As filed with the Securities and Exchange Commission on December 4, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------------
FORM S-8
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
PharmaNetics, Inc.
------------------
(Exact name of issuer as specified in its charter)
North Carolina 56-2098302
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5301 Departure Drive, Raleigh, North Carolina 27616
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(Address of Principal Executive Offices) (Zip Code)
PharmaNetics, Inc. 1995 Stock Plan
(formerly the Cardiovascular Diagnostics, Inc. 1995 Stock Plan)
---------------------------------------------------------------
(Full title of the plans)
John P. Funkhouser
President and Chief Executive Officer
PharmaNetics, Inc.
5301 Departure Drive
Raleigh, North Carolina 27616
-----------------------------
(Name and address of agent for service)
(919) 954-9871
--------------
(Telephone number, including area code, of agent for service)
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Copies to:
Kevin A. Prakke, Esq.
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607
(919) 781-4000
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================
Title of Proposed maximum Proposed maximum Amount of
Securities to Amounts to Offering price aggregate registration
be registered be registered Per share offering price fee
============================================================================================
<S> <C> <C> <C> <C>
Common Stock, no par 350,000 shares
value per share (1) $5.81 (2) $2,033,500 (2) $565.31 (2)
============================================================================================
</TABLE>
(1) Consists of additional shares reserved for issuance under the PharmaNetics,
Inc. 1995 Stock Plan, as amended (formerly the Cardiovascular Diagnostics,
Inc. 1995 Stock Plan).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average of the high and low prices for
the Common Stock of Cardiovascular Diagnostics, Inc. on the NASDAQ National
Market System on November 30, 1998.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information*
Item 2. Registration Information and Employee Plan Annual Information*
- ----------
* The information required by Items 1 and 2 of Part I of Form S-8 is omitted
from this registration statement in accordance with the Note to Part I of Form
S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Pursuant to a holding company reorganization effected on December 2, 1998,
Pharmanetics, Inc. (the "Registrant") became the sole parent company of
Cardiovascular Diagnostics, Inc. (the "Company"). The following documents
heretofore filed by the Company with the Securities and Exchange Commission (the
"Commission") are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 filed pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) The Company's Proxy Statement dated April 9, 1998, filed
pursuant to Section 14 of the Exchange Act, in connection with the Annual
Meeting of Shareholders of the Company held May 7, 1998;
(c) The Company's Proxy Statement dated October 27, 1998, filed
pursuant to Section 14 of the Exchange Act, in connection with the special
meeting of shareholders of the Company held December 2, 1998;
(d) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1998, filed pursuant to Section
13 of the Exchange Act; and
(e) The description of the Registrant's Common Stock (which is
identical to the description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A (File No. 0-26992) filed
pursuant to Section 12 of the Exchange Act, including any amendment or
report filed for the purpose of updating such description).
<PAGE>
All documents filed by the Registrant pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the filing of
a post-effective amendment that indicates that all securities offered under this
registration statement have been sold or that deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference herein and to
be part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein) modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or superseded.
Item 4. Description of Securities
Not applicable. The class of securities to be offered is registered under
Section 12 of the Exchange Act.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
The Registrant's Articles of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the fullest extent permitted
by Section 55-8-30(e) of the North Carolina Business Corporation Act (the
"Business Corporation Act") and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by Section 55-8-50
through 55-8-58 of the Business Corporation Act, including circumstances in
which indemnification is otherwise discretionary. Pursuant to Section 55-8-51
and 55-8-57 of the Business Corporation Act, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under the Business
Corporation Act. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant, for
acts or omissions that the
2
<PAGE>
director believes to be contrary to the best interests of the Registrant or its
shareholders, for any transaction from which the director derived an improper
personal benefit, for acts or omissions involving a reckless disregard for the
director's duty to the Registrant or its shareholders when the director was
aware or should have been aware of a risk of serious injury to the Registrant or
its shareholders, for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
Registrant or its shareholders, for improper transactions between the director
and the Registrant and for improper distributions to shareholders and loans to
directors and officers. These provisions do not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
The Registrant's Bylaws require the Registrant to indemnify its directors
and officers against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any such
person may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interest of the Registrant and,
with respect to any proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
The following exhibits are filed as part of this registration statement:
Exhibit Number Description
5.1 Opinion of Wyrick Robbins Yates & Ponton LLP
10.24 PharmaNetics, Inc. 1994 Stock Plan (formerly
the Cardiovascular Diagnostics, Inc. 1994
Stock Plan, as amended)
10.25 PharmaNetics, Inc. 1995 Stock Plan (formerly
the Cardiovascular Diagnostics, Inc. 1995
Stock Plan, as amended)
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Wyrick Robbins Yates & Ponton LLP
(included in Exhibit 5.1)
24.1 Power of Attorney (see page S-1)
3
<PAGE>
Item 9. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Raleigh, State of North Carolina, on the 2nd
day of December 1998.
