or instrument. (j) "Disclosure Documents" has the meaning specified in Section 4.7 of this Agreement. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (l) "GAAP" means generally accepted accounting principles in effect in the United States of America. (m) "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any entity or official exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. (n) "Holder" has the meaning specified in Section 6.1 of this Agreement. (o) "Indemnified Party" has the meaning specified in Section 7.1 of this Agreement. (p) "Intellectual Property Rights" has the meaning specified in Section 3.16 of this Agreement. (q) "Investor" has the meaning specified in the preamble to this Agreement. (r) "Issuer" means The Knot, Inc., a Delaware corporation. 19 (s) "Issuer Indemnified Party" has the meaning specified in Section 7.2 of this Agreement. (t) "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in connection with such mortgage, pledge, security interest, encumbrance, lien or charge). (u) "Material Adverse Effect" means a material and adverse change in, or effect on, the financial condition, properties, assets, liabilities, rights, obligations, operations or business, of a Person and its Subsidiaries taken as a whole. (v) "Offering" has the meaning specified in the Recitals to this Agreement. (w) "Permit" means any permit, certificate, consent, approval, authorization, order, license, variance, franchise or other similar indicia of authority issued or granted by any Governmental Authority. (x) "Person" means an individual, partnership, corporation, business trust, joint stock company, estate, trust, unincorporated association, joint venture, Governmental Authority or other entity, of whatever nature. (y) "Purchase Price" has the meaning specified in Section 1.1 of this Agreement. (z) "Register", "registered" and "registration" refer to a registration of the offering and sale or resale of Common Stock effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of such registration statement. (aa) "Registrable Securities" means all Shares of Common Stock acquired by the Investor pursuant to this Agreement and any other shares of Common Stock or other securities issued in respect of such Shares by way of a stock dividend or stock split or in connection with a combination or subdivision of the Issuer's Common Stock or by way of a recapitalization, merger or consolidation or reorganization of the Issuer; provided, however, that as to any particular securities, such securities will cease to be Registrable Securities when they have been sold pursuant to registration or in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale. (bb) "Requirements of Law" means as to any Person, the certificate of incorporation, by-laws or other organizational or governing documents of such Person, and any domestic or foreign and federal, state or local law, rule, regulation, statute or ordinance or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to, or binding upon, such Person or any of its properties or to which such Person or any of its property is subject. 20 (cc) "Rule 144" has the meaning specified in Section 6.2 of this Agreement. (dd) "SEC" means the Securities and Exchange Commission. (ee) "SEC Reports" has the meaning specified in Section 3.7 of this Agreement. (ff) "Securities Act" means the Securities Act of 1933, as amended. (gg) "Shares" has the meaning specified in Section 1.1 of this Agreement. (hh) "Shelf Registration Statement" has the meaning specified in Section 6.2 of this Agreement. (ii) "Subsidiary" means as to any Person, a corporation or limited partnership of which more than 50% of the outstanding capital stock or partnership interests having full voting power is at the time directly or indirectly owned or controlled by such Person. (jj) "Suspension Event" has the meaning specified in Section 6.3(d) of this Agreement. 9.2 Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificates, reports or other documents made or delivered pursuant hereto or thereto, unless the context otherwise requires. (b) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) All accounting terms shall have a meaning determined in accordance with GAAP. (d) The words "hereof," "herein" and "hereunder," and words of similar import, when used in this Agreement shall refer to this Agreement as a whole (including any exhibits and schedules hereto) and not to any particular provision of this Agreement. 9.3 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses and telecopy numbers (or to such other addresses or telecopy numbers which such party shall subsequently designate in writing to the other party): 21 (a) if to the Issuer to: The Knot, Inc. 462 Broadway New York, New York 10013 Attention: Chief Financial Officer Telecopy: (212) 219-1929 with a copy to: Brian B. Margolis, Esq. Proskauer Rose LLP 1585 Broadway New York, NY 10036 Telecopy: (212) 969-2900 (b) if to the Investor to the address set forth next to its name on the signature page hereto. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered by hand, by messenger or by courier, or if sent by facsimile, upon confirmation of receipt. 9.4 Entire Agreement. This Agreement (including the exhibits and schedules attached hereto) and other documents delivered at the Closing pursuant hereto, contain the entire understanding of the parties in respect of its subject matter and supersede all prior agreements and understandings between the parties with respect to such subject matter. 9.5 Expenses; Taxes. Except as otherwise provided in this Agreement, the parties shall pay their own fees and expenses, including their own counsel fees, incurred in connection with this Agreement or any transaction contemplated hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes based on the income of the Investor) arising out of the issuance of the Shares (but not with respect to subsequent transfers) by the Issuer to the Investor and consummation of the transactions contemplated by this Agreement shall be paid by the Issuer. 9.6 Amendment; Waiver. This Agreement may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by both parties. No failure to exercise, and no delay in exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. The rights and remedies of the parties under this Agreement are in addition to all other rights and remedies, at law or equity, that they may have against each other. 22 9.7 Binding Effect; Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of the parties and their respective successors and legal assigns. The rights and obligations of this Agreement may not be assigned by any party without the prior written consent of the other party. 9.8 Counterparts; Facsimile Signature. This Agreement may be executed by facsimile signature and in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. 9.9 Headings. The headings contained in this Agreement are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Agreement. 9.10 Governing Law; Interpretation. This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of New York applicable to contracts executed and to be wholly performed within such State. 9.11 Severability. The parties stipulate that the terms and provisions of this Agreement are fair and reasonable as of the date of this Agreement. However, any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If, moreover, any of those provisions shall for any reason be determined by a court of competent jurisdiction to be unenforceable because excessively broad or vague as to duration, activity or subject, it shall be construed by limiting, reducing or defining it, so as to be enforceable. [SIGNATURES AND OTHER INFORMATION ON NEXT THREE PAGES] 23 IN WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to be duly executed and delivered as of the date set forth below. NAME OF INVESTOR (please print) ADDRESS FOR NOTICE (please print) T. Rowe Price Associates, Inc. 110 East Pratt Street Baltimore, Maryland 21202 Attention: Bonnie Maher Tax Identification #: 52-0556948 SIGNATURE By: /s/ DARRELL N. BRAMAN ---------------------------- Name: Darrell N. Braman Title: Vice President Date: November 18, 2003 Number of Shares subscribed for: 1,500,000 Aggregate Purchase Price (see Section 1.1): $5,625,000.00 The Investor hereby provides the following additional information: (a) Excluding the shares of Common Stock subscribed for above, set forth below is the number of shares of Common Stock and options rights or warrants of The Knot, Inc. ("Options" and together with the Common Stock, "Securities") which the Investor beneficially owns or of which the Investor is the record owner on the date hereof. Please refer to the definition of beneficial ownership on Exhibit B attached hereto. If none, please so state. Number of Shares: 4,500 (excluding the Shares subscribed for above) Number of Options: n/a Please indicate by an asterisk (*) above if the Investor disclaims "beneficial ownership" of any of the above listed Securities, and indicate in response to question (b) below who has beneficial ownership. (b) If the Investor disclaims "beneficial ownership" in question (a), please furnish the following information with respect to the person(s) other than the Investor who is the beneficial owner(s) of the Securities in question. If not applicable, please check box: [X] Name of Beneficial Owner:________________________________________ Relationship to the Investor:____________________________________ Number of Securities Beneficially Owned:_________________________ 24 (c) Are any of the Securities listed in response to question (a) the subject of a voting agreement, contract or other arrangement whereby others have voting control over, or any other interest in, any of the Investor's Securities? [ ] Yes [X] No If the answer is "Yes", please give details:______________________________. (d) Please describe each position, office or other material relationship which the Investor has had with the Issuer or any of its affiliates, including any Subsidiary of the Issuer, within the past three years. Please include a description of any loans or other indebtedness, and any contracts or other arrangements or transactions involving a material amount, payable by the Investor to the Issuer or any of its Affiliates, including its Subsidiaries, or by the Issuer or any of its Affiliates, including its Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors and executive officers, and any other person controlling or controlled by the Issuer. If none, please so state. Answer: N/A (e) Please provide the name and address of other person(s), if any, to whom any proxy statements, registration statements (including notice of effectiveness thereof), prospectuses or similar documents and information should be delivered by the Issuer on behalf of the Investor in the future, with respect to the Investor's shares: Bonnie Maher Bonnie Maher T. Rowe Price Associates, Inc. T. Rowe Price Associates, Inc. 100 East Pratt Street 100 East Pratt Street Baltimore, Maryland 21202 Baltimore, Maryland 21202 (f) Please advise of special stock certificate delivery requirements for closing, if any: 1. Copies of both front and back of each certificate are to be faxed to: Darrell Braman, 410.345.6575 2. Original certificates are to be delivered to custodian bank listed on Exhibit C (g) Please advise if a NASD member has placed with you the Shares being purchased hereunder: (Name of Member:)_____________________________ 25 ACCEPTED THIS 18TH DAY OF NOVEMBER, 2003 BY: THE KNOT, INC. By: /s/ RICHARD E. SZEFC --------------------------------- Name: Richard E. Szefc Title: Chief Financial Officer, Treasurer & Secretary 26 EXHIBIT A DISCLOSURE DOCUMENTS THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS AND DISCLOSURES WHICH ARE DELIVERED HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN: 1. Annual Report on Form 10-K for the year ended December 31, 2002 2. Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 3. Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 4. Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 5. Proxy Statement dated April 10, 2003 6. Current Reports on Form 8-K dated May 13, 2003, August 13, 2003 and November 13, 2003 7. PowerPoint presentation to potential investors dated October 30, 2003 RISK FACTORS 1. SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY ADVERSELY AFFECT OUR STOCK PRICE. Sales of substantial numbers of shares of our Common Stock in the public market, or the perception that significant sales are likely, could adversely affect the market price of our Common Stock. Compliance with the registration rights provisions of the Subscription Agreement could create the perception that all Shares that are a part of this Offering will soon be available for sale, and this number of Shares is greater than the average trading volume for our shares. No prediction can be made as to the effect, if any, that market sales of such Shares will have on the market price of our Common Stock. Sales of substantial amounts of such Shares in the public market could adversely affect the market price of our Common Stock. 2 OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE AND IS LIKELY TO EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS IN THE FUTURE THAT COULD REDUCE THE VALUE OF YOUR INVESTMENT AND SUBJECT US TO LITIGATION. The market price of our Common Stock has fluctuated in the past and is likely to continue to be highly volatile, with extreme price and volume fluctuations. These broad market and industry factors may harm the market price of our Common Stock, regardless of our actual operating 27 performance, and for this or other reasons, we could continue to suffer significant declines in the market price of our Common Stock. In the past, companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we were to become the object of securities class action litigation, it could result in substantial costs and a diversion of our management's attention and resources. 3 THE LACK OF THE LISTING OF OUR COMMON STOCK ON A STOCK EXCHANGE OR NASDAQ RESULTS IN A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND MAKES OBTAINING FUTURE EQUITY FINANCING MORE DIFFICULT FOR US. Our Common Stock trades on the OTC Bulletin Board, which was established for securities that do not meet the Nasdaq National Market listing requirements. Consequently, selling our Common Stock is more difficult because smaller quantities of shares are bought and sold, transactions could be delayed, and security analysts' and news media coverage of us has been reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of Common Stock. The delisting of our Common Stock from the Nasdaq National Market or further declines in our stock price could also greatly impair our ability to raise additional necessary capital through equity or debt financing, and significantly increase the ownership dilution to stockholders caused by our issuing equity in financing or other transactions. The price at which we issue shares in such transactions is generally based on the market price of our Common Stock and a decline in our stock price could result in the need for us to issue a greater number of shares to raise a given amount of funding or acquire a given dollar value of goods or services. In addition, because our Common Stock is not listed on the Nasdaq National Market, we are subject to Rule 15g-9 under the Securities and Exchange Act of 1934, as amended. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell the Common Stock and affect the ability of holders to sell their shares of our Common Stock in the secondary market. 4 THE OFFERING PRICE OF THE SHARES MAY NOT BEAR ANY RELATIONSHIP TO OUR ASSETS, BOOK VALUE, EARNINGS HISTORY, OR OTHER ESTABLISHED CRITERIA. AS A RESULT, YOU MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION. The offering price of the Shares was established based on such factors as our capital requirements, financial conditions and prospects, percentage of ownership to be held by investors following this Offering, and the general condition of securities markets at the time of the Offering. The offering price does not necessarily bear any relationship to our assets, book value, earnings history or other established criteria of value. As a result, you may experience immediate and substantial dilution. 28 5 WE ARE UNABLE TO DETERMINE WITH CERTAINTY WHEN THE REGISTRATION STATEMENT TO BE FILED WITH THE SEC WILL BE DECLARED EFFECTIVE. CONSEQUENTLY, YOU MAY NOT BE ABLE TO SELL YOUR SHARES FOR A SUBSTANTIAL PERIOD OF TIME. Although we have undertaken to register the Shares for resale by you, you should be aware that we are unable to determine with certainty when the registration statement to be filed with the SEC will become effective. In addition, the SEC may seek to review our registration statement, in which case, the period necessary to achieve effectiveness of the registration statement with the SEC will be affected by our ability to provide the SEC with sufficient disclosures satisfactory to the SEC. The length of the SEC review process is uncertain and may extend to a number of months. As you are aware, the Shares being sold in this Offering are restricted in nature and may not be publicly resold absent the effectiveness of the registration statement or pursuant to an applicable exemption from registration. Consequently, you may not be able to sell your Shares for a substantial period of time. 6 WE MAY SPEND THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE. The net proceeds of this offering are not allocated for specific uses. Our management will have broad discretion to spend the net proceeds from this offering in ways with which investors may not agree. The failure of our management to apply these funds effectively would result in unfavorable returns, which could cause the price of our Common Stock to decline. RECENT EVENT On September 19, 2003, WeddingChannel.com, Inc. ("WeddingChannel") filed a Complaint against the Issuer in the United States District Court for the Southern District of New York. The Complaint alleges that the Issuer has violated U.S. Patent 6,618,753 ("Systems and Methods for Registering Gift Registries and for Purchasing Gifts"), and further alleges that certain actions of the Issuer give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If the Issuer is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This Complaint was served on the Issuer on September 22, 2003. Based on information currently available, the Issuer believes that the claims are without merit, and is vigorously defending itself against all claims. On October 14, 2003, the Issuer filed an Answer and Counterclaims against WeddingChannel. The Issuer's Answer raises various defenses to the counts alleged by WeddingChannel. Additionally, the Issuer has brought Counterclaims including a request that the Court declare the patent-in-suit is invalid, unenforceable and not infringed. The Issuer's Counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. 29 EXHIBIT B Explanation of "BENEFICIAL OWNERSHIP" Securities that are subject to a power to vote or dispose are deemed beneficially owned by the person who holds such power, directly or indirectly. This means that the same securities may be deemed beneficially owned by more than one person, if such power is shared. In addition, the beneficial ownership rules provide that shares which may be acquired upon exercise of an option or warrant, or which may be acquired upon the termination of a trust, discretionary account or similar arrangement, which can be effected within a period of 60 days from the date of determination, are deemed to be "beneficially" owned. Furthermore, shares that are subject to rights or powers even though such rights or powers to acquire are not exercisable within the 60-day period may also be deemed to be beneficially owned if the rights or powers were acquired "with the purpose or effect of changing or influencing the control of the issuer or in connection with or as a participant in any transaction having such purpose or effect." In determining whether securities are "beneficially owned," benefits which are substantially equivalent to those of ownership by virtue of any contract, understanding, relationship, agreement or other arrangement should cause the securities to be listed as "beneficially owned." Thus, for example, securities held for a person's benefit in the name of others or in the name of any estate or trust in which such person may be interested should also be listed. Securities held by a person's spouse, children or other members of such person's family who are such person's dependents or who live in such person's household should be listed as "beneficially owned" unless such person does not enjoy benefits equivalent to those of ownership with respect to such securities. If a person has a proprietary or beneficial interest in a controlled corporation, partnership, personal holding company, trust or estate which owns of record or beneficially any securities, such person should state the amount of such securities owned by such controlled corporation, partnership, personal holding company, trust or estate in lieu of allocating such person's proprietary interest, and by note or otherwise, please indicate that. In any case, the name of the controlled corporation, partnership, personal holding company, or estate must be stated. In all cases the nature of the beneficial ownership should be stated. Disclosure Schedule This disclosure of exceptions (the "Disclosure Schedule") is made and given pursuant to the Subscription Agreement dated as of November 18, 2003 (the "Agreement") by and between The Knot, Inc. (the "Issuer") and the person or entity identified therein as the "Investor." The numbers below correspond to the section numbers of representations and warranties contained in Article III of the Agreement. Unless the context otherwise requires, all capitalized terms are used herein as defined in the Agreement. When a document is referred to herein or a reference is made to a particular part only of such document, the full contents of the document are referred to, provided that the full contents of the document have been delivered or made available to the Investor. The disclosure set forth in the Disclosure Schedule shall qualify all representations and warranties of the Issuer set forth in the Agreement, provided that any such disclosure is not made by reference to an agreement or document not otherwise delivered or made available to the Purchasers. The following Disclosure Schedule may set forth conditions, sets of facts or other disclosure not strictly called for by the Agreement where it was thought that such disclosure might be helpful. No implication shall be drawn that any condition, set of facts or other disclosure set forth herein is necessarily material or is otherwise required to be disclosed or that the inclusion of such disclosure establishes or implies a standard of materiality, a standard for what is or is not in the usual and ordinary course of business or any other standard for disclosure set forth in the Agreement. Section 3.9 - Capitalization 1. Pursuant to Section 7.1 of the Common Stock Purchase Agreement (the "May Agreement"), dated as of February 19, 2002, between the Issuer and May Bridal Corporation, a Missouri corporation ("May"), if the Issuer proposes to sell, transfer or otherwise issue any Common Stock or preferred stock or other interest convertible into Common Stock, to any party other than May, which transaction would result in May's interest in the Common Stock or in the voting power of the Issuer being more than one percentage point lower after the transaction than before the transaction, then the Issuer shall offer to May the right to acquire shares of Common Stock or preferred stock or other interest on the same terms and conditions as offered to the third party (if such terms and conditions involve consideration other than cash, then the Issuer will offer terms and conditions that involve cash consideration substantially equivalent to those offered to the third party) in such amount as to preserve May's percentage interest in the Common Stock and voting power of the Issuer. If the Issuer engages in several such transactions or proposed transactions, which individual transactions would not result in May's interest in the Common Stock or in the voting power of the Issuer being reduced by one percentage point, the Issuer need not make such offer to May unless and until the aggregate of the transactions would result in such a change. Common Stock reserved for future issuance as of the date of the May Agreement, or which shall be reserved for future issuance pursuant to the Issuer's stock incentive plans for officers and directors which may be adopted from time to time by appropriate corporate resolution, is excepted from the provisions of Section 7.1 of the May Agreement. May has agreed to waive its right to acquire shares of Common Stock in this Offering in consideration of the Issuer agreeing to amend Section 7.4 of the May Agreement, to lower from 15% to 10% the percentage of the Common Stock or of the voting power of the Issuer owned by May above which the Issuer is required to take all steps necessary to elect such person as May shall from time to time designate to serve as a member of the board of directors of the Issuer, and to nominate and submit such person for election by the stockholders of the Issuer. 2. Pursuant to Section 7.2 of the May Agreement, if the Issuer proposes to acquire any Common Stock or preferred stock or other interest convertible into Common Stock, from any party other than May, which transaction would result in May's interest in the Common Stock or in the voting power of the Issuer being more than 20% after the transaction, then the Issuer shall offer to acquire shares of Common Stock or preferred stock or other interest from May on the same terms and conditions as offered to the third party (if such terms and conditions involve consideration other than cash, then the Issuer will offer terms and conditions that involve cash consideration substantially equivalent to those offered to the third party) in such amount as to permit May to own less than 20% of the Common Stock or voting power of the Issuer after the transaction. Section 3.11 - Litigation On September 19, 2003, WeddingChannel.com, Inc. ("WeddingChannel") filed a complaint against the Issuer in the United States District Court for the Southern District of New York. The complaint alleges that the Issuer has violated U.S. Patent 6,618,753 ("Systems and Methods for Registering Gift Registries and for Purchasing Gifts"), and further alleges that certain actions of the Issuer give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If the Issuer is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This complaint was served on the Issuer on September 22, 2003. Based on information currently available, the Issuer believes that the claims are without merit, and is vigorously defending itself against all claims. On October 14, 2003, the Issuer filed an answer and counterclaims against WeddingChannel. The Issuer's answer raises various defenses to the counts alleged by WeddingChannel. Additionally, the Issuer has brought counterclaims including a request that the court declare the patent-in-suit is invalid, unenforceable and not infringed. The Issuer's Counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. Section 3.12 - Rights of Registration, Voting Rights and Anti-Dilution 1. Pursuant to the terms of the Third Amended and Restated Investors' Rights Agreement (the "Investors' Rights Agreement"), dated November 8, 1999, by and among the Issuer and certain of its stockholders listed on the signature pages attached thereto, the Issuer granted to the Holders (as that term is defined in the Investors' Rights Agreement) certain demand, piggy-back and Form S-3 registration rights. 2. On July 23, 1999, the Issuer entered into a Warrant Agreement with America Online, Inc. ("AOL") which granted AOL the right to purchase up to 366,667 shares of Common Stock (collectively, the "Warrant Shares") at a per share exercise price of $7.20. The exercise price is subject to downward adjustment, on a weighted average basis, upon the occurrence of certain stock issuances without consideration or for a consideration per share less than the exercise price in effect immediately prior to the issuance of Common Stock. The number of Warrant Shares is subject to upward adjustment in proportion to the change in exercise price. Immediately prior to the Offering, the warrant is exercisable for 440,958 Warrant Shares at a per share exercise price of $5.987. After giving effect to the transactions contemplated by the Offering, the per share exercise price of the Warrant Shares shall be reduced to $5.73 and the number of Warrant Shares shall be increased to 460,977. The warrant is immediately exercisable and expires in July 2007. Section 3.16 - Patents and Trademarks On September 19, 2003, WeddingChannel filed a complaint against the Issuer in the United States District Court for the Southern District of New York. The complaint alleges that the Issuer has violated U.S. Patent 6,618,753 ("Systems and Methods for Registering Gift Registries and for Purchasing Gifts"), and further alleges that certain actions of the Issuer give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If the Issuer is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This complaint was served on the Issuer on September 22, 2003. Based on information currently available, the Issuer believes that the claims are without merit, and is vigorously defending itself against all claims. On October 14, 2003, the Issuer filed an answer and counterclaims against WeddingChannel. The Issuer's answer raises various defenses to the counts alleged by WeddingChannel. Additionally, the Issuer has brought counterclaims including a request that the court declare the patent-in-suit is invalid, unenforceable and not infringed. The Issuer's Counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. EXHIBIT C T. Rowe Price New Horizons Fund, Inc. - 1,350,000 shares Nominee Name - Bridge & Co. Nominee Tax ID #04-6184478 Delivery Instructions: State Street Bank 225 Franklin Street Main Concourse Boston, MA 02110 Fund - T. Rowe Price New Horizons Fund Fund #7001 Attn: Anna Barnes T. Rowe Price Global Technology Fund, Inc. - 10,000 shares Nominee Name - Mildship & Co. Nominee Tax ID # 04-3516707 Delivery Instructions: State Street Bank 225 Franklin Street Main Concourse Boston, MA 02110 Fund - T. Rowe Price Global Technology Fund Fund #7012 Attn: Anna Barnes T. Rowe Price Media & Telecommunications Fund, Inc. - 75,000 shares Nominee Name - Heirloom & Co. Nominee Tax ID # 04-3012059 Delivery Instructions: State Street Bank 225 Franklin Street Main Concourse Boston, MA 02110 Fund - T. Rowe Price Media & Telecommunications Fund Fund #70A9 Attn: Anna Barnes TD Mutual Funds - TD Entertainment & Communications Fund - 15,000 shares Nominee Name - Mac & Co. Nominee Tax ID # 25-1536944 Delivery Instructions: Physical Deliveries New York Mellon Securities Trust Co. 120 Broadway, 13th Floor New York, NY 10271 Fund - TD Entertainment & Communications Fund Fund #TDKF1066002 NYC 457/401K Small Cap Account - 50,000 shares Nominee Name - Hare & Co. Nominee Tax ID # 13-6062916 Delivery Instructions: Bank of New York 1 Wall Street, 3rd Fl, Window A, New York, NY 10286 Fund - NYC 457/401K Small Cap Account Fund # 4137 Attn: Sylvester Perry EX-4 4 ex4-5.txt EXHIBIT 4.5 EXHIBIT 4.5 SUBSCRIPTION AGREEMENT This Subscription Agreement (this "Agreement") is entered into as of November 18, 2003 by and between The Knot, Inc., a Delaware corporation (together with its successors and permitted assigns, the "Issuer"), and the undersigned investor (together with its successors and permitted assigns, the "Investor"). