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There is no eBook format that will do everything you want. You cannot get the highlights stored with the eBook.
As to what format you use depends on what devices you both have. If it's a tablet, computer, or phone, use ePub. If it's a Reader, it depends on the Reader. If it's a Kindle, use KF8. If it's a Kobo or some other Reader that can handle ePub, use ePub.
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