PHARMANETICS, INC.
By: /s/ John P. Funkhouser
_______________________________
John P. Funkhouser,
President
POWER OF ATTORNEY
Each person whose signature appears below in so signing also makes,
constitutes and appoints John P. Funkhouser and Paul T. Storey, and each of them
acting alone, his true and lawful attorneys-in-fact and agent, with full power
of substitution, for him in any and all capacities, to execute and cause to be
filed with the Securities and Exchange Commission any and all amendments and
post-effective amendments to this Form S-8, with exhibits thereto and other
documents in connection therewith, and hereby ratifies and confirms all that
said attorneys-in-fact or his or their substitute or substitutes may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Form S-8 has been signed below by the following persons in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ John P. Funkhouser Director, Chairman, President
- -------------------------- and Chief Executive Officer
John P. Funkhouser (Principal Executive Officer) December 2, 1998
/s/ Paul T. Storey Director of Finance, and
- -------------------------- Treasurer (Principal
Paul T. Storey Financial and Accounting
Officer) December 2, 1998
/s/ William A. Hawkins Director
- --------------------------
William A. Hawkins December 2, 1998
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ John K. Pirotte Director December 2, 1998
- --------------------------
John K. Pirotte
/s/ Stephen R. Puckett Director December 2, 1998
- --------------------------
Stephen R. Puckett
/s/ Philip R. Tracy Director December 2, 1998
- --------------------------
Philip R. Tracy
</TABLE>
S-2
EXHIBIT 5.1
WYRICK ROBBINS YATES & PONTON LLP
Attorneys at Law
The Summit
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
December 2, 1998
Pharmanetics, Inc.
5301 Departure Drive
Raleigh, North Carolina 27616
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 filed by
PharmaNetics, Inc., a North Carolina corporation (the "Company"), with the
Securities and Exchange Commission on or about the date hereof (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 350,000 shares of the Company's Common
Stock, no par value per share (the "Shares"). We understand that the Shares are
to be issued pursuant to the Company's 1995 Stock Plan. In our examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with the original of
all documents submitted to us as copies thereof.
As your legal counsel, we have examined the proceedings taken, and are
familiar with the proceedings proposed to be taken, by you in connection with
the sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, the Shares, when issued in the manner referred to in the Registration
Statement and in accordance with the resolutions adopted by the Board of
Directors of the Company, will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus relating thereto, and any
amendments thereto.
Very truly yours,
/s/ WYRICK ROBBINS YATES & PONTON LLP
PHARMANETICS, INC. 1994 STOCK PLAN
(formerly the Cardiovascular Diagnostics, Inc. 1994 Stock Plan)
(as amended by the Board of Directors through December 2, 1998)
1. Purpose. This 1994 Stock Plan (the "Plan") is intended to provide
incentives:
(a) to employees of Cardiovascular Diagnostics, Inc. (the
"Company"), or its parent, PharmaNetics, Inc. (the "Parent") or any of Parent's
present or future subsidiaries (collectively, "Related Corporations"), by
providing them with opportunities to purchase Common Stock (as defined below) of
the Parent pursuant to options granted hereunder that qualify as "incentive
stock options" ("ISOs") under Section 422 of the Internal Revenue Code of 1986,
as amended, or any successor statute (the "Code");
(b) to employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase Common Stock (as
defined below) of the Parent pursuant to options granted hereunder that do not
qualify as ISOs (nonstatutory stock options, or "NSOs");
(c) to employees and consultants of the Company and Related
Corporations by providing them with bonus awards of Common Stock (as defined
below) of the Parent ("Stock Bonuses"); and
(d) to employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct purchases of
Common Stock (as defined below) of the Parent ("Purchase Rights").
