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Exhibit 10.7
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of October ___, 1999, by and among The
Knot, Inc., a Delaware corporation (the "Company"), the holders of the Company's
Series A Preferred Stock (the "Series A Preferred Stock") listed on the
signature pages attached hereto (the " Series A Investors"), the holder of the
Company's Series B Preferred Stock (the "Series B Preferred Stock") listed on
the signature pages attached hereto (the "Series B Investor") and the holders of
the Company's Common Stock (the "Founders") listed on the signature pages
attached hereto (the "Founders"). The Company, the Series A Investors, the
Series B Investor and the Founders are individually referred to herein as a
"Party" and are collectively referred to herein as the "Parties." The Company's
Board of Directors is referred to in as the "Board."
RECITALS
WHEREAS, the Company, the Founders, the Series A Investors and the
Series B Investor are parties to that certain Second Amended and Restated
Investors' Rights Agreement dated as of April 13, 1999 (the "Existing
Agreement");
WHEREAS, the Parties have agreed to amend and restate the Existing
Agreement to include the Common Stock of the Company issuable upon exercise of
the AOL Warrant (as defined herein) and as contemplated by this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the Parties hereby agree that the Existing Agreement
shall be amended and restated in its entirety by this Agreement, and the Parties
hereto further agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Affiliate" has the meaning given to such
term in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
(c) The term "AOL Warrant" means that certain warrant,
dated July 23, 1999, to purchase 366,667 shares of the Company's Common Stock.
(d) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(e) The term "Founders" means collectively Xxxxx Xxx,
Xxxxxx Xxxxx, Xxxxxxx Xxxxxxx and Xxx Xxxxxxx.
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(f) The term "Holder" means any person owning or having
the right to acquire (i) Series A Preferred Stock or any assignee thereof in
accordance with Section 1.11 or (ii) Series B Preferred Stock or any assignee
thereof in accordance with Section 1.11.
(g) The term "1934 Act" means the Securities Exchange
Act of 1934, as amended.
(h) The term "Person" means an individual, a
corporation, a general or limited partnership, a limited liability company, an
association, a trust or any other entity or organization.
(i) The term "Qualified Public Offering" means the
Company's sale of its Common Stock in a firm commitment underwritten public
offering led by a nationally recognized underwriter pursuant to a registration
statement under the Act on Form S-1 or S-3 (or any successor form thereto) with
a per share purchase price greater than $7.50 (as such price may be subject to
adjustment in the same fashion as the conversion prices set forth in Section
4(d) of the Amended and Restated Certificate of Incorporation of the Company)
and aggregate proceeds in excess of $10,000,000.
(j) The term "QVC Warrant" means that certain warrant,
dated August 23, 1999, to purchase 1,700,000 shares of the Company's Common
Stock, held by the Series B Investor.
(k) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(l) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series A Preferred Stock
or Series B Preferred Stock, (ii) the Common Stock issuable upon exercise of the
AOL Warrant or the QVC Warrant and (iii) any Common Stock or other securities of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
shares referenced in (i) and (ii) above, provided, however that Registrable
Securities shall not include any shares of Common Stock which have been
previously registered hereunder or which have been sold to the public.
(m) The term "SEC" shall mean the Securities and
Exchange Commission.
(n) The number of shares of "Registrable Securities"
outstanding shall be determined by the number of outstanding shares of Common
Stock that are, and the number of shares of Common Stock issuable pursuant to
the then exercisable or convertible securities that are, Registrable Securities.
