as 1,842,887 if a 1:10 split were effected. The resulting decrease in the number
of shares of our common stock outstanding could potentially impact the liquidity
of our common stock on NASDAQ, especially in the case of larger block trades.
The reverse stock split, if implemented, would not change the number of
authorized shares of common stock as designated by the Company's restated
certificate of incorporation. Therefore, because the number of issued and
outstanding shares of common stock would decrease, the number of shares
remaining available for future issuance would increase.
Because a reverse stock split would result in an increased number of
authorized but unissued shares of our common stock, it may be construed as
having an anti-takeover effect, although neither the Board of Directors nor the
Company's management views this proposal as having such purpose. However, the
Board of Directors, subject to its fiduciary duties and applicable law, could
use this increased number of authorized but unissued shares to frustrate persons
seeking to take over or otherwise gain control of the Company by, for example,
privately placing shares with purchasers who might side with the Board of
Directors in opposing a hostile takeover bid. Shares of our common stock could
also be issued to a holder that would thereafter have sufficient voting power to
assure than any proposal to amend or repeal the Company's by-laws or certain
provisions of the Company's Restated Certificate of Incorporation would not
receive the requisite vote. Such uses of our common stock could render more
difficult, or discourage, an attempt to acquire control of the Company if such
transaction were opposed by the Board of Directors.
EFFECTS ON OWNERSHIP BY INDIVIDUAL STOCKHOLDERS
If we implement a reverse stock split, the number of shares of common
stock you hold would be reduced by dividing the number of shares held
immediately before the reverse split by the number fixed for the reverse split
by the Board, and then rounding up to the nearest whole share. This means that a
stockholder who would otherwise be entitled to receive a fractional share
following a reverse stock split will receive a whole share in lieu thereof. The
reverse stock split would affect our common stock uniformly and would not affect
your percentage of ownership interests in the Company or proportionate voting
power, except to the extent that interests in fractional shares are rounded up
to a whole share.
Effect on Outstanding Stock, Options. In addition, all the terms of
outstanding stock options of the Company entitling their holders to purchase
shares of our common stock would be adjusted as a result of the reverse stock
split, as required by the terms of these options. In particular, the number of
shares to be issued upon the exercise of outstanding options would be decreased,
and the exercise price for each such option, as applicable, would be increased,
in accordance with the ratio of the reverse stock split. None of the other
rights currently accruing to holders of outstanding options would be affected by
the reverse stock split. The number of options available for issuance under our
existing stock option plans would be adjusted proportionately based upon the
reverse stock split ratio.
Other Effects on Outstanding Shares. If we implement a reverse stock
split, the rights and preferences of the outstanding shares of common stock
would remain the same after the reverse stock split. Each share of common stock
issued pursuant to the reverse stock split would be fully paid and
nonassessable.
The reverse stock split would result in some stockholders owning
"odd-lots" of less than 100 shares of common stock. Brokerage commissions and
other costs of transactions in odd-lots may be higher than the costs of
transactions in "round-lots."
Our common stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended. As a result, we are subject to the
periodic reporting and other requirements of the Exchange Act. The proposed
reverse stock split would not affect the registration of the common stock under
the Exchange Act.
PROCEDURE FOR EFFECTING THE REVERSE STOCK SPLIT AND EXCHANGE OF STOCK
CERTIFICATES
If you approve the proposed amendment to our certificate of
incorporation, the Board would implement the reverse stock split at its
discretion, determine the exact ratio of the reverse split and file the
amendment to the
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