Both ISOs and NSOs are referred to hereafter individually as "Options,"
and Options, Stock Bonuses and Purchase Rights are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
(a) Procedure. The Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted in
such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable state and
federal corporate and securities laws, of the Code and of any applicable stock
exchange or market (collectively, the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Subject to ratification of the grant or authorization of each
Stock Right by the Board (if so required by applicable law), and subject to the
terms of the Plan, the Committee, if so appointed, shall have the authority to:
<PAGE>
(i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible under Section 3 to
receive ISOs) to whom ISOs may be granted, and to determine (from among the
class of individuals and entities eligible under Section 3 to receive NSOs,
Stock Bonuses and Purchase Rights) to whom NSOs, Stock Bonuses and Purchase
Rights may be granted;
(ii) determine the time or times at which Options, Stock
Bonuses or Purchase Rights may be granted;
(iii) determine the option price of shares subject to each
Option, which price shall not be less than the minimum price specified in
Section 6, and the purchase price of shares subject to each Purchase Right;
(iv) determine whether each Option granted shall be an ISO or
NSO;
(v) determine (subject to Section 7) the time or times when
each Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options
are to be imposed on shares subject to Options, Stock Bonuses and Purchase
Rights and the nature of such restrictions, if any; and
(vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it.
If the Committee determines to issue a NSO, it shall take whatever
actions it deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Stock Right granted under it.
(c) The Committee may select one of its members as its chairman, and
shall hold meetings at such time and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee. All references in this Plan to the Committee shall mean the Board if
no Committee has been appointed. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members thereof and thereafter directly
administer the Plan.
3. Eligible Employees and Others. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers of the Company who are
not employees may not be granted ISOs under the Plan. NSOs, Stock Bonuses and
Purchase Rights may be granted to any director, employee or consultant of the
Company or any Related Corporation; provided, however, that no director of the
Company or the Parent, who is not also an employee of the Company or the Parent
shall be eligible to receive any Stock Right under the Plan after the time when
the Company or the Parent shall have registered its equity securities under
Section 12 of the Exchange Act. Granting of any Stock Right to any individual or
entity
2
<PAGE>
shall neither entitle that individual or entity to, nor disqualify him or
her from, participation in any other grant of Stock Rights.
4. Stock. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Parent, no par value per share, or such
shares of the Parent's capital stock into which such class of shares may be
converted pursuant to any reorganization, recapitalization, merger,
consolidation or the like (the "Common Stock"), or shares of Common Stock
reacquired by the Parent in any manner. The aggregate number of shares that may
be issued pursuant to the Plan is 626,084 shares, subject to adjustment as
provided herein. Any such shares may be issued as ISOs, NSOs or Stock Bonuses,
or to persons or entities making purchases pursuant to Purchase Rights, so long
as the number of shares so issued does not exceed such aggregate number, as
adjusted. If any Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Parent shall reacquire any shares
issued pursuant to Stock Rights, the unpurchased shares subject to such Options
and any shares so reacquired by the Parent shall again be available for grants
of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time after the Effective Date, as set forth in Section 16, and prior to 10
years thereafter. The date of grant of a Stock Right under the Plan will be the
date specified by the Committee at the time it grants the Stock Right; provided,
however, that such date shall not be prior to the date on which the Committee
acts. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to an NSO pursuant to Section 17.
6. Minimum Price; ISO Limitations.
(a) The price per share specified in the agreement relating to each
NSO, Stock Bonus or Purchase Right granted under the Plan shall be established
by the Board or the Committee, taking into account any noncash consideration to
be received by the Parent from the recipient of Stock Rights.