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in Section 9.1. RECITALS Subject to the terms and conditions of this Agreement, the Investor desires to subscribe for and purchase, and the Issuer desires to issue and sell to the Investor, certain shares of the Issuer's common stock, par value $0.01 per share (the "Common Stock"). The Board of Directors of the Issuer has authorized the Issuer to offer a maximum of 2,800,000 shares of Common Stock in a private placement to the Investor and other investors at a purchase price of $3.75 per share and on the other terms and conditions contained in this Agreement (the "Offering"); provided, that the Offering and the subsequent sale of Common Stock shall not require approval of the Issuer's stockholders and that the Issuer reserves the right to issue and sell a lesser or greater number of shares. TERMS OF AGREEMENT In consideration of the mutual representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows: 1. SUBSCRIPTION AND ISSUANCE OF COMMON STOCK. 1.1 Subscription and Issuance of Common Stock. Subject to the terms and conditions of this Agreement, the Issuer shall issue and sell to the Investor and the Investor subscribes for and shall purchase from the Issuer the number of shares of Common Stock set forth on the signature page hereof (the "Shares") for the aggregate purchase price set forth on the signature page hereof, which shall be equal to the product of the number of Shares subscribed for by the Investor multiplied by the per share purchase price specified in the above Recitals to this Agreement (the "Purchase Price"). 1.2 Legend. Any certificate or certificates representing the Shares shall bear the following legend, in addition to any legend that may be required by any Requirements of Law: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION. 1.3 Use of Proceeds. The Issuer intends to apply the net proceeds from the sale of the Shares for general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in businesses, technologies or products that are complementary to our business. However, we have no present plans or commitments and are not currently engaged in any negotiations with respect to such transactions. Pending our use of the net proceeds of this offering for these purposes, we intend to invest the proceeds in short-term, interest-bearing, investment-grade securities. 2. CLOSING. 2.1 Closing. The closing of the transactions contemplated herein (the "Closing") shall take place on a date designated by the Issuer, which date shall be at 10:00 a.m. on or before November 19, 2003. The Closing shall take place at the offices of Allen & Company LLC, 711 Fifth Avenue, New York, New York 10022. At the Closing, unless the Investor and the Issuer otherwise agree (a) the Investor shall pay the Purchase Price to the Issuer, by wire transfer of immediately available funds to an account designated in writing by the Issuer, (b) the Issuer shall issue to the Investor the Shares, and shall deliver or cause to be delivered to the Investor a certificate or certificates representing the Shares duly registered in the name of the Investor, as specified on the signature pages hereto, bearing the legend specified in Section 1.2 and (iii) all other actions referred to in this Agreement which are required to be taken for the Closing shall be taken and all other agreements and other documents referred to in this Agreement which are required for the Closing shall be executed and delivered. 2.2 Termination. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of the Issuer and the Investor; (b) by the Investor, upon a materially inaccurate representation or breach of any material warranty, covenant or agreement on the part of the Issuer set forth in this Agreement, in either case such that the conditions in Section 8.1 would be reasonably incapable of being satisfied on or prior to the date of the Closing; or (c) by the Issuer, upon a materially inaccurate representation or breach of any material warranty, covenant or agreement on the part of the Investor set forth in this Agreement, in either case such that the conditions in Section 8.2 would be reasonably incapable of being satisfied on or prior to the date of the Closing. 2.3 Effect of Termination. In the event of termination of this Agreement pursuant to Section 2.2, this Agreement shall forthwith become void, there shall be no liability on the part of the Issuer or the Investor to each other and all rights and obligations of any party hereto shall cease; provided, however, that nothing herein shall relieve any party from liability for the willful breach of any of its representations and warranties, covenants or agreements set forth in this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. As a material inducement to the Investor entering into this Agreement and subscribing for the Shares, the Issuer represents and warrants to the Investor as follows: 2 3.1 Corporate Status. The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Issuer and its Subsidiaries has full corporate power and authority to own and hold its properties and to conduct its business as described in the Issuer's SEC Reports. Each of the Issuer and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business requires qualification or good standing, except for any failure to be so qualified or be in good standing that would not have a Material Adverse Effect. 3.2 Corporate Power and Authority. The Issuer has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. At or prior to the Closing, the Issuer will have taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. No further approval or authorization of any stockholder or the Board of Directors of the Issuer is required for the issuance and sale of the Shares or, except as provided in Section 6.2, the filing of the Shelf Registration Statement. 3.3 Enforceability. This Agreement has been duly executed and delivered by the Issuer and (assuming it has been duly authorized, executed and delivered by the Investor) constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, the indemnity provisions of Section 7 of this Agreement, which may not be enforceable based upon public policy considerations, and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity. 3.4 No Violation. The execution and delivery by the Issuer of this Agreement, the consummation of the transactions contemplated hereby, and the compliance by the Issuer with the terms and provisions hereof (including, without limitation, the Issuer's issuance to the Investor of the Shares as contemplated by and in accordance with this Agreement), will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate the Certificate of Incorporation or By-Laws of the Issuer or any material Contract to which the Issuer is a party (except to the extent such a default, acceleration, or violation would not, in the case of a Contract, have a Material Adverse Effect on the Issuer), or materially violate any Requirement of Law applicable to the Issuer, or result in the creation or imposition of any material Lien upon any of the capital stock, properties or assets of the Issuer or any of its Subsidiaries (except where such violations of any Requirement of Law or creations or impositions of any Liens would not have a Material Adverse Effect on the Issuer). Neither the Issuer nor any of its Subsidiaries is (a) in default under or in violation of any material Contract to which it is a party or by which it or any of its properties is bound or (b) to its knowledge, in violation of any order of any Governmental Authority, which, in the case of clauses (a) and (b), could reasonably be expected to have a Material Adverse Effect. 3.5 Consents/Approvals. Except for the filing of a registration statement in accordance with Article 6 hereof and filings with the SEC, the securities commissions of the states in which the Shares are to be issued, and The OTC Bulletin Board (if any), no consents, 3 filings, authorizations or other actions of any Governmental Authority are required to be obtained or made by the Issuer for the Issuer's execution, delivery and performance of this Agreement which have not already been obtained or made. No consent, approval, waiver or other action by any Person under any Contract to which the Issuer is a party or by which the Issuer or any of its properties or assets are bound is required or necessary for the execution, delivery or performance by the Issuer of this Agreement and the consummation of the transactions contemplated hereby, except where the failure to obtain such consents would not have a Material Adverse Effect on the Issuer. 3.6 Valid Issuance. Upon payment of the Purchase Price by the Investor and delivery to the Investor of the certificates for the Shares, such Shares will be validly issued, fully paid and non-assessable and will be free and clear of all Liens imposed by the Issuer and will not be subject to any preemptive rights or other similar rights of stockholders of the Issuer. 3.7 SEC Filings, Other Filings and OTC Bulletin Board Compliance. The Issuer has timely made all filings required to be made by it under the Exchange Act. The Issuer has delivered or made accessible to the Investor true, accurate and complete copies of (a) Issuer's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, (b) the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003 (c) the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003 (d) the Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003, (e) the Issuer's definitive proxy statement dated April 10, 2003 relating to its 2003 Annual Meeting of Stockholders, and (f) the Issuer's Current Reports on Form 8-K dated May 13, 2003, August 13, 2003 and November 13, 2003 (the "SEC Reports"). The SEC Reports, when filed, complied in all material respects with all applicable requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, if and to the extent applicable, and the rules and regulations of the SEC thereunder applicable to the SEC Reports. None of the SEC Reports, at the time of filing, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in light of the circumstances in which they were made. The Issuer has filed in a timely manner all documents that the Issuer was required to file under the Exchange Act during the twelve (12) months preceding the date of this Agreement. The Issuer is currently eligible to register the resale of the Shares in a secondary offering on a registration statement on Form S-3 under the Securities Act. The Issuer has taken, or will have taken prior to the Closing, all necessary actions to ensure its continued inclusion in, and the continued eligibility of the Common Stock for trading on, The OTC Bulletin Board under all currently effective inclusion requirements. Each balance sheet included in the SEC Reports (including any related notes and schedules) fairly presents in all material respects the consolidated financial position of the Issuer as of its date, and each of the other financial statements included in the SEC Reports (including any related notes and schedules) fairly presents in all material respects the consolidated results of operations of the Issuer for the periods or as of the dates therein set forth in accordance with GAAP consistently applied during the periods involved (except that the interim reports are subject to adjustments which might be required as a result of year end audit and except as otherwise stated therein). Such financial statements included in the SEC Reports were, at that time they were filed, consistent with the books and records of the Issuer in all material respects and complied as to form in all material respects with then applicable accounting requirements and with the rules and regulations of the SEC with respect thereto. The Issuer keeps accounting records in accordance 4 with GAAP in which all material assets and liabilities, and all material transactions, including off-balance sheet transactions, of the Issuer are recorded in material conformity with applicable accounting principles and disclosed as required by Requirements of Law in the SEC Reports. 3.8 Commissions. The Issuer has not incurred any other obligation for any finder's or broker's or agent's fees or commissions in connection with the transactions contemplated hereby, except that the Issuer will pay a five percent (5%) commission to Allen & Company LLC ("Allen"), the placement agent for the Offering, in accordance with that certain Placement Agency Agreement entered into between the Issuer and Allen. 3.9 Capitalization. As of the date of this Agreement, the authorized capital stock of the Issuer consists of 100,000,000 shares of Common Stock. All issued and outstanding shares of capital stock of the Issuer have been, and as of the Closing Date will be, duly authorized and validly issued and are fully paid and non-assessable, have been issued in compliance with all applicable state and federal securities laws in all material respects and were not issued in violation of, or subject to, any preemptive, subscription or other similar rights of any stockholder of the Issuer. As of September 30, 2003, the Issuer had issued and outstanding 18,880,191 shares of Common Stock. In addition, the authorized capital stock of the Issuer includes 5,000,000 shares of preferred stock, none of which are outstanding as of September 30, 2003 Except for outstanding options to purchase 3,434,740 shares of Common Stock and a warrant to purchase 440,958 shares of Common Stock, as of September 30, 2003, there were no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal and similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Issuer of any shares of capital stock, and the Issuer is not a party to or subject to any agreement or understanding and, to the Issuer's knowledge, there is no agreement or understanding between any Persons, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Issuer, except as set forth on Schedule 3.9. The Issuer owns, directly or indirectly, all of the capital stock of its Subsidiaries, free and clear of any Liens or equitable interests other than as reflected in the SEC Reports. The Issuer has no obligation, contingent or otherwise, to redeem or repurchase any equity security or any security that is a combination of debt and equity. 