Risks Related to Our Stock
Our stock price could decline if a significant number of shares become available for sale.
In November 2003 we issued in a private placement transaction warrants to purchase an
aggregate of 921,178 shares of common stock, of which 395,486 warrants (having an exercise price of
$ 3.30 per share) currently remain outstanding. In addition, as of December 31, 2004, we have an
aggregate of 4,915,376 stock options outstanding to employees, directors and others with a weighted
average exercise price of $1.10 per share. The shares of common stock that may be issued upon
exercise of these warrants and options may be resold into the public market. Sales of substantial
amounts of common stock in the public market as a result of the exercise of these warrants or
options, or the perception that future sales of these shares could occur, could reduce the market
price of our common stock and make it more difficult to sell equity securities in the future.
The market price of our common stock may be volatile. You may not be able to sell your shares at or
above the price at which you purchased such shares.
The trading price of our common stock may be subject to wide fluctuations in response to
quarter-to-quarter fluctuations in operating results, announcements of material adverse events,
general conditions in our industry or the public marketplace and other events or factors. In
addition, stock markets have experienced extreme price and
trading volume volatility in recent years. This volatility has had a substantial effect on the
market prices of securities of many technology related companies for reasons frequently unrelated
to the operating performance of the specific companies. These broad market fluctuations may
adversely affect the market price of our common stock. In addition, if our operating results differ
from our announced guidance or the expectations of equity research analysts or investors, the price
of our common stock could decrease significantly.
Our certificate of incorporation, our bylaws, our shareholder rights plan and Delaware law make it
difficult for a third party to acquire us, despite the possible benefit to our stockholders.
Provisions of our certificate of incorporation, our bylaws, our shareholder rights plan and
Delaware law could make it more difficult for a third party to acquire us, even if doing so would
be beneficial to our stockholders. For example, our certificate of incorporation provides for a
classified board of directors, meaning that only approximately one-third of our directors may be
subject to re-election at each annual stockholder meeting. Our certificate of incorporation also
permits our Board of Directors to issue one or more series of preferred stock which may have rights
and preferences superior to those of the common stock. The ability to issue preferred stock could
have the effect of delaying or preventing a third party from acquiring us. We have also adopted a
shareholder rights plan. These provisions could discourage takeover attempts and could materially
adversely affect the price of our stock. In addition, because we are incorporated in Delaware, we
are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may
prohibit large stockholders from consummating a merger with, or acquisition of us. These provisions
may prevent a merger or acquisition that would be attractive to stockholders and could limit the
price that investors would be willing to pay in the future for our common stock.
There are limitations on the liabilities of our directors and executive officers.
Pursuant to our bylaws and under Delaware law, our directors are not liable to us or our
stockholders for monetary damages for breach of fiduciary duty, except for liability for breach of
a directors duty of loyalty, acts or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of law, or any transaction in which a director has
derived an improper personal benefit.