(b) The price per share specified in the agreement relating to each
ISO granted under the Plan shall not be less than the fair market value per
share of Common Stock on the date of such grant. In the case of an ISO to be
granted to an employee owning stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement relating to such ISO
shall not be less than 110% of the fair market value per share of Common Stock
on the date of the grant.
(c) In no event shall the aggregate fair market value (determined at
the time an ISO is granted) of Common Stock for which ISOs granted to any
employee are exercisable for the first time by such employee during any calendar
year (under all stock option plans of the Company and any Related Corporation)
exceed $100,000; provided that this Section shall have no force or effect to the
extent that its inclusion in the Plan is not necessary for Options issued as
ISOs to qualify as ISOs pursuant to Section 422 of the Code.
(d) If, at the time an Option is granted under the Plan, the
Parent's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the time such Option is granted and
shall mean:
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<PAGE>
(i) the average as of the close of business on that date of
the high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange;
(ii) the last reported sale price as of the close of business
on that date of the Common Stock on the Nasdaq National Market System (the
"NASDAQ/NMS"), if the Common Stock is not then traded on a national securities
exchange but is then traded on the NASDAQ/NMS; or
(iii) the closing bid price or average of bid prices last
quoted on that date by an established quotation service, if the Common Stock is
not reported on the NASDAQ/NMS.
However, if the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors that it deems appropriate, including,
without limitation, recent sale and offer prices on the Common Stock in private
transactions negotiated at arm's length, but determined without regard to any
restriction other than a restriction that, by its terms, will never lapse.
7. Option Duration. Subject to earlier termination as provided in Sections
9 and 10, each Option shall expire on the date specified by the Committee, but
not more than:
(a) 10 years from the date of grant in the case of NSOs;
(b) 10 years from the date of grant in the case of ISOs generally;
and
(c) 5 years from the date of grant in the case of ISOs granted to an
employee owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Related Corporation.
Subject to earlier termination as provided in Sections 9 and 10, the
term of each ISO shall be the term set forth in the original instrument granting
such ISO, except with respect to any part of such ISO that is converted into an
NSO pursuant to Section 17.
8. Exercise of Options. Subject to the provisions of Section 9 through
Section 12 of the Plan, each Option granted under the Plan shall be exercisable
as follows:
(a) the Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify;
(b) once an installment becomes exercisable it shall remain
exercisable until expiration or termination of the Option, unless otherwise
specified by the Committee;
(c) each Option or installment may be exercised at any time or from
time to time, in whole or in part, for up to the total number of shares with
respect to which it is then exercisable; and
(d) the Committee shall have the right to accelerate the date of
exercise of any installment of any Option, provided that the Committee shall not
accelerate the exercise date of any installment of any ISO granted to any
employee (and not previously converted into an NSO pursuant to
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<PAGE>
Section 17) if such acceleration would violate the annual vesting limitation
contained in Section 422 of the Code, as described in Section 6(c).
9. Termination of Employment. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in Section 10, unless otherwise specified in the
instrument granting such ISO, the ISO optionee shall have the continued right to
exercise any ISO held by him or her, to the extent of the number of shares with
respect to which he or she could have exercised it on the date of termination,
until the ISO's specified expiration date; provided, however, in the event the
ISO optionee exercises any ISO after the date that is three months following the
date of termination of employment, such ISO will automatically be converted into
an NSO subject to the terms of the Plan. Employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment with the Company or any
Related Corporation is guaranteed by statute or by contract. A bona fide leave
of absence with the written approval of the Company or any Related Corporation
shall not be considered an interruption of employment under the Plan, provided
that such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved period
of absence. ISOs granted under the Plan shall not be affected by any change of
employment within or among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any Related Corporation.
NOTHING IN THE PLAN SHALL BE DEEMED TO GIVE ANY GRANTEE OF ANY STOCK RIGHT
THE RIGHT TO BE RETAINED IN EMPLOYMENT OR OTHER SERVICE BY THE COMPANY OR ANY
RELATED CORPORATION FOR ANY PERIOD OF TIME.