3.10 Material Changes. Except as set forth in the SEC Reports or as otherwise contemplated herein, since September 30, 2003, there has been no Material Adverse Effect in respect of the Issuer and its Subsidiaries taken as a whole. Except as set forth in the SEC Reports, since September 30, 2003, there has not been: (i) any direct or indirect redemption, purchase or other acquisition by the Issuer of any shares of the Common Stock; (ii) any declaration, setting aside or payment of any dividend or other distribution by the Issuer with respect to the Common Stock; (iii) any borrowings incurred or any material liabilities (absolute, accrued or contingent) assumed, other than current liabilities incurred in the ordinary course of business, liabilities under Contracts entered into in the ordinary course of business, liabilities not required to be reflected on the Issuer's financial statements pursuant to GAAP or required to disclosed in the SEC Reports, and liabilities in connection with the matters described on Schedule 3.11; (iv) any Lien or adverse claim on any of its material properties or assets, except for Liens for taxes not yet due and payable or otherwise in the ordinary course of business, and except as set forth on Schedule 3.11; (v) any sale, assignment or transfer of any of its material assets, tangible or intangible, except in the ordinary course of business; (vi) any extraordinary 5 losses or waiver of any rights of material value, other than in the ordinary course of business; (vii) any material capital expenditures or commitments therefor other than in the ordinary course of business; (viii) any other material transaction other than in the ordinary course of business; (ix) any material change in the nature or operations of the business of the Issuer and its Subsidiaries; (x) any default in the payment of principal or interest in any material amount, or violation of any material covenant, with respect to any outstanding debt obligations that are material to the Issuer and its Subsidiaries as a whole; (xi) any material changes to its critical accounting policies or material deviations from historical accounting and other practices in connection with the maintenance of the Issuer's books and records; or (xii) any agreement or commitment to do any of the foregoing. 3.11 Litigation. Except as disclosed on Schedule 3.11 or in the SEC Reports, there is no action, suit, proceeding or investigation pending or, to the Issuer's knowledge, currently threatened against the Issuer or any of its Subsidiaries that questions the validity of this Agreement or the right of the Issuer to enter into it, or to consummate the transactions contemplated hereby, or that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect on the Issuer or any change in the current equity ownership of the Issuer. The foregoing includes, without limitation, actions pending or, to the Issuer's knowledge, threatened involving the prior employment of any of the Issuer's employees or their use in connection with the Issuer's business of any information or techniques allegedly proprietary to any of their former employers. Neither the Issuer nor any of its Subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or Governmental Authority. There is no action, suit, proceeding or investigation by the Issuer or any of its Subsidiaries currently pending or which the Issuer or any of its Subsidiaries currently intends to initiate, which could reasonably be expected to have a Material Adverse Effect. 3.12 Rights of Registration, Voting Rights, and Anti-Dilution. Except as contemplated in this Agreement and except as disclosed on Schedule 3.12, the Issuer has not granted or agreed to grant any registration rights, including piggyback rights, to any Person and, to the Issuer's knowledge, no stockholder of the Issuer has entered into any agreements with respect to the voting of capital shares of the Issuer. Except as disclosed on Schedule 3.12, the issuance of the Shares does not constitute an anti-dilution event for any existing security holders of the Issuer, pursuant to which such security holders would be entitled to additional securities or a reduction in the applicable conversion price or exercise price of any securities. 3.13 Offerings. Subject in part to the truth and accuracy of Investor's representations and warranties set forth in this Agreement, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities Act and any applicable state securities laws, and neither the Issuer nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. 3.14 Disclosure. The Disclosure Documents (as defined in Section 4.7), as of their respective dates, did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 6 3.15 Licenses and Permits. To the Issuer's knowledge, each of the Issuer and its Subsidiaries has all Permits under applicable Requirements of Law from all applicable Governmental Authorities that are necessary to operate its businesses as presently conducted and all such Permits are in full force and effect, except where the failure to have any such Permits in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Issuer's knowledge, neither the Issuer nor any of its Subsidiaries is in default under, or in violation of or noncompliance with, any of such Permits, except for any such default, violation, or noncompliance which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Issuer's knowledge, other than as disclosed in the SEC Reports, there is no proposed change in any Requirements of Law which would require the Issuer and its Subsidiaries to obtain any Permits in order to conduct its business as presently conducted that the Issuer and its Subsidiaries do not currently possess and the lack of which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 3.16 Patents and Trademarks. To the Issuer's knowledge and except with respect to those matters described on Schedule 3.16, the Issuer and each of its Subsidiaries has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and know-how (including trade secrets or other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the "Intellectual Property Rights") that are necessary for use in connection with its business as presently conducted, except where the failure to have such Intellectual Property Rights would not reasonably be expected to have a Material Adverse Effect, and, to the Issuer's knowledge and except with respect to those matters described on Schedule 3.16, there is no existing infringement by another person or entity of any of the Intellectual Property Rights that are necessary for use in connection with the Issuer's business as presently conducted. To the Issuer's knowledge and except with respect to those matters described on Schedule 3.16, the Issuer is not infringing on, or in conflict with, any right of any other person with respect to any intangibles nor is there any claim of infringement made or threatened by a third party against or involving the Issuer. 3.17 Insurance. The Issuer maintains and will continue to maintain insurance with such insurers, and insuring against such losses, in such amounts, and subject to such deductibles and exclusions as are customary in the Issuer's industry and otherwise reasonably prudent, all of which insurance is in full force and effect. 3.18 Material Contracts. All material Contracts to which the Issuer or its Subsidiaries is a party and which are required to have been filed by the Issuer as exhibits to the SEC Reports have been filed by the Issuer with the SEC pursuant to the requirements of the Exchange Act. Each such material Contract is in full force and effect, except as otherwise required pursuant to their respective terms, and is binding on the Issuer or its Subsidiaries, as the case may be, in each case, in accordance with their respective terms, and neither the Issuer or any of its Subsidiaries nor, to the Issuer's knowledge, any other party thereto is in breach of, or in default under, any such material Contract, which breach or default would reasonably be expected to have a Material Adverse Effect. There exists no actual or, to the knowledge of the Issuer, threatened termination, cancellation or limitation of, or any material adverse modification or change in, the business relationship of the Issuer or any of its Subsidiaries, or the business of the Issuer or any of its 7 Subsidiaries, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the business of the Issuer or any of its Subsidiaries would, individually or in the aggregate, have a Material Adverse Effect. 3.19 Internal Controls/Accounting. The Issuer maintains a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 3.20 Taxes. The Issuer has filed all material federal, state and foreign income and franchise tax returns (or has duly filed extensions thereto) and has paid or accrued all taxes shown as due thereon, and the Issuer has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which is reasonably likely to have a Material Adverse Effect. 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. As a material inducement to the Issuer entering into this Agreement and issuing the Shares, the Investor represents, warrants, and covenants to the Issuer as follows: 4.1 Power and Authority. The Investor, if other than a natural person, is an entity duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation. The Investor has the corporate, partnership or other power (or capacity) and authority under applicable law to execute and deliver this Agreement and consummate the transactions contemplated hereby, and has all necessary authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The Investor has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby. 4.2 No Violation. The execution and delivery by the Investor of this Agreement, the consummation of the transactions contemplated hereby, and the compliance by the Investor with the terms and provisions hereof, will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate any charter or similar documents of the Investor, if other than a natural person, or any Contract to which the Investor is a party or by which it or its properties or assets are bound, or violate any Requirement of Law applicable to the Investor, other than such violations or defaults which, individually and in the aggregate, do not and will not have a Material Adverse Effect on the Investor. The Investor will comply with any Requirement of Law applicable to it in connection with the Offering and any resale by the Investor of the Shares. 4.3 Consents/Approvals. No consents, filings, authorizations or actions of any Governmental Authority are required for the Investor's execution, delivery and performance of this Agreement. No consent, approval, waiver or other actions by any Person under any Contract 8 to which the Investor is a party or by which the Investor or any of its properties or assets are bound is required or necessary for the execution, delivery and performance by the Investor of this Agreement and the consummation of the transactions contemplated hereby. 4.4 Enforceability. This Agreement has been duly executed and delivered by the Investor and (assuming it has been duly authorized, executed, and delivered by the Issuer) constitutes a legal, valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor's rights generally, the indemnity provisions of Section 7 of this Agreement, which may not be enforceable based upon public policy considerations, and general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity. 4.5 Investment Intent. The Investor is acquiring the Shares hereunder for its own account and with no present intention of distributing or selling such Shares and further agrees not to transfer such Shares in violation of the Securities Act or any applicable state securities law, and no one other than the Investor will have any beneficial interest in the Shares (except to the extent that the Investor may have delegated voting authority to its investment advisor). The Investor agrees that it will not sell or otherwise dispose of any of the Shares unless such sale or other disposition has been registered under the Securities Act or, in the opinion of counsel acceptable to the Issuer, is exempt from registration under the Securities Act and has been registered or qualified or, in the opinion of such counsel acceptable to the Issuer, is exempt from registration or qualification under applicable state securities laws. The Investor understands that the offer and sale by the Issuer of the Shares being acquired by the Investor hereunder has not been registered under the Securities Act by reason of their contemplated issuance in transactions exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that the reliance of the Issuer on such exemption from registration is predicated in part on these representations and warranties of the Investor. The Investor acknowledges that pursuant to Section 1.2 of this Agreement a restrictive legend consistent with the foregoing has been or will be placed on the certificates for the Shares. 4.6 Accredited Investor. The Investor is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment to be made by it hereunder. 4.7 Adequate Information. The Investor has received from the Issuer, and has reviewed, such information which the Investor considers necessary or appropriate to evaluate the risks and merits of an investment in the Shares, including without limitation, the Disclosure Schedule to this Agreement and the documents listed on Exhibit A, which have been received by the Investor as part of an informational packet of materials from the Issuer (the "Disclosure Documents"). The Investor acknowledges that each of the SEC Reports, including the risk factors contained therein, are specifically incorporated herein by reference and form an integral part of this Agreement. The Investor also acknowledges that the additional risk factors set forth on Exhibit A and contained in the Disclosure Documents are specifically incorporated herein by reference and form an integral part of this Agreement. 9 4.8 Opportunity to Question. The Investor has had the opportunity to question, and has questioned, to the extent deemed necessary or appropriate, representatives of the Issuer so as to receive answers and verify information obtained in the Investor's examination of the Issuer, including the information that the Investor has received and reviewed as referenced in Section 4.7 hereof in relation to its investment in the Shares. 4.9 No Other Representations. No oral or written material representations have been made to the Investor in connection with the Investor's acquisition of the Shares which were in any way inconsistent with the information reviewed by the Investor. The Investor acknowledges that in deciding whether to enter into this Agreement and to purchase the Shares hereunder, it has not relied on any representations or warranties of any type or description made by the Issuer or any of its representatives with regard to the Issuer, any of its Subsidiaries, any of their respective businesses, properties or prospects of the investment contemplated herein, other than the representations and warranties set forth in Section 3 hereof. 