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1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2, if
the Company shall receive at any time after the earlier of (i) March 23, 2003 or
(ii) six (6) months after the effective date of the Qualified Public Offering, a
written request from the Holders of twenty-five percent (25%) or more of the
then outstanding Registrable Securities owned by either the Series A or B
Investors (the "Initiating Holders") that the Company file a registration
statement under the Act covering the registration of Registrable Securities with
an anticipated aggregate offering price of at least $10,000,000, then the
Company shall:
(i) within ten (10) days of the receipt thereof,
give written notice of such request to all other Holders; and
(ii) subject to the limitations of this Section
1.2, use all reasonable efforts to effect, as soon as practicable, the
registration under the Act of all Registrable Securities that the Holders
request to be registered in a written request received by the Company within
fifteen (15) days after receipt of such written notice from the Company.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company (which underwriter or underwriters shall be
nationally recognized and shall be reasonably acceptable to a majority in
interest of the Initiating Holders). Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities underwritten (including those
Registrable Securities owned by the Initiating Holders) (the "Offering
Quantity"), then the Company shall so advise all Holders of Registrable
Securities that would otherwise be underwritten pursuant hereto, and the number
of shares that may be included in the underwriting shall be included in the
following priority:
(i) first, before including any securities that
are not Registrable Securities that derive from the same series as those then
owned by or initially owned by the Initiating Holder, the Company will include
all of the Registrable Securities that derive from the same series as those
owned by the Initiating Holder (the "Same Series Holders"), and if the number of
the Registrable Securities of the Same Series Holders requested to be included
exceeds the Offering Quantity, then the Company shall include only such
requesting Same Series Holder's pro rata share of the Offering Quantity, based
on the amount of Registrable Securities held by such Same Series Holder; and
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(ii) second, to the extent (and only to the
extent) that the Offering Quantity exceeds the aggregate amount of Registrable
Securities which are requested to be included in such registration, the Company
shall include in such registration, on a pro rata basis, the Registrable
Securities that derive from a different series than those owned by the
Initiating Holder.
(c) The Company shall not be required to effect a
registration pursuant to this Section 1.2:
(i) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service in
such jurisdiction and except as may be required under the Act; or
(ii) after the Company has effected four (4)
demand registrations pursuant to this Section 1.2 (two (2) on behalf of the
Series A Investors and, two (2) on behalf of the Series B Investor and such
registrations have been declared or ordered effective and the Offering Quantity
of Registrable Securities shall have been sold thereunder (for purposes hereof,
a demand shall be deemed requested by the Initiating Holder(s)); or
(iii) during the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of the
filing of, and ending on a date one hundred eighty (180) days following the
effective date of, a Company-initiated registration subject to Section 1.3
below, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Initiating Holders propose to dispose
of Registrable Securities that may be registered on Form S-3 pursuant to Section
1.4 hereof; or
(v) if the Company shall furnish to the Initiating
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Company's Chief Executive Officer or Chairman of the
Board stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be effected at such time, in which event the
Company shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the Initiating Holders,
provided that such right to delay a request shall be exercised by the Company
not more than once in any twelve (12)-month period; or
1.3 Company Registration.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating to a corporate
reorganization or other transaction under Rule 145 of the Act, a registration on
any form that does not include substantially the same information as would be
required to be
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included in a registration statement covering the sale of the Registrable
Securities hereunder, or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of any
Holder given within twenty (20) days after receipt of such notice from the
Company in accordance with Section 3.5, the Company shall, subject to the
provisions of Section 1.3(c), use all reasonable efforts to cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
(b) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The expenses
of such withdrawn registration shall be borne by the Company in accordance with
Section 1.7 hereof
(c) Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under this Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters) and enter into an
underwriting agreement in customary form with an underwriter or underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total number of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the number of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in their sole discretion will not jeopardize the
success of the offering. In such event the Company shall so advise all Holders
of Registrable Securities that would otherwise be underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be determined by the following procedure. Each Holder may
include that number of Registrable Securities owned by such Holder that is the
product of multiplying the number of Registrable Securities owned by such Holder
by a fraction, the numerator of which shall be the number of the then
outstanding Registrable Securities owned by such Holder and the denominator of
which shall be the sum of the then outstanding Registrable Securities held by
all Holders, provided, however, if any Holder does not request inclusion of the
maximum number of Registrable Securities allocated to such Holder pursuant to
the above-described procedure, the remaining portion of such Holder's allocation
shall be reallocated among those requesting Holders whose allocations did not
satisfy their requests pro rata on the basis of the number of Registrable
Securities which are then held by such Holders. This reallocation procedure
shall be repeated until all Registrable Securities which may be included in the
registration on behalf of the Holders have been so allocated. Notwithstanding
the forgoing, except for the Company's initial public offering of its Common
Stock, in no event shall the amount of Registrable Securities owned by the
Series A Investors and Series B Investor which are included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering with such inclusion to be determined on a pro rata basis among the
Holders requesting Registration.