10. Death; Disability.
(a) If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of death, any ISO of his or hers may be exercised
to the extent of the number of shares with respect to which he or she could have
exercised it on the date of death, by his or her estate, personal representative
or beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the ISO's specified expiration date, unless
otherwise specified in the instrument granting such ISO.
(b) If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of disability, he or she shall continue to have
the right to exercise any ISO held by him or her on the date of termination
until the ISO's specified expiration date, unless otherwise specified in the
instrument granting such ISO; provided, however, in the event the optionee
exercises after the date that is one year following the date of termination,
such ISO will automatically be converted into a NSO subject to the terms of the
Plan. For the purposes of the Plan, the term "disability" shall mean "permanent
and total disability" as defined in Section 22(e)(3) of the Code.
11. Assignability. No Stock Right shall be assignable or transferable by
the grantee except with the consent of the Committee, by will or by the laws of
descent and distribution, and during the lifetime of the grantee each Stock
Right shall be exercisable only by him or her, except with the prior consent of
the Committee; provided that no such assignment shall be made in the case of an
ISO.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall
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<PAGE>
conform to the terms and conditions set forth in Sections 6 through 11 hereof
and may contain such other provisions as the Committee deems advisable that are
not inconsistent with the Plan, including restrictions (or other conditions
deemed by the Committee to be in the best interests of the Company) applicable
to the exercise of Options or to shares of Common Stock issuable upon exercise
of Options. In granting any NSO, the Committee may specify that such NSO shall
be subject to the restrictions set forth herein with respect to ISOs, or to such
other termination and cancellation provisions as the Committee may determine.
The Committee may from time to time confer authority and responsibility on one
or more of its own members and/or one or more officers of the Company or any
Related Corporation to execute and deliver such instruments. The proper officers
of the Company or any Related Corporation are authorized and directed to take
any and all action necessary or advisable from time to time to carry out the
terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, the
rights of a recipient of a Stock Right granted hereunder shall be adjusted as
hereinafter provided, unless otherwise provided in the written agreement between
the recipient and the Parent relating to such Stock Right:
(a) If the shares of Common Stock shall be subdivided or combined
into a greater or smaller number of shares or if the Parent shall issue shares
of Common Stock as a stock dividend on its outstanding Common Stock, the number
of shares of Common Stock deliverable upon the exercise of outstanding Stock
Rights shall be appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price (if any) per share
to reflect such subdivision, combination or stock dividend.
(b) If the Parent is to be consolidated with or acquired by another
entity in a merger, sale of all or substantially all of the Parent's assets or
otherwise (an "Acquisition"), unless otherwise provided by the Committee, in its
sole discretion, all conditions to the exercisability of Options and rights of
the Parent to repurchase or restrict the sale of shares of Common Stock issued
pursuant to exercise of a Stock Right shall lapse and the Committee or the board
of directors of any entity assuming the obligations of the Parent hereunder (the
"Successor Board") shall, as to outstanding Options, make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options the consideration payable with respect
to the outstanding shares of Common Stock in connection with the Acquisition.
(c) In the event of a recapitalization or reorganization of the
Parent (other than a transaction described in subsection (b) above) pursuant to
which securities of the Parent or of another corporation are issued with respect
to the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had exercised the Option
immediately prior to such recapitalization or reorganization.
(d) Notwithstanding the foregoing, any adjustments made pursuant to
subsections (a), (b) or (c) with respect to ISOs shall be made only after the
Committee determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments as to all
or some of such ISOs.
(e) In the event of the proposed dissolution or liquidation of the
Parent, each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Committee.
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(f) Except as expressly provided herein, no issuance by the Parent
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to Options. No
adjustments shall be made for dividends paid in cash or in property other than
Common Stock of the Parent.
(g) No fractional shares shall be issued under the Plan and any
optionee who would otherwise be entitled to receive a fraction of a share upon
exercise of an Option shall receive from the Parent cash in lieu of such
fractional shares in an amount equal to the fair market value of such fractional
shares, as determined in the sole discretion of the Committee.