4.10 Knowledge and Experience. The Investor has such knowledge and experience in financial, tax and business matters, including substantial experience in evaluating and investing in common stock and other securities (including the common stock and other securities of speculative companies), so as to enable the Investor to utilize the information referred to in Section 4.7 hereof and any other information made available by the Issuer to the Investor in order to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision with respect thereto. 4.11 Independent Decision. The Investor is not relying on the Issuer or on any legal or other opinion in the materials reviewed by the Investor with respect to the financial or tax considerations of the Investor relating to its investment in the Shares. The Investor has relied solely on the representations and warranties, covenants and agreements of the Issuer in this Agreement (including the exhibits and schedules hereto) and on its examination and independent investigation in making its decision to acquire the Shares. 4.12 Commissions. The Investor has not incurred any obligation for any finder's or broker's or agent's fees or commissions in connection with the transactions contemplated hereby. 4.13 Underwriter Disclaimer. The Investor disclaims being an underwriter, but the Investor being deemed an underwriter by the SEC shall not relieve the Issuer of any of its obligations hereunder. 4.14 Independent Acquisition. The Investor is acquiring from the Issuer for its own account, and is making an independent investment decision in subscribing for, that number of shares of Common Stock set forth on the signature page hereof; the Investor is not acting in concert with any other investor or purchaser in connection with the acquisition or subsequent voting or disposition of the shares being subscribed for pursuant to this Agreement. 5. COVENANTS. 5.1 Public Announcements. The Investor agrees not to make any public announcement or issue any press release or otherwise publicly disseminate any information 10 about the subject matter of this Agreement. Except as provided herein, the Issuer shall have the right to make such public announcements and shall control, in its sole and absolute discretion, the timing, form and content of all press releases or other public communications of any sort relating to the subject matter of this Agreement, and the method of their release, or publication thereof. The Issuer shall file within five (5) business days after the Closing Date a Current Report on Form 8-K with the SEC in respect of the transactions contemplated by this Agreement. The Issuer may issue an initial press release relating to the transactions contemplated by this Agreement, but shall not identify any Investor in such press release without the consent of such Investor, except as may be required by any Requirement of Law or rule of any exchange on which the Issuer's securities are listed. 5.2 Further Assurances. Each party shall execute and deliver such additional instruments and other documents and shall take such further actions as may be reasonably necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement and the transactions contemplated hereby. Each of the Investor and the Issuer shall make on a prompt and timely basis all governmental or regulatory notifications and filings required to be made by it with or to any Governmental Authority in connection with the consummation of the transactions contemplated hereby. The Issuer and the Investor each agree to cooperate with the other in the preparation and filing of all forms, notifications, reports and information, if any, required or reasonably deemed advisable pursuant to any Requirement of Law or the rules of The OTC Bulletin Board (if any) in connection with the transactions contemplated by this Agreement and to use their respective commercially reasonable efforts to agree jointly on a method to overcome any objections by any Governmental Authority to any such transactions. Except as may be specifically required hereunder, neither of the parties hereto or their respective Affiliates shall be required to agree to take any action that in the reasonable opinion of such party would result in or produce a Material Adverse Effect on such party. 5.3 Notification of Certain Matters. Prior to the Closing, each party hereto shall give prompt notice to the other party of the occurrence, or non-occurrence, of any event which would be likely to cause any representation and warranty herein to be untrue or inaccurate, or any covenant, condition or agreement herein not to be complied with or satisfied. 5.4 Confidential Information. The Investor agrees that no portion of the Confidential Information (as defined below) shall be disclosed to third parties, except as may be required by law, without the prior express written consent of the Issuer, and shall not be used by the Investor other than in connection with its evaluation of the transactions contemplated hereby; provided, that the Investor may share such information with such of its officers and professional advisors as may need to know such information to assist the Investor in its evaluation thereof on the condition that such parties agree to be bound by the terms hereof. "Confidential Information" means the existence and terms of this Agreement, the transactions contemplated hereby, and the disclosures and other information contained herein, excluding any disclosures or other information that is publicly available. 6. REGISTRATION RIGHTS. The Investor shall have the following registration rights with respect to the Registrable Securities owned by it: 11 6.1 Transfer of Registration Rights. The Investor may assign the registration rights with respect to the Shares to any party or parties to which it may from time to time transfer all of the Shares; provided, that the transferee agrees in writing with the Issuer to be bound by the applicable provisions of this Agreement regarding such registration rights and indemnification relating thereto. Upon assignment of any registration rights pursuant to this Section 6.1, the Investor shall deliver to the Issuer a notice of such assignment which includes the identity and address of any assignee and such other information reasonably requested by the Issuer in connection with effecting any such registration (collectively, the Investor and each such subsequent holder is referred to as a "Holder"). 6.2 Required Registration. As promptly as practicable after the Closing, but in no event later than thirty (30) days after the date of the Closing, the Issuer agrees to file a Registration Statement on Form S-3 (the "Shelf Registration Statement") to register the resale of all of the Shares. The Issuer shall use its best efforts to cause the SEC to declare the Shelf Registration Statement effective no later than the 90th day after the date of Closing; provided, however, that not less than two days prior to the filing of the Shelf Registration Statement, the Issuer shall provide the Investor (or the investment adviser of such Investor) with a copy of the Shelf Registration Statement proposed to be filed and the Issuer agrees to consider all appropriate comments provided by such Investor with respect to the Shelf Registration Statement for inclusion in the Shelf Registration Statement. The Issuer shall thereafter maintain the effectiveness of the Shelf Registration Statement until the earlier of (a) the date on which all the Shares have been sold pursuant to the Shelf Registration Statement or Rule 144 promulgated under the Securities Act ("Rule 144"), and (b) such time as the Issuer reasonably determines, based on an opinion of counsel, that all of the Holders will be eligible to sell under Rule 144 all of the Shares then owned by the Holders within the volume limitations imposed by paragraph (e) of Rule 144 in the three month period immediately following the termination of the effectiveness of the Shelf Registration Statement. The Issuer's obligations contained in this Section 6.2 shall terminate on the second anniversary of the date of the Closing. 6.3 Registration Procedures. (a) In case of the Shelf Registration Statement effected by the Issuer subject to this Section 6, the Issuer shall keep the Investor, on behalf of Holder, advised in writing as to the initiation of such registration, and as to the completion thereof. In addition, subject to Section 6.2 above, the Issuer shall, to the extent applicable to the Shelf Registration Statement: (i) prepare and file with the SEC such amendments and supplements to the Shelf Registration Statement as may be necessary to keep such registration continuously effective and free from any material misstatement or omission necessary to make the statements therein, in light of the circumstances, not misleading, and comply with provisions of the Securities Act with respect to the disposition of all securities covered thereby during the period referred to in Section 6.2; (ii) update, correct, amend and supplement the Shelf Registration Statement as necessary; 12 (iii) notify the Holder promptly when the Shelf Registration Statement is declared effective by the SEC, and furnish such number of prospectuses, including preliminary prospectuses, and other documents incident thereto as Holder may reasonably request from time to time; (iv) use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions of the United States where an exemption is not available and as Holder may reasonably request to enable it to consummate the disposition in such jurisdiction of the Registrable Securities (provided that the Issuer will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this provision, or (B) consent to general service of process in any such jurisdiction, or (C) subject itself to taxation in any jurisdiction where it is not already subject to taxation); (v) notify Holder at any time when a prospectus relating to the Registrable Securities is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in the Shelf Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and subject to Section 6.3(d), the Issuer will promptly prepare a supplement or amendment to such prospectus, so that, as thereafter delivered to purchasers of such shares, such prospectus will not contain any untrue statements of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vi) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Issuer are then listed and obtain all necessary approvals from The OTC Bulletin Board (if any) for trading thereon; (vii) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of the Shelf Registration Statement; (viii) upon the sale of any Registrable Securities pursuant to the Shelf Registration Statement, direct the transfer agent to remove all restrictive legends from all certificates or other instruments evidencing the Registrable Securities; (ix) With a view to making available to the Holder the benefits of certain rules and regulations of the SEC that at any time permit the sale of the Registrable Securities to the public without registration, so long as any Registrable Securities are outstanding, the Issuer shall use its commercially reasonable efforts for a period of two years following the date of Closing: (1) to make and keep public information available, as those terms are understood and defined in Rule 144(c) under the Securities Act; (2) to file with the SEC in a timely manner all reports and other documents required of the Issuer under the Exchange Act; and 13 (3) to furnish to the Holder upon any reasonable request a written statement by the Issuer as to its compliance with the public information requirements of Rule 144(c) under the Securities Act; and (x) To advise the Holder promptly after it has received notice or obtained knowledge of the existence of any stop order by the SEC delaying or suspending the effectiveness of the Shelf Registration Statement or of the initiation or threat of any proceeding for that purpose, and to make every commercially reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible time. (b) Notwithstanding anything stated or implied to the contrary in Section 6.3(a) above, the Issuer shall not be required to consent to any underwritten offering of the Registrable Securities or to any specific underwriter participating in any underwritten public offering of the Registrable Securities. (c) Each Holder agrees that upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 6.3(a)(v), and subject to Section 6.3 (d), such Holder will forthwith discontinue such Holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6.3(a)(v) and, if so directed by the Issuer, will deliver to the Issuer at the Issuer's expense all copies, other than permanent file copies, then in such Holder's possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. (d) In addition to any discontinuance of a Holder's disposition of Registrable Securities under paragraph (c) above, the Issuer, upon the happening of any pending corporate development, public filing with the SEC or similar event, that, in the good faith judgment of the Issuer's Board of Directors based on the advice of counsel, renders it advisable to suspend use of the prospectus, may, for no more than thirty (30) days in the aggregate per event (each a "Suspension Event"), suspend use of the prospectus, on written notice to each Holder (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended period of suspension, if known), in which case each Holder shall discontinue disposition of Registrable Securities covered by the registration statement related to such Registrable Securities or prospectus until copies of a supplemented or amended prospectus are distributed to the Holders or until the Holders are advised in writing by the Issuers that sales of Registrable Securities under the applicable prospectus may be resumed and have received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. The suspension and notice thereof described in this Section 6.3(d) shall be subject to the confidentiality provisions of Section 5.4 herein and shall not be disclosed by the Holders. The Issuer may not utilize the suspension described in this Section 6.3(d) for more than two (2) Suspension Events in any 12-month period. The Issuer will use commercially reasonably efforts to ensure that the use of the Shelf Registration Statement and prospectus may be resumed as promptly as practicable. (e) Except as required by law, all expenses incurred by the Issuer in complying with this Section 6, including but not limited to, all registration, qualification and 14 filing fees, printing expenses, fees and disbursements of counsel and accountants for the Issuer, blue sky fees and expenses (including fees and disbursements of counsel related to all blue sky matters) incurred in connection with any registration, qualification or compliance pursuant to this Section 6 shall be borne by the Issuer. All underwriting discounts and selling commissions applicable to a sale incurred in connection with any registration of Registrable Securities and the legal fees and other expenses of a Holder shall be borne by such Holder. (f) Further Information. If Registrable Securities owned by a Holder are included in any registration, such Holder shall furnish the Issuer such information regarding itself as the Issuer may reasonably request and as shall be required in connection with any registration (or amendment or supplement thereto), referred to in this Agreement, and Holder shall indemnify the Issuer with respect thereto in accordance with Section 7 hereof. The Investor hereby represents and warrants to the Issuer that it has accurately and completely provided the requested information and answered the questions numbered (a) through (d) on the signature pages of this Agreement, and the Investor agrees and acknowledges that the Issuer may rely on such information as being true and correct for purposes of preparing and filing the Shelf Registration Statement at the time of filing thereof and at the time it is declared effective, unless the Investor has notified the Issuer in writing to the contrary prior to such time. 6.4 Transfer of Shares. An Investor may transfer all or any part of its Shares to any Person under common management with the Investor; provided, that any such transfer shall be effected in full compliance with all applicable federal and state securities laws, including, but not limited to, the Securities Act and the rules of the SEC promulgated thereunder. The Issuer will effect such transfer of restricted certificates and will promptly amend the Prospectus forming a part of the Shelf Registration Statement to add the transferee to the selling stockholders in the Shelf Registration Statement; provided that the transferor and transferee shall be required to provide the Issuer with the information requested of the Investor in this Agreement, information reasonably necessary for the Issuer to determine that the transfer was effected in accordance with all applicable federal and state securities laws, including, but not limited to, the Securities Act and the rules of the SEC promulgated thereunder, and all other information reasonably requested by the Issuer from time to time in connection with any transfer, registration, qualification or compliance referred to in Section 6.4. 