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1.4 Form S-3 Registration. (a) In case the Company shall
receive written notice from the Holders of at least thirty percent (30%) of the
Registrable Securities owned by the Series A and/or B Investors requesting that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company shall:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) use all reasonable efforts to effect, as soon
as practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable Securities
of any other Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company, provided, that if less than all of the Registrable Securities shall
be registered, Holders shall participate in such registration on the basis of
the procedure described in Section 1.3(c).
(b) The Company shall not be obligated to effect any
such registration, qualification or compliance, pursuant to this Section 1.4:
(i) if Form S-3 is not available for such offering
by the Holders;
(ii) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $1,000,000;
(iii) if the Company shall furnish to the Holders
who request a registration hereunder a certificate signed by the Chief Executive
Officer or Chairman of the Board of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after receipt of the request of the Holder or Holders
under this Section 1.4; provided, however, that the Company shall not utilize
this right more than once in any twelve month period;
(iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected one
registration on Form S-3 for the Holders of the class of Registrable Securities
requesting an additional registration hereunder pursuant to this Section 1.4; or
(v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
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Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after
receipt of the request or requests of the Holders. Registrations effected
pursuant to this Section 1.4 shall not be counted as requests for
registration effected pursuant to Section 1.2.
1.5 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration
statement with respect to the Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder keep such registration statement effective for a period of up to one
hundred twenty (120) days or, if earlier, until the distribution contemplated in
the registration statement has been completed;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;
(c) furnish to the Holders such numbers of copies of the
registration statement, and any amendments and supplements thereto, and the
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) use all reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions;
(e) in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering;
(f) notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed; and
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(h) provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
1.6 Information from the Holder(s). It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that'
such Holder shall furnish to the Company such. information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections I.2, 1.3, and 1.4
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of one counsel for the selling Holders
shall be borne by the Company. Notwithstanding the foregoing, the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to Sections 1.2 or 1.4, if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses pro rata based upon the number of Registrable Securities that were
to be requested in the withdrawn registration) unless, in the case of a
registration requested under Section 1.2, the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 1.2, provided, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition or business of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Sections 1.2 or 1.4.
1.8 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners or members, or officers,
directors, employees and stockholders of each Holder, legal counsel and
accountants for each Holder, any underwriter (as defined in the Act) and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the 1934 Act, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Act, the 1934 Act
or any state securities laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
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material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) 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 (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities laws or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities laws;
and the Company will reimburse each such Holder, underwriter, or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection l.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter, or controlling person; provided further, however,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Holder or underwriter, or any
person controlling such Holder or underwriter, from whom the person asserting
any such losses, claims, damages or liabilities purchased shares in the
offering, if a copy of the prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Holder or underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the shares to such person, and if the prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder
(each, an "Indemnifying Holder") will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, legal counsel and accountants for the Company, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or any state securities
laws, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Indemnifying Holder
expressly for use in connection with such registration; and each such
Indemnifying Holder will reimburse any person intended to be indemnified
pursuant to this subsection l.9(b), for any legal or other expenses reasonably
incurred by such person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection l.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Indemnifying Holder (which
consent shall not be unreasonably withheld), provided that in no event shall any
indemnity under this subsection l.9(b) exceed the gross proceeds from the
offering received by such Holder, less such Holder's pro rata share of any
underwriting discounts. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Holder, consent to entry
of any judgment or enter into any settlement that does not include as an
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unconditional term thereof the giving by the claimant or plaintiff to such
Holder of a release from all liability in respect to such claim or litigation.