(h) Upon the happening of any of the foregoing events described in
subsections (a), (b) or (c) above, the class and aggregate number of shares set
forth in Section 4 hereof that are subject to Stock Rights that previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described. The Committee or the Successor Board
shall determine the specific adjustments to be made under this Section 13 and,
subject to Section 2, its determination shall be conclusive.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Parent
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the exercise price therefor
either (a) in United States dollars in cash or by check, (b) at the discretion
of the Committee, through the delivery of already-owned shares of Common Stock
having a fair market value equal as of the date of the exercise to the cash
exercise price of the Stock Right, or (c) at the discretion of the Committee, by
delivery of the grantee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Code, or (d) at the discretion of the
Committee, by any combination of (a), (b) and (c). If the Committee exercises
its discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c) or (d) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO in
question. The holder of a Stock Right shall not have the rights of a shareholder
with respect to the shares covered by the Stock Right until the date of issuance
of a stock certificate for such shares. Except as expressly provided above in
Section 13 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
15. Stock Appreciation Rights; Surrender of Options. The Committee may, in
its sole and absolute discretion and subject to such terms and conditions as it
deems appropriate, accept the surrender by an optionee of an Option granted to
him under the Plan and authorize payment in consideration therefor of an amount
equal to the difference between the purchase price payable for the shares of
Common Stock under the instrument granting the Option and the fair market value
of the shares subject to the Option (determined as of the date of such surrender
of the Option). Such payment shall be made in shares of Common Stock valued at
fair market value on the date of such surrender, or in cash, or partly in such
shares of Common Stock and partly in cash as the Committee shall determine. The
surrender shall be permitted only if the Committee determines that such
surrender is consistent with the purpose set forth in Section 1, and only to the
extent that the Option is exercisable under Section 8 on the date of surrender.
In no event shall an optionee surrender his Option under this Section if the
fair market value of the shares on the date of such surrender is less than the
purchase price payable for the shares of Common Stock subject to the Option. Any
ISO surrendered pursuant to the provisions of this Section 15 shall be deemed to
have been converted into a NSO immediately prior to such surrender.
Notwithstanding the foregoing, if on the date of
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<PAGE>
surrender the optionee is an Insider, then any election to surrender an Option
shall not be permitted unless (a) such surrender shall occur after the date six
(6) months from the date such Option was granted, (b) the Insider shall have
made an irrevocable election to surrender the Option pursuant to this paragraph
15 at least six (6) months prior to the date the Option is surrendered or (c)
the surrender of the Option hereunder by the Insider is otherwise exempt
pursuant to the regulations promulgated under Section 16 of the Exchange Act.
16. Term and Amendment of Plan. This Plan was adopted by the Board on
February 3, 1994 (the "Effective Date"), was approved by the shareholders of the
Company in September 1994 and was assumed by the Parent in connection with a
holding company reorganization in December 1998. The Plan shall expire 10 years
after the Effective Date (except as to Stock Rights outstanding on that date).
Subject to the provisions of Section 5 above, Stock Rights may be granted under
the Plan prior to the date of shareholder approval of the Plan. The Board may
terminate or amend the Plan in any respect at any time, except that without the
approval of the shareholders obtained within 12 months before or after the Board
adopts a resolution authorizing any of the following actions,
(a) the total number of shares that may be issued under the Plan may
not be increased (except by adjustment pursuant to Section 13);
(b) the provisions of Section 3 regarding eligibility for grants of
ISOs may not be modified;
(c) the provisions of Section 6(b) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to Section 13); and
(d) the expiration date of the Plan may not be extended.
Except as provided in Section 13(b) and the second sentence of this
Section 16, in no event may action of the Board or shareholders alter or impair
the rights of a grantee, without his or her consent, under any Stock Right
previously granted.
17. Conversion of ISOs into NSOs; Termination of ISOs. The Committee, at
the request of any optionee, may in its discretion take such actions as may be
necessary to convert such optionee's ISOs (or any installments or portions of
installments thereof) that have not been exercised on the date of conversion
into NSOs at any time prior to the expiration of such ISOs. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Committee (with the consent of the optionee) may impose
such conditions on the exercise of the resulting NSOs as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with the Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into NSOs, and no such
conversion shall occur until and unless the Committee takes appropriate action.