7. INDEMNIFICATION. 7.1 Indemnification by the Issuer. The Issuer will indemnify and hold harmless each Holder of Shares which are included in a registration statement pursuant to the provisions of Section 6 hereof and any underwriter (as defined in the Securities Act) for such Holder, and any person who controls such Holder or such underwriter within the meaning of the Securities Act, and any officer, director, investment adviser, employee, agent, partner, member or affiliate of such Holder (each, an "Indemnified Party"), from and against, and will reimburse each such Indemnified Party with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and expenses to which such Holder or any such Indemnified Party may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are 15 based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any materially inaccurate representation or breach of any material warranty, agreement or covenant of the Issuer contained herein; provided, however, that the Issuer will not be liable in any such case to the extent that any such claim, action, demand, loss, damage, liability, cost or expense is caused by an untrue statement or alleged untrue statement or omission or alleged omission (1) made in conformity with information furnished by such Holder in writing specifically for use in the preparation thereof, (2) which was cured in an amendment or supplement to the prospectus (or any amendment or supplement thereto) delivered to the Holder on a timely basis to permit proper delivery thereof prior to the date on which any Shares were transferred or sold, or (3) which was caused by the failure of such Investor to comply with the covenants and agreements contained in this Agreement respecting resale of the Shares. 7.2 Indemnification by the Holder. Each Holder of Shares which are included in a registration pursuant to the provisions of Section 6 hereof will indemnify and hold harmless the Issuer, and any Person who controls the Issuer within the meaning of the Securities Act, and any officer, director, employee, agent, partner, member or affiliate of the Issuer (each, an "Issuer Indemnified Party") from and against, and will reimburse the Issuer Indemnified Parties with respect to, any and all losses, damages, liabilities, costs or expenses to which such Issuer Indemnified Parties may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or are caused by the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made solely in reliance upon and in conformity with written information furnished by such Holder specifically for use in the preparation thereof; provided, however, that the liability of any Holder pursuant to this Section 7.2 shall be limited to an amount not to exceed the net proceeds received by such Holder from the sale of Registrable Securities pursuant to the registration statement which gives rise to such obligation to indemnify. 7.3 Procedures. Promptly after receipt by a party indemnified pursuant to the provisions of Section 7.1 or Section 7.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 7.1 or Section 7.2, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7 and shall not relieve the indemnifying party from liability under this Section 7, except to the extent that such indemnifying party is materially prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of Section 7.1 or Section 16 7.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 8. CONDITIONS TO CLOSING. 8.1 Conditions to the Obligations of the Investor. The obligation of the Investor to proceed with the Closing is subject to the following conditions any and all of which may be waived by the Investor, in whole or in part, to the extent permitted by applicable law: (a) Representations and Warranties. Each of the representations and warranties of the Issuer contained in this Agreement shall be true and correct in all material respects as of the Closing as though made on and as of the Closing, except (i) for changes specifically permitted by this Agreement, (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, and (iii) such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on the Issuer. Unless the Investor receives written notice to the contrary at the Closing, Investor shall be entitled to assume that the preceding is accurate in all respects at the Closing. (b) Agreement and Covenants. The Issuer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. Unless the Investor receives written notice to the contrary at the Closing, Investor shall be entitled to assume that the preceding is accurate in all respects at the Closing. (c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement. (d) Opinion of Issuer's Counsel. The Investor shall have received an opinion of Issuer's counsel, dated the Closing Date, with respect to legal matters customary for private offerings of this type. (e) Closing Certificate. The Investor shall have received a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Issuer, dated as of the Closing, to the effect that the representations and warranties of the Issuer contained in Section 3 hereof are true and correct in all material respects as of the Closing, and that all covenants, agreements and conditions required to be satisfied by the Issuer under this Agreement at or prior to the Closing have been performed, satisfied and complied with by the Issuer in all material respects. 17 8.2 Conditions to the Obligations of the Issuer. The obligation of the Issuer to proceed with the Closing is subject to the following conditions any and all of which may be waived by the Issuer, in whole or in part, to the extent permitted by applicable law: (a) Representations and Warranties. Each of the representations and warranties of the Investor contained in this Agreement shall be true and correct as of the Closing as though made on and as of the Closing, except (i) for changes specifically permitted by this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date. Unless the Issuer receives written notification to the contrary at the Closing, the Issuer shall be entitled to assume that the preceding is accurate in all respects at the Closing. (b) Agreement and Covenants. The Investor shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. Unless the Issuer receives written notification to the contrary at the Closing, the Issuer shall be entitled to assume that the preceding is accurate in all respects at the Closing. (c) No Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement. (d) Agreement. The Investor shall have executed and delivered to the Issuer this Agreement (and completed the information requested on the signature page hereto). (e) Securities Exemptions. The offer and sale of the Shares to the Investor pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. (f) Closing Matters. The Investor and the Issuer shall use their respective best efforts to establish with the assistance of Allen mutually satisfactory closing procedures for delivery of the Shares and the full payment of the purchase price of the Shares. 9. MISCELLANEOUS. 9.1 Defined Terms. As used herein the following terms shall have the following meanings: (a) "Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. (b) "Agreement" has the meaning specified in the preamble to this Agreement. (c) "Allen" has the meaning specified in Section 3.8 of this Agreement. 18 (d) "Bylaws" means the Bylaws of the Issuer, as the same may be supplemented, amended, or restated from time to time. (e) "Certificate of Incorporation" means the Issuer's Certificate of Incorporation, as the same may be supplemented, amended or restated from time to time. (f) "Closing" has the meaning specified in Section 2.2 of this Agreement. (g) "Common Stock" has the meaning specified in the Recitals to this Agreement. (h) "Confidential Information" has the meaning specified in Section 5.4 of this Agreement. (i) "Contract" means any indenture, lease, sublease, loan agreement, mortgage, note, restriction, commitment, obligation or other contract, agreement or instrument. (j) "Disclosure Documents" has the meaning specified in Section 4.7 of this Agreement. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (l) "GAAP" means generally accepted accounting principles in effect in the United States of America. (m) "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any entity or official exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. (n) "Holder" has the meaning specified in Section 6.1 of this Agreement. (o) "Indemnified Party" has the meaning specified in Section 7.1 of this Agreement. (p) "Intellectual Property Rights" has the meaning specified in Section 3.16 of this Agreement. (q) "Investor" has the meaning specified in the preamble to this Agreement. (r) "Issuer" means The Knot, Inc., a Delaware corporation. (s) "Issuer Indemnified Party" has the meaning specified in Section 7.2 of this Agreement. (t) "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in connection with such mortgage, pledge, security interest, encumbrance, lien or charge). 19 (u) "Material Adverse Effect" means a material and adverse change in, or effect on, the financial condition, properties, assets, liabilities, rights, obligations, operations or business, of a Person and its Subsidiaries taken as a whole. (v) "Offering" has the meaning specified in the Recitals to this Agreement. (w) "Permit" means any permit, certificate, consent, approval, authorization, order, license, variance, franchise or other similar indicia of authority issued or granted by any Governmental Authority. (x) "Person" means an individual, partnership, corporation, business trust, joint stock company, estate, trust, unincorporated association, joint venture, Governmental Authority or other entity, of whatever nature. (y) "Purchase Price" has the meaning specified in Section 1.1 of this Agreement. (z) "Register", "registered" and "registration" refer to a registration of the offering and sale or resale of Common Stock effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of such registration statement. (aa) "Registrable Securities" means all Shares of Common Stock acquired by the Investor pursuant to this Agreement and any other shares of Common Stock or other securities issued in respect of such Shares by way of a stock dividend or stock split or in connection with a combination or subdivision of the Issuer's Common Stock or by way of a recapitalization, merger or consolidation or reorganization of the Issuer; provided, however, that as to any particular securities, such securities will cease to be Registrable Securities when they have been sold pursuant to registration or in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale. (bb) "Requirements of Law" means as to any Person, the certificate of incorporation, by-laws or other organizational or governing documents of such Person, and any domestic or foreign and federal, state or local law, rule, regulation, statute or ordinance or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to, or binding upon, such Person or any of its properties or to which such Person or any of its property is subject. (cc) "Rule 144" has the meaning specified in Section 6.2 of this Agreement. (dd) "SEC" means the Securities and Exchange Commission. (ee) "SEC Reports" has the meaning specified in Section 3.7 of this Agreement. (ff) "Securities Act" means the Securities Act of 1933, as amended. 20 (gg) "Shares" has the meaning specified in Section 1.1 of this Agreement. (hh) "Shelf Registration Statement" has the meaning specified in Section 6.2 of this Agreement. (ii) "Subsidiary" means as to any Person, a corporation or limited partnership of which more than 50% of the outstanding capital stock or partnership interests having full voting power is at the time directly or indirectly owned or controlled by such Person. (jj) "Suspension Event" has the meaning specified in Section 6.3(d) of this Agreement. 9.2 Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificates, reports or other documents made or delivered pursuant hereto or thereto, unless the context otherwise requires. (b) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) All accounting terms shall have a meaning determined in accordance with GAAP. (d) The words "hereof," "herein" and "hereunder," and words of similar import, when used in this Agreement shall refer to this Agreement as a whole (including any exhibits and schedules hereto) and not to any particular provision of this Agreement. 9.3 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses and telecopy numbers (or to such other addresses or telecopy numbers which such party shall subsequently designate in writing to the other party): (a) if to the Issuer to: The Knot, Inc. 462 Broadway New York, New York 10013 Attention: Chief Financial Officer Telecopy: (212) 219-1929 21 with a copy to: Brian B. Margolis, Esq. Proskauer Rose LLP 1585 Broadway New York, NY 10036 Telecopy: (212) 969-2900 (b) if to the Investor to the address set forth next to its name on the signature page hereto. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered by hand, by messenger or by courier, or if sent by facsimile, upon confirmation of receipt. 9.4 Entire Agreement. This Agreement (including the exhibits and schedules attached hereto) and other documents delivered at the Closing pursuant hereto, contain the entire understanding of the parties in respect of its subject matter and supersede all prior agreements and understandings between the parties with respect to such subject matter. 