Nutrisystem 2008 Annual Report Download - page 20

If we do not continue to receive referrals from existing customers, our customer acquisition cost may
increase.
We rely on word-of-mouth advertising for a portion of our new customers. If our brand suffers or the
number of customers acquired through referrals drops due to other circumstances, our costs associated with
acquiring new customers and generating revenue will increase, which will, in turn, have an adverse affect on our
profitability.
We use spokespersons to promote our products. If these spokespersons suffer adverse publicity, our
revenue could be adversely affected.
Our marketing strategy depends in part on celebrity spokespersons, as well as customer spokespersons, to
promote our weight management program. Any of these spokespersons may become the subject of adverse news
reports, negative publicity or otherwise be alienated from a segment of our customer base, whether weight loss
related or not. If so, such events may reduce the effectiveness of his or her endorsement and, in turn, adversely
affect our revenue and results of operations.
If we cannot protect and enforce our trademarks and other intellectual property rights, our brand and our
business will suffer.
We believe that our trademarks and other proprietary rights are important to our success and competitive
position. The actions we take to establish and protect our trademarks and other proprietary rights may prove to be
inadequate to prevent imitation of our products or services or to prevent others from claiming violations of their
trademarks and proprietary rights by us. In addition, others may develop similar trademarks or other intellectual
property independently or assert rights in our trademarks and other proprietary rights. If so, third parties may
seek to block or limit sales of our products and services based on allegations that use of some of our marks or
other intellectual property constitutes a violation of their intellectual property rights. If we cannot protect our
trademarks and other intellectual property rights, or if our trademarks or other intellectual property rights infringe
upon the rights of third parties, the value of our brand may decline, which would adversely affect our results of
operations.
We are dependent on our key executive officers for future success.
Our future success depends to a significant degree on the skills, experience and efforts of our key executive
officers. The loss of the services of any of these individuals could harm our business. We have not obtained life
insurance on any key executive officers. If any key executive officers left us or were seriously injured and
became unable to work, the business could be harmed.
Provisions in our certificate of incorporation may deter or delay an acquisition of us or prevent a change
in control, even if an acquisition or a change of control would be beneficial to our stockholders.
Provisions of our certificate of incorporation (as amended) may have the effect of deterring unsolicited
takeovers or delaying or preventing a third party from acquiring control of us, even if our stockholders might
otherwise receive a premium for their shares over then current market prices. In addition, these provisions may
limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
Our certificate of incorporation (as amended) permits our Board of Directors to issue preferred stock
without stockholder approval upon such terms as the Board of Directors may determine. The rights of the holders
of our common stock will be junior to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred stock could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our
outstanding common stock. The issuance of a substantial number of preferred shares could adversely affect the
price of our common stock.
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