The Committee, with the consent of the optionee, may also terminate any portion
of any ISO that has not been exercised at the time of such termination.
18. Application of Funds. The proceeds received by the Parent from the
sale of shares pursuant to Stock Rights shall be used for general corporate
purposes.
19. Governmental Regulation. The Company's obligation to sell and deliver
shares of the Common Stock under the Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
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20. Withholding of Additional Income Taxes.
(a) Upon the exercise of an NSO, or the grant of a Stock Bonus or
Purchase Right for less than the fair market value of the Common Stock, the
making of a Disqualifying Disposition (as defined in Section 21), the vesting of
restricted Common Stock acquired on the exercise of a Stock Right hereunder or
the surrender of an Option pursuant to Section 15, the Parent, in accordance
with Section 3402(a) of the Code and any applicable state statute or regulation,
may require the optionee, Stock Bonus recipient or purchaser to pay to the
Parent additional withholding taxes in respect of the amount that is considered
compensation includable in such person's gross income. With respect to (a) the
exercise of an Option, (b) the grant of a Stock Bonus, (c) the grant of a
Purchase Right of Common Stock for less than its fair market value, (d) the
vesting of restricted Common Stock acquired by exercising a Stock Right, or (e)
the acceptance of a surrender of an Option, the Committee in its discretion may
condition such event on the payment by the optionee, Stock Bonus recipient or
purchaser of any such additional withholding taxes.
(b) At the sole and absolute discretion of the Committee, the holder
of Stock Rights may pay all or any part of the total estimated federal and state
income tax liability arising out of the exercise or receipt of such Stock
Rights, the making of a Disqualifying Disposition, or the vesting of restricted
Common Stock acquired on the exercise of a Stock Right hereunder (each of the
foregoing, a "Tax Event") by tendering already-owned shares of Common Stock or
(except in the case of a Disqualifying Disposition) by directing the Parent to
withhold shares of Common Stock otherwise to be transferred to the holder of
such Stock Rights as a result of the exercise or receipt thereof in an amount
equal to the estimated federal and state income tax liability arising out of
such event. In such event, the holder of Stock Rights must, however, notify the
Committee of his or her desire to pay all or any part of the total estimated
federal and state income tax liability arising out of a Tax Event by tendering
already-owned shares of Common Stock or having shares of Common Stock withheld
prior to the date that the amount of federal or state income tax to be withheld
is to be determined. If the holder of Stock Rights is an Insider, an election by
an Insider to pay all or any part of the total estimated federal and state
income tax liability arising out of any Tax Event (other than a Disqualifying
Disposition) by having shares of Common Stock withheld (i) shall be made at
least six (6) months prior to the date of the Tax Event and shall be irrevocable
(except that an Insider can revoke such election upon six months' notice to the
Committee by making a written irrevocable election to revoke the prior
election); or (ii) shall be made in accordance with paragraph 15 of the Plan or
as otherwise may be permitted pursuant to the regulations promulgated under
Section 16 of the Exchange Act. For purposes of this paragraph 20, shares of
Common Stock shall be valued at their fair market value on the date that the
amount of the tax withholdings is to be determined.
21. Notice to Parent of Disqualifying Disposition. Each employee who
receives an ISO must agree to notify the Parent in writing immediately after the
employee makes a Disqualifying Disposition (as defined below) of any Common
Stock acquired pursuant to the exercise of an ISO. A "Disqualifying Disposition"
is any disposition (including any sale) of such Common Stock before either (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
22. Governing Law; Construction. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of North Carolina. In construing this Plan, the singular shall include the
plural and the masculine gender shall include the feminine and neuter, unless
the context otherwise requires.