9.5 Expenses; Taxes. Except as otherwise provided in this Agreement, the parties shall pay their own fees and expenses, including their own counsel fees, incurred in connection with this Agreement or any transaction contemplated hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes based on the income of the Investor) arising out of the issuance of the Shares (but not with respect to subsequent transfers) by the Issuer to the Investor and consummation of the transactions contemplated by this Agreement shall be paid by the Issuer. 9.6 Amendment; Waiver. This Agreement may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by both parties. No failure to exercise, and no delay in exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. The rights and remedies of the parties under this Agreement are in addition to all other rights and remedies, at law or equity, that they may have against each other. 9.7 Binding Effect; Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of the parties and their respective successors and legal assigns. The rights and obligations of this Agreement may not be assigned by any party without the prior written consent of the other party. 9.8 Counterparts; Facsimile Signature. This Agreement may be executed by facsimile signature and in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. 22 9.9 Headings. The headings contained in this Agreement are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Agreement. 9.10 Governing Law; Interpretation. This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of New York applicable to contracts executed and to be wholly performed within such State. 9.11 Severability. The parties stipulate that the terms and provisions of this Agreement are fair and reasonable as of the date of this Agreement. However, any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If, moreover, any of those provisions shall for any reason be determined by a court of competent jurisdiction to be unenforceable because excessively broad or vague as to duration, activity or subject, it shall be construed by limiting, reducing or defining it, so as to be enforceable. [SIGNATURES AND OTHER INFORMATION ON NEXT THREE PAGES] 23 IN WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to be duly executed and delivered as of the date set forth below. NAME OF INVESTOR (please print) ADDRESS FOR NOTICE (please print) * 333 South Hope Street - 55th Floor - ----------------------------------- Los Angeles, CA 90071 by Capital Research and Managemen Company, its investment adviser Attention: ------------------------ Tax Identification #: * ------------- SIGNATURE By: /s/ PAUL G. HAAGA, JR. -------------------------------- Name: Paul G. Haaga, Jr. Title: Executive Vice President Date: November 18, 2003 Exact name to appear on stock certificate: Number of Shares subscribed for: * I* - ----------------------------------- ---------------------------------- Aggregate Purchase Price (see Section 1.1): $ * ------------ [* - NOTE TO EDGAR FILING - SEE SCHEDULE OF DIFFERENCES THAT FOLLOWS THIS EXHIBIT] The Investor hereby provides the following additional information: (a) Excluding the shares of Common Stock subscribed for above, set forth below is the number of shares of Common Stock and options rights or warrants of The Knot, Inc. ("Options" and together with the Common Stock, "Securities") which the Investor beneficially owns or of which the Investor is the record owner on the date hereof. Please refer to the definition of beneficial ownership on Exhibit B attached hereto. If none, please so state. Number of Shares: 0 (excluding the Shares subscribed for above) Number of Options: 0 Please indicate by an asterisk (*) above if the Investor disclaims "beneficial ownership" of any of the above listed Securities, and indicate in response to question (b) below who has beneficial ownership. (b) If the Investor disclaims "beneficial ownership" in question (a), please furnish the following information with respect to the person(s) other than the Investor who is the beneficial owner(s) of the Securities in question. If not applicable, please check box: [ ] Name of Beneficial Owner: ---------------------------------------- Relationship to the Investor: ------------------------------------ Number of Securities Beneficially Owned: ------------------------- 24 (c) Are any of the Securities listed in response to question (a) the subject of a voting agreement, contract or other arrangement whereby others have voting control over, or any other interest in, any of the Investor's Securities? [ ] Yes [ ] No If the answer is "Yes", please give details: . ------------------------------ (d) Please describe each position, office or other material relationship which the Investor has had with the Issuer or any of its affiliates, including any Subsidiary of the Issuer, within the past three years. Please include a description of any loans or other indebtedness, and any contracts or other arrangements or transactions involving a material amount, payable by the Investor to the Issuer or any of its Affiliates, including its Subsidiaries, or by the Issuer or any of its Affiliates, including its Subsidiaries, to the Investor. "Affiliates" of the Issuer include its directors and executive officers, and any other person controlling or controlled by the Issuer. If none, please so state. Answer: N/A (e) Please provide the name and address of other person(s), if any, to whom any proxy statements, registration statements (including notice of effectiveness thereof), prospectuses or similar documents and information should be delivered by the Issuer on behalf of the Investor in the future, with respect to the Investor's shares: - ---------------------------- ---------------------------- - ---------------------------- ---------------------------- - ---------------------------- ---------------------------- - ---------------------------- ---------------------------- (f) Please advise of special stock certificate delivery requirements for closing, if any: (g) Please advise if a NASD member has placed with you the Shares being purchased hereunder: (Name of Member:) Allen & Co. 25 ACCEPTED THIS 18TH DAY OF NOVEMBER, 2003 BY: THE KNOT, INC. By: /s/ RICHARD E. SZEFC --------------------------------- Name: Richard E. Szefc Title: Chief Financial Officer, Treasurer & Secretary 26 EXHIBIT A DISCLOSURE DOCUMENTS THE INVESTOR IS URGED TO REVIEW THE FOLLOWING DOCUMENTS AND DISCLOSURES WHICH ARE DELIVERED HEREWITH AND INCORPORATED BY REFERENCE HEREIN AS IF RESTATED HEREIN: 1. Annual Report on Form 10-K for the year ended December 31, 2002 2. Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 3. Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 4. Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 5. Proxy Statement dated April 10, 2003 6. Current Reports on Form 8-K dated May 13, 2003, August 13, 2003 and November 13, 2003 7. PowerPoint presentation to potential investors dated October 30, 2003 RISK FACTORS 1. SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY ADVERSELY AFFECT OUR STOCK PRICE. Sales of substantial numbers of shares of our Common Stock in the public market, or the perception that significant sales are likely, could adversely affect the market price of our Common Stock. Compliance with the registration rights provisions of the Subscription Agreement could create the perception that all Shares that are a part of this Offering will soon be available for sale, and this number of Shares is greater than the average trading volume for our shares. No prediction can be made as to the effect, if any, that market sales of such Shares will have on the market price of our Common Stock. Sales of substantial amounts of such Shares in the public market could adversely affect the market price of our Common Stock. 2 OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE AND IS LIKELY TO EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS IN THE FUTURE THAT COULD REDUCE THE VALUE OF YOUR INVESTMENT AND SUBJECT US TO LITIGATION. The market price of our Common Stock has fluctuated in the past and is likely to continue to be highly volatile, with extreme price and volume fluctuations. These broad market and industry factors may harm the market price of our Common Stock, regardless of our actual operating 27 performance, and for this or other reasons, we could continue to suffer significant declines in the market price of our Common Stock. In the past, companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we were to become the object of securities class action litigation, it could result in substantial costs and a diversion of our management's attention and resources. 3 THE LACK OF THE LISTING OF OUR COMMON STOCK ON A STOCK EXCHANGE OR NASDAQ RESULTS IN A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND MAKES OBTAINING FUTURE EQUITY FINANCING MORE DIFFICULT FOR US. Our Common Stock trades on the OTC Bulletin Board, which was established for securities that do not meet the Nasdaq National Market listing requirements. Consequently, selling our Common Stock is more difficult because smaller quantities of shares are bought and sold, transactions could be delayed, and security analysts' and news media coverage of us has been reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of Common Stock. The delisting of our Common Stock from the Nasdaq National Market or further declines in our stock price could also greatly impair our ability to raise additional necessary capital through equity or debt financing, and significantly increase the ownership dilution to stockholders caused by our issuing equity in financing or other transactions. The price at which we issue shares in such transactions is generally based on the market price of our Common Stock and a decline in our stock price could result in the need for us to issue a greater number of shares to raise a given amount of funding or acquire a given dollar value of goods or services. In addition, because our Common Stock is not listed on the Nasdaq National Market, we are subject to Rule 15g-9 under the Securities and Exchange Act of 1934, as amended. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell the Common Stock and affect the ability of holders to sell their shares of our Common Stock in the secondary market. 4 THE OFFERING PRICE OF THE SHARES MAY NOT BEAR ANY RELATIONSHIP TO OUR ASSETS, BOOK VALUE, EARNINGS HISTORY, OR OTHER ESTABLISHED CRITERIA. AS A RESULT, YOU MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION. The offering price of the Shares was established based on such factors as our capital requirements, financial conditions and prospects, percentage of ownership to be held by investors following this Offering, and the general condition of securities markets at the time of the Offering. The offering price does not necessarily bear any relationship to our assets, book value, earnings history or other established criteria of value. As a result, you may experience immediate and substantial dilution. 28 5 WE ARE UNABLE TO DETERMINE WITH CERTAINTY WHEN THE REGISTRATION STATEMENT TO BE FILED WITH THE SEC WILL BE DECLARED EFFECTIVE. CONSEQUENTLY, YOU MAY NOT BE ABLE TO SELL YOUR SHARES FOR A SUBSTANTIAL PERIOD OF TIME. Although we have undertaken to register the Shares for resale by you, you should be aware that we are unable to determine with certainty when the registration statement to be filed with the SEC will become effective. In addition, the SEC may seek to review our registration statement, in which case, the period necessary to achieve effectiveness of the registration statement with the SEC will be affected by our ability to provide the SEC with sufficient disclosures satisfactory to the SEC. The length of the SEC review process is uncertain and may extend to a number of months. As you are aware, the Shares being sold in this Offering are restricted in nature and may not be publicly resold absent the effectiveness of the registration statement or pursuant to an applicable exemption from registration. Consequently, you may not be able to sell your Shares for a substantial period of time. 6 WE MAY SPEND THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE. The net proceeds of this offering are not allocated for specific uses. Our management will have broad discretion to spend the net proceeds from this offering in ways with which investors may not agree. The failure of our management to apply these funds effectively would result in unfavorable returns, which could cause the price of our Common Stock to decline. RECENT EVENT On September 19, 2003, WeddingChannel.com, Inc. ("WeddingChannel") filed a Complaint against the Issuer in the United States District Court for the Southern District of New York. The Complaint alleges that the Issuer has violated U.S. Patent 6,618,753 ("Systems and Methods for Registering Gift Registries and for Purchasing Gifts"), and further alleges that certain actions of the Issuer give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If the Issuer is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This Complaint was served on the Issuer on September 22, 2003. Based on information currently available, the Issuer believes that the claims are without merit, and is vigorously defending itself against all claims. On October 14, 2003, the Issuer filed an Answer and Counterclaims against WeddingChannel. The Issuer's Answer raises various defenses to the counts alleged by WeddingChannel. Additionally, the Issuer has brought Counterclaims including a request that the Court declare the patent-in-suit is invalid, unenforceable and not infringed. The Issuer's Counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. 