(c) Promptly after receipt by an indemnified party under
this Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section
1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and the Holders under
this Section 1.9 shall survive the completion of any offering of the Registrable
Securities in a registration statement under this Section 1, and otherwise.
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1.10 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after the
effective date of the Qualified Public Offering;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.11 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities that (i) is a subsidiary, parent, partner, limited
partner, retired partner, member, retired member or stockholder of a Holder or
an entity associated by common ownership or control and (ii) after such
assignment or transfer, holds at least 1,000,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), provided: (a) the Company is, within
a reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned, (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of
Section 1.13 below, and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
1.12 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the holders of a majority of the Series A and B Preferred
Stock, each voting separately as a series, enter into any agreement with any
holder or prospective holder of any securities of the Company, which does not at
the time own any Registrable Securities, that would allow such holder or
prospective holder (a) to include such securities in any registration filed
under Section 1.3 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of such securities will not reduce the
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amount of the Registrable Securities that are included in such registration or
(b) to demand registration of their securities.
1.13 "Market Stand-Off" Agreement. Each Holder hereby agrees
that it will not, without the prior written consent of the managing underwriter,
during the period commencing on the date of the final prospectus relating to the
Company's initial public offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred
eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such Common Stock
or any such securities are then owned by the Holder or are thereafter acquired),
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise, provided, however, that the forgoing restrictions described in
clauses (i) and (ii) shall not apply to any transaction between a Holder and any
of its Affiliates.. The foregoing provisions of this Section 1.13 shall apply
only to the Company's initial public offering of equity securities, shall not
apply to the sale of any shares to an underwriter pursuant to an underwriting
agreement, and shall only be applicable to the Holders if all officers and
directors and greater than five percent (5%) stockholders of the Company enter
into similar agreements. The underwriters in connection with the Company's
initial public offering are intended third party beneficiaries of this Section
1.13 and shall have the right, power and authority to enforce the provisions
hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.14 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after seven (7)
years following the closing of the Qualified Public Offering or, as to any
Holder, such earlier time at which all Registrable Securities held by such
Holder (and any affiliate of the Holder with whom such Holder must aggregate its
sales under Rule 144) can be sold in any three (3)-month period without
registration in compliance with Rule 144 of the Act.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall
deliver to each Holder:
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
and
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audited and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited income statement, statement of
cash flows for such fiscal quarter and an unaudited balance sheet as of the end
of such fiscal quarter.
(c) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows and balance sheet for and
as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event at least
thirty (30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including balance
sheets, income statements and statements of cash flows for such months and, as
soon as prepared, any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for
in subsections (b)and (c) of this Section 2.1, an instrument executed by the
Chief Financial Officer or President of the Company certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment; and
(f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the Holder
or any assignee of the Holder may from time to time request, provided, however,
that the Company shall not be obligated under this subsection (fl or any other
subsection of Section 2.1 to provide information that it deems in good faith to
be a trade secret or similar confidential information.
2.2 Inspection. The Company shall permit each Holder that
holds at least 1,000,000 shares of Registrable Securities at such Holder's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Holder; provided, however, that the Company shall not be obligated pursuant to
this Section 2.2 to provide access to any information that it reasonably
considers to be a trade secret or similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to the Holders
and be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
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2.4 Right of First Offer. Subject to the terms and conditions
specified in this Section 2.4 and Section 3(a), the Company hereby grants to
each Major Investor (as hereinafter defined) a right of first offer with respect
to future sales by the Company of its Shares (as hereinafter defined). A Series
A Investor, as well as any transferee of a Series A Investor, shall be a Major
Investor provided that such Person holds at least 500,000 shares of Registrable
Securities (as adjusted for stock splits, stock dividends, combinations and
other recapitalizations). The Series B Investor, as well as any transferee of
the Series B Investor, shall be a Major Investor provided that such Person holds
at least 400,000 shares of Registrable Securities (as adjusted for stock splits,
stock dividends, combinations and other recapitalizations). For purposes of this
Section 2.4, Major Investor includes any general partners and Affiliates of a
Holder. Each Holder shall be entitled to apportion the right of first offer
hereby granted it among itself and its partners and Affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exchangeable or exercisable for any shares of, any class of
its capital stock ("Shares"), the Company first shall offer such Shares to each
Major Investor in accordance with the following provisions.