29 EXHIBIT B Explanation of "BENEFICIAL OWNERSHIP" Securities that are subject to a power to vote or dispose are deemed beneficially owned by the person who holds such power, directly or indirectly. This means that the same securities may be deemed beneficially owned by more than one person, if such power is shared. In addition, the beneficial ownership rules provide that shares which may be acquired upon exercise of an option or warrant, or which may be acquired upon the termination of a trust, discretionary account or similar arrangement, which can be effected within a period of 60 days from the date of determination, are deemed to be "beneficially" owned. Furthermore, shares that are subject to rights or powers even though such rights or powers to acquire are not exercisable within the 60-day period may also be deemed to be beneficially owned if the rights or powers were acquired "with the purpose or effect of changing or influencing the control of the issuer or in connection with or as a participant in any transaction having such purpose or effect." In determining whether securities are "beneficially owned," benefits which are substantially equivalent to those of ownership by virtue of any contract, understanding, relationship, agreement or other arrangement should cause the securities to be listed as "beneficially owned." Thus, for example, securities held for a person's benefit in the name of others or in the name of any estate or trust in which such person may be interested should also be listed. Securities held by a person's spouse, children or other members of such person's family who are such person's dependents or who live in such person's household should be listed as "beneficially owned" unless such person does not enjoy benefits equivalent to those of ownership with respect to such securities. If a person has a proprietary or beneficial interest in a controlled corporation, partnership, personal holding company, trust or estate which owns of record or beneficially any securities, such person should state the amount of such securities owned by such controlled corporation, partnership, personal holding company, trust or estate in lieu of allocating such person's proprietary interest, and by note or otherwise, please indicate that. In any case, the name of the controlled corporation, partnership, personal holding company, or estate must be stated. In all cases the nature of the beneficial ownership should be stated. Disclosure Schedule This disclosure of exceptions (the "Disclosure Schedule") is made and given pursuant to the Subscription Agreement dated as of November 18, 2003 (the "Agreement") by and between The Knot, Inc. (the "Issuer") and the person or entity identified therein as the "Investor." The numbers below correspond to the section numbers of representations and warranties contained in Article III of the Agreement. Unless the context otherwise requires, all capitalized terms are used herein as defined in the Agreement. When a document is referred to herein or a reference is made to a particular part only of such document, the full contents of the document are referred to, provided that the full contents of the document have been delivered or made available to the Investor. The disclosure set forth in the Disclosure Schedule shall qualify all representations and warranties of the Issuer set forth in the Agreement, provided that any such disclosure is not made by reference to an agreement or document not otherwise delivered or made available to the Purchasers. The following Disclosure Schedule may set forth conditions, sets of facts or other disclosure not strictly called for by the Agreement where it was thought that such disclosure might be helpful. No implication shall be drawn that any condition, set of facts or other disclosure set forth herein is necessarily material or is otherwise required to be disclosed or that the inclusion of such disclosure establishes or implies a standard of materiality, a standard for what is or is not in the usual and ordinary course of business or any other standard for disclosure set forth in the Agreement. Section 3.9 - Capitalization 1. Pursuant to Section 7.1 of the Common Stock Purchase Agreement (the "May Agreement"), dated as of February 19, 2002, between the Issuer and May Bridal Corporation, a Missouri corporation ("May"), if the Issuer proposes to sell, transfer or otherwise issue any Common Stock or preferred stock or other interest convertible into Common Stock, to any party other than May, which transaction would result in May's interest in the Common Stock or in the voting power of the Issuer being more than one percentage point lower after the transaction than before the transaction, then the Issuer shall offer to May the right to acquire shares of Common Stock or preferred stock or other interest on the same terms and conditions as offered to the third party (if such terms and conditions involve consideration other than cash, then the Issuer will offer terms and conditions that involve cash consideration substantially equivalent to those offered to the third party) in such amount as to preserve May's percentage interest in the Common Stock and voting power of the Issuer. If the Issuer engages in several such transactions or proposed transactions, which individual transactions would not result in May's interest in the Common Stock or in the voting power of the Issuer being reduced by one percentage point, the Issuer need not make such offer to May unless and until the aggregate of the transactions would result in such a change. Common Stock reserved for future issuance as of the date of the May Agreement, or which shall be reserved for future issuance pursuant to the Issuer's stock incentive plans for officers and directors which may be adopted from time to time by appropriate corporate resolution, is excepted from the provisions of Section 7.1 of the May Agreement. May has agreed to waive its right to acquire shares of Common Stock in this Offering in consideration of the Issuer agreeing to amend Section 7.4 of the May Agreement, to lower from 15% to 10% the percentage of the Common Stock or of the voting power of the Issuer owned by May above which the Issuer is required to take all steps necessary to elect such person as May shall from time to time designate to serve as a member of the board of directors of the Issuer, and to nominate and submit such person for election by the stockholders of the Issuer. 2. Pursuant to Section 7.2 of the May Agreement, if the Issuer proposes to acquire any Common Stock or preferred stock or other interest convertible into Common Stock, from any party other than May, which transaction would result in May's interest in the Common Stock or in the voting power of the Issuer being more than 20% after the transaction, then the Issuer shall offer to acquire shares of Common Stock or preferred stock or other interest from May on the same terms and conditions as offered to the third party (if such terms and conditions involve consideration other than cash, then the Issuer will offer terms and conditions that involve cash consideration substantially equivalent to those offered to the third party) in such amount as to permit May to own less than 20% of the Common Stock or voting power of the Issuer after the transaction. Section 3.11 - Litigation On September 19, 2003, WeddingChannel.com, Inc. ("WeddingChannel") filed a complaint against the Issuer in the United States District Court for the Southern District of New York. The complaint alleges that the Issuer has violated U.S. Patent 6,618,753 ("Systems and Methods for Registering Gift Registries and for Purchasing Gifts"), and further alleges that certain actions of the Issuer give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If the Issuer is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This complaint was served on the Issuer on September 22, 2003. Based on information currently available, the Issuer believes that the claims are without merit, and is vigorously defending itself against all claims. On October 14, 2003, the Issuer filed an answer and counterclaims against WeddingChannel. The Issuer's answer raises various defenses to the counts alleged by WeddingChannel. Additionally, the Issuer has brought counterclaims including a request that the court declare the patent-in-suit is invalid, unenforceable and not infringed. The Issuer's Counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. Section 3.12 - Rights of Registration, Voting Rights and Anti-Dilution 1. Pursuant to the terms of the Third Amended and Restated Investors' Rights Agreement (the "Investors' Rights Agreement"), dated November 8, 1999, by and among the Issuer and certain of its stockholders listed on the signature pages attached thereto, the Issuer granted to the Holders (as that term is defined in the Investors' Rights Agreement) certain demand, piggy-back and Form S-3 registration rights. 2. On July 23, 1999, the Issuer entered into a Warrant Agreement with America Online, Inc. ("AOL") which granted AOL the right to purchase up to 366,667 shares of Common Stock (collectively, the "Warrant Shares") at a per share exercise price of $7.20. The exercise price is subject to downward adjustment, on a weighted average basis, upon the occurrence of certain stock issuances without consideration or for a consideration per share less than the exercise price in effect immediately prior to the issuance of Common Stock. The number of Warrant Shares is subject to upward adjustment in proportion to the change in exercise price. Immediately prior to the Offering, the warrant is exercisable for 440,958 Warrant Shares at a per share exercise price of $5.987. After giving effect to the transactions contemplated by the Offering, the per share exercise price of the Warrant Shares shall be reduced to $5.73 and the number of Warrant Shares shall be increased to 460,977. The warrant is immediately exercisable and expires in July 2007. Section 3.16 - Patents and Trademarks On September 19, 2003, WeddingChannel filed a complaint against the Issuer in the United States District Court for the Southern District of New York. The complaint alleges that the Issuer has violated U.S. Patent 6,618,753 ("Systems and Methods for Registering Gift Registries and for Purchasing Gifts"), and further alleges that certain actions of the Issuer give rise to various federal statute, state statute and common law causes of actions. WeddingChannel is seeking, among other things, unspecified damages and injunctive relief. If the Issuer is found to have willfully infringed the patent-in-suit, enhanced damages are awardable. This complaint was served on the Issuer on September 22, 2003. Based on information currently available, the Issuer believes that the claims are without merit, and is vigorously defending itself against all claims. On October 14, 2003, the Issuer filed an answer and counterclaims against WeddingChannel. The Issuer's answer raises various defenses to the counts alleged by WeddingChannel. Additionally, the Issuer has brought counterclaims including a request that the court declare the patent-in-suit is invalid, unenforceable and not infringed. The Issuer's Counterclaims further allege that certain actions taken by, or on behalf of WeddingChannel give rise to various federal statutory claims, state statutory claims and common law causes of action. Schedule of Differences pursuant to Instruction 2 of Regulation S-K, Item 601(a)
- -------------------------------------------------------------------------------------------------------------------- Detail Agreement No. 1 Agreement No. 2 - -------------------------------------------------------------------------------------------------------------------- Name of Investor SMALLCAP World Fund, Inc. American Funds Insurance Series - Global Small Capitalization Fund - -------------------------------------------------------------------------------------------------------------------- Tax Identification # 95-4253845 95-4672504 - -------------------------------------------------------------------------------------------------------------------- Exact name to appear on stock CLIPPERBAY & CO. PIPING & CO. certificate - -------------------------------------------------------------------------------------------------------------------- Number of Shares subscribed for 1,200,000 100,000 - -------------------------------------------------------------------------------------------------------------------- Aggregate Purchase Price $4,500,000.00 $375,000.00 - --------------------------------------------------------------------------------------------------------------------
EX-5 5 ex5-1.txt EXHIBIT 5.1 EXHIBIT 5.1 [LETTERHEAD OF PROSKAUER ROSE LLP] December 10, 2003 The Knot, Inc. 462 Broadway, Floor 6 New York, New York 10013 Ladies and Gentlemen: We are acting as counsel to The Knot, Inc., a Delaware corporation (the "Company"), in connection with the registration on Form S-3 (the "Registration Statement"), filed under the Securities Act of 1933, as amended, with respect to the re-sale by the selling stockholders named in the Registration Statement of 2,800,000 shares of common stock, par value $0.01 per share, of the Company (the "Shares"). In connection with the rendering of this opinion, we have examined originals or copies of such documents, corporate records and other instruments as we have deemed relevant. We have made such examination of law as we have deemed necessary to express the opinion contained herein. As to matters of fact relevant to this opinion, we have relied upon, and assumed without independent verification, the accuracy of certificates of public officials and officers of the Company. We have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified, facsimile or photostatic copies, and the authenticity of the originals of such copies. Based upon the foregoing, and subject to the limitations, qualifications, exceptions and assumptions expressed herein, it is our opinion that, as of the date hereof, the Shares are, and when sold pursuant to and as described in the Registration Statement, will be, duly authorized, legally issued, fully paid, and non-assessable. This opinion is limited in all respects to the General Corporation Law of the State of Delaware, and we express no opinion as to the laws, statutes, rules or regulations of any other jurisdiction. We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the prospectus contained in the Registration Statement. In giving the foregoing consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, /s/ PROSKAUER ROSE LLP PROSKAUER ROSE LLP EX-10 6 ex10-13.txt EXHIBIT 10.13 EXHIBIT 10.13 AMENDMENT to COMMON STOCK PURCHASE AGREEMENT THIS AMENDMENT (the "Amendment"), dated as of November 11, 2003, is by and between MAY BRIDAL CORPORATION, a Missouri corporation ("May"), and THE KNOT, INC., a Delaware corporation (the "Company"). WHEREAS, May and the Company entered into a Common Stock Purchase Agreement, dated as of February 19, 2002 (the "Agreement"); and WHEREAS, May and the Company wish to amend certain terms of the Agreement, pursuant to Section 8.4 thereunder. NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms used herein and not defined upon first usage shall have the meanings assigned such terms in the Agreement. 2. Amendment of Section 7.4. Section 7.4 of the Agreement is deleted in its entirety and replaced with the following: "7.4 Board Designee. So long as Purchaser owns more than 10% of the Common Stock or of the voting power of the Company, the Company shall take all steps necessary to elect such person as Purchaser shall from time to time designate to serve as a member of the board of directors of the Company, and to nominate and submit such person for election by the shareholders of the Company." 3. No Other Amendments. Except as provided above, al of the terms, conditions and provisions of the Agreement remain in full force and effect. 4. Counterparts/Duplicate Originals. This Amendment may be executed in counterparts and/or duplicate originals, each of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first written above. MAY BRIDAL CORPORATION By: /s/ RICHARD A. BRICKSON ----------------------------------- Name: Richard A. Brickson Title: Vice President and Secretary THE KNOT, INC. By: /s/ RICHARD SZEFC ----------------------------------- Name: Richard Szefc Title: CFO EX-23 7 ex23-1.txt EXHIBIT 23.1 EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 and related Prospectus of The Knot, Inc. for the registration of 2,800,000 shares of its common stock and to the incorporation by reference therein of our report dated February 14, 2003, with respect to the consolidated financial statements, and our report dated March 28, 2003, with respect to the financial statement schedule of The Knot, Inc., both of which are included in its Annual Report (Form 10-K) for the year ended December 31, 2002. /s/ ERNST & YOUNG LLP New York, New York December 10, 2003 -----END PRIVACY-ENHANCED MESSAGE-----