(a) The Company shall deliver a notice in accordance
with Section 3.5 (the "First Offer Notice") to the Major Investors stating (i)
its bona fide intention to offer such Shares, (ii) the number of such Shares to
be offered, and (iii) the price and terms upon which it proposes to offer such
Shares.
(b) By written notification received by the Company,
within twenty (20) calendar days after receipt of the notice, the Major Investor
may elect to purchase or obtain, at the price and on the terms specified in the
First Offer Notice, up to that portion of such Shares that equals the proportion
that the number of shares of Common Stock issued and held, or issuable upon
conversion of the Series A or B Preferred Stock then held, by such Major
Investor bears to the total number of shares of Common Stock of the Company then
outstanding (assuming full conversion of all convertible securities).
(c) If all Shares that Major Investors are entitled to
obtain pursuant to subsection 2.4(b) are not elected to be obtained as provided
in subsection 2.4(b) hereof, the Company may, during the ninety (90) day period
following the expiration of the period provided in subsection 2.4(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or persons
at a price not less than, and upon terms no more favorable to the offerer than
those specified in the First Offer Notice. If the Company does not enter into an
agreement for the sale of the Shares within such ninety (90) day period, or if
such agreement is not consummated within ninety (90) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Shares shall not be offered unless first reoffered to the Major Investors in
accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall
not be applicable to (i) the issuance or sale of up to 2,849,868 shares of
Common Stock (pursuant to options granted) to employees, directors and
consultants for the primary purpose of soliciting or retaining their services or
any greater number unanimously approved by the Board, (ii) the
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issuance of securities pursuant to the Qualified Public Offering, (iii) the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities, including but not limited to the exercise of the AOL
Warrant and the QVC Warrant, (iv) the issuance of securities in connection with
a bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise or (v) the
issuance of stock, warrants or other securities or rights to persons or entities
with which the Company has business relationships provided such issuances are
for other than primarily equity financing purposes and provided that at the time
of any such issuance, the aggregate of such issuance and similar issuances in
the preceding twelve month period do not exceed 1% of the then outstanding
Common Stock of the Company (assuming full conversion and exercise of all
convertible and exercisable securities).
2.5 Observer Rights. As long as America Online, Inc. owns not
less than 400,000 of the shares of the Series A Preferred Stock (or an
equivalent amount of Common Stock issued upon conversion thereof), the Company
shall invite a representative of America Online, Inc. to attend all meetings of
its Board of Directors in a nonvoting observer capacity and, in this respect,
shall give such representative copies of all notices, minutes, consents, and
other materials that it provides to its directors; provided, however, that any
representative granted observer rights by the Company, including but not limited
to those rights granted to America Online, Inc. above, shall agree to hold in
confidence and trust and to act in a fiduciary manner with respect to all
information so provided; and, provided further, that the Company reserves the
right to withhold any information and to exclude such representative from any
meeting or portion thereof if access to such information or attendance at such
meeting could adversely affect the attorney-client privilege between the Company
and its counsel or would result in disclosure of trade secrets to such
representative or if such Investor or its representative is a direct competitor
of the Company.
2.6 Termination of Certain Covenants. The covenants set forth
in Sections 2.4 and 2.5 shall terminate and be of no further force or effect
upon the closing of the sale of securities pursuant to the Qualified Public
Offering.
2.7 Acquisition Restrictions. Without the prior written
approval of the Series B Investor, the Company agrees that it shall not accept
any offer to purchase any of the capital stock or assets of the Company or from
any Person or any Affiliate of any Person that operates a 24-hour a day shopping
network on television.
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3. Standstill Agreement: Drag-Along Right. (a) The Series B Investor
hereby agrees that it will not nor will any of its Affiliates or possess rights
to acquire more than forty-three and one-half percent (43.5%) of the Company's
outstanding voting stock. (For the avoidance of doubt, the parties agree that
the QVC Warrant by its terms does not constitute "a right to acquire the
Company's outstanding voting stock" referred to in the previous sentence.) The
restriction set forth in this Section 3(a) shall terminate simultaneously with
the closing of (i) a Qualified Public Offering, (ii) a sale of all or
substantially all of the assets of the Company (a "Sale of Assets") or (iii) a
transaction or series of related transactions that results in the transfer of
fifty percent (50%) or more of the outstanding voting power of the Company (a
"Change of Control"). With respect to either a Change of Control or a Sale of
Assets, the Series B Investor and its Affiliates shall have voted their
respective shares in favor of such Change of Control or Sale of Assets, to the
extent a vote of the shareholders of the Company is necessary to permit the
consummation of such Change of Control (a "Qualified Change of Control") or Sale
of Assets (a "Qualified Sale of Assets"), respectively. The voting obligation of
the Series B Investor and its Affiliates described in the preceding sentence
shall only apply in the event that the Company has already received the minimum
number of votes necessary to authorize such Change of Control or Sale of Assets.
Neither the Series B Investor nor any of its Affiliates will be deemed to have
violated the restriction set forth in this Section 3(a) if their aggregate
ownership of the voting stock of the Company becomes greater than forty three
and one-half percent (43.5%) as a result of any redemptions by the Company of
any of its voting stock. For purposes of this Section 3(a), the exercise of the
QVC Warrant simultaneously with a Qualified Public Offering, a Qualified Change
of Control or a Qualified Sale of Assets (each, a "Trigger Event") shall mean
that the exercise of the QVC Warrant shall be deemed to have occurred
immediately prior to such Trigger Event for all purposes other than the voting
rights associated with the underlying shares of Common Stock issuable upon the
exercise of the QVC Warrant.
(b) In the event the holders of more than 50% of the
outstanding voting stock propose to enter into a Change of Control transaction
(a "Drag-Along Transaction"), the Series B Investor agrees, and shall cause its
Affiliates, to participate fully in such Drag-Along Transaction by (x) voting
all of their respective voting stock in favor of such transaction, to the extent
a vote of the shareholders is necessary for the consummation of the transaction
and (y) to the extent applicable, selling all of their respective shares to the
proposed transferee (including those shares of Common Stock that may be received
upon exercise of the QVC Warrant); provided that the per share purchase price to
be received by the Series B Investor and its Affiliates shall be at least $4.30
(as such price may be subject to adjustment in the same fashion as the
conversion prices set forth in Section 4(d) of the Amended and Restated
Certificate of Incorporation of the Company). The consideration received by the
Series B Investor and its Affiliates in connection with a Drag-Along Transaction
shall be on the same terms and conditions as that received by the other holders
of voting stock. The obligation of the Series B Investor and its Affiliates to
participate in Drag-Along Transactions shall terminate eighteen months after the
date hereof.
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4. Voting Agreements. Each of the Series A Investors, the Series B
Investor, and the Founders (collectively, the "Significant Stockholders") agrees
that neither it nor any of its Affiliates will enter into any voting trust or
any other voting agreement (each, a "Voting Agreement") with any other
Significant Stockholder. Each Significant Stockholder hereby further agrees that
a condition to any transfer of capital stock of the Company owned by such
Significant Stockholder shall be that the transferee agrees to be bound by the
restriction set forth in this Section 4; provided, however, that the restriction
set forth in this Section 4 shall not apply to any Voting Agreements entered
into by either the Series ~ Investor or any Series A Investor with its
respective Affiliates.
5. Miscellaneous.
5.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
5.2 Governing Law. This Agreement, including the validity
hereof and the rights and obligations of the parties hereunder, and all
amendments and supplements hereof and all waivers and consents hereunder, shall
be construed in accordance with and governed by the domestic substantive laws of
the State of New York without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of the domestic
substantive laws of any. other jurisdiction. Any action to enforce the terms of
this Agreement shall be brought in a New York State or United States Federal
District Court located in the City of New York, and each of the parties to this
Agreement hereby irrevocably consents to the jurisdiction of any such court over
its person, and waives any defenses based upon improper venue, inconvenient
forum or lack of jurisdiction.
5.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
8:00 p.m. E.S.T.), or the first business day following such delivery (if
delivered after 8:00 p.m. E.S.T.) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such
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communications shall be those as set forth on the signature pages attached
hereto, or such other address as may be designated in writing hereafter, in the
same manner, by such parties.
5.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
5.7 Entire Agreement: Amendments and Waivers. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof and supersedes all prior agreements and understandings, including the
Existing Agreement, with regard to the subject matter hereof Other than Section
4, any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the prior written consent of
the Company and the holders of a majority of the Series A and Series B Preferred
Stock, each voting separately as a series. With respect to Section 4, such
provision may be amended and/or the observance of Section 4 may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the prior written consent of the Company, the Founders
and the holders of a majority of the Series A and B Preferred Stock, each voting
separately as a series. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Registrable Securities, each
future holder of any such Registrable Securities and the Company.
5.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision was so excluded and shall be enforceable in
accordance with its terms.
5.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
5.10 Capacity; Authorization of Series A Investors and the
Series B Investor. Each Founder has all legal capacity to enter into this
Agreement and to carry out his or her obligations hereunder. Each Series A
Investor and Series B Investor represents that it has all necessary corporate or
other power and has taken all necessary corporate or other action required for
the due authorization, execution, delivery and performance of this Agreement,
and this Agreement constitutes its valid and legally binding obligation,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
COMPANY
THE KNOT, INC.
By:___________________________________________
Xxxxx Xxx
President and Chief Executive Officer
Address: The Knot, Inc.
000 Xxxxxxxx, 0'x Xxxxx
Xxx Xxxx, XX 00000
Attention: President and Chief Executive
Officer
Fax: (000) 000-0000
FOUNDERS
XXXXX XXX
By:___________________________________________
Address: 00 Xxx Xxxxxx Xxxxxx 0X
Xxxxxxxx, XX 00000
XXXXXX XXXXX
By:___________________________________________
Address: 00 Xxx Xxxxxx Xxxxxx 0X
Xxxxxxxx, XX 00000
XXXXXXX XXXXXXX
By:___________________________________________
Address: 000 Xxxxxx, #0
Xxx Xxxx, XX 00000
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XXX XXXXXXX
By:___________________________________________
Address: 00 Xxxxx Xxxxxx, Xxx. 0
Xxx Xxxx, XX 00000
SERIES A INVESTORS
HUMMER WINBLAD VENTURE PARTNERS III, L.P.
By:___________________________________________
Name:
Title:
Address: 0 Xxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention:
HUMMER WINBLAD TECHNOLOGY FUND III, L.P.
By:___________________________________________
Name:
Title:
Address: 0 Xxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention:
Fax:
AMERICA ONLINE, INC.
By:___________________________________________
Name:
Title:
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Address: 00000 XXX Xxx
Xxxxxx, XX 00000
Attention:
Fax:
SERIES B INVESTOR
QVC INTERACTIVE HOLDINGS, LLC.
By:___________________________________________
Name:
Title:
Address: Studio Park
0000 Xxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Chief Information Officer
With a copy to: General Counsel
Fax: (000) 000-0000
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