9
PHARMANETICS, INC. 1995 STOCK PLAN
(formerly the Cardiovascular Diagnostics, Inc. 1995 Stock Plan)
As amended by the Board of Directors through
December 2, 1998
1. Purpose. This 1995 Stock Plan (the "Plan") is intended to provide
incentives:
(a) to employees of Cardiovascular Diagnostics, Inc. (the
"Company"), or its parent, PharmaNetics, Inc. (the "Parent") or any of the
Parent's present or future subsidiaries (collectively, "Related Corporations"),
by providing them with opportunities to purchase Common Stock (as defined below)
of the Parent pursuant to options granted hereunder that qualify as "incentive
stock options" ("ISOs") under Section 422 of the Internal Revenue Code of 1986,
as amended, or any successor statute (the "Code");
(b) to directors, employees and consultants of the Company and
Related Corporations by providing them with opportunities to purchase Common
Stock (as defined below) of the Parent pursuant to options granted hereunder
that do not qualify as ISOs (nonstatutory stock options, or "NSOs");
(c) to employees and consultants of the Company and Related
Corporations by providing them with bonus awards of Common Stock (as defined
below) of the Parent ("Stock Bonuses"); and
(d) to employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct purchases of
Common Stock (as defined below) of the Parent ("Purchase Rights").
Both ISOs and NSOs are referred to hereafter individually as "Options",
and Options, Stock Bonuses and Purchase Rights are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
(a) Procedure. The Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted in
such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable state and
federal corporate and securities laws, of the Code and of any applicable stock
exchange or market (collectively, the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
<PAGE>
(b) Subject to ratification of the grant or authorization of each
Stock Right by the Board (if so required by applicable law), and subject to the
terms of the Plan, the Committee, if so appointed, shall have the authority to:
(i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible under Section 3 to
receive ISOs) to whom ISOs may be granted, and to determine (from among the
class of individuals and entities eligible under Section 3 to receive NSOs,
Stock Bonuses and Purchase Rights to whom NSOs, Stock Bonuses and Purchase
Rights may be granted;
(ii) determine the time or times at which Options, Stock
Bonuses or Purchase Rights may be granted;
(iii) determine the option price of shares subject to each
Option, which price shall not be less than the minimum price specified in
Section 6 hereof, as appropriate, and the purchase price of shares subject to
each Purchase Right;
(iv) determine whether each Option granted shall be an ISO or
NSO;
(v) determine (subject to Section 7) the time or times when
each Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options
are to be imposed on shares subject to Options, Stock Bonuses and Purchase
Rights and the nature of such restrictions, if any; and
(vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it.
If the Committee determines to issue a NSO, it shall take whatever
actions it deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Stock Right granted under it.
(c) The Committee may select one of its members as its chairman, and
shall hold meetings at such time and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee. All references in this Plan to the Committee shall mean the Board if
no Committee has been appointed. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members thereof and thereafter directly
administer the Plan.
3. Eligible Employees and Others. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers of the Company who are
not employees may not be granted ISOs under the Plan. NSOs, Stock Bonuses and
Purchase Rights may be granted to any director,
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employee or consultant of the Company or any Related Corporation; provided,
however, that, no director of the Company or the Parent who is not also an
employee of the Company or the Parent shall be eligible to receive any Stock
Right under the Plan after the time when the Company or the Parent shall have
registered its equity securities under Section 12 of the Exchange Act. Granting
of any Stock Right to any individual or entity shall neither entitle that
individual or entity to, nor disqualify him or her from, participation in any
other grant of Stock Rights.
4. Stock. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Parent, no par value per share, or such
shares of the Parent's capital stock into which such class of shares may be
converted pursuant to any reorganization, recapitalization, merger,
consolidation or the like (the "Common Stock"), or shares of Common Stock
reacquired by the Parent in any manner. The aggregate number of shares that may
be issued pursuant to the Plan is 838,150 shares, subject to adjustment as
provided herein. Any such shares may be issued as ISOs, NSOs or Stock Bonuses,
or to persons or entities making purchases pursuant to Purchase Rights, so long
as the number of shares so issued does not exceed such aggregate number, as
adjusted. If any Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Parent shall reacquire any shares
issued pursuant to Stock Rights, the unpurchased shares subject to such Options
and any shares so reacquired by the Parent shall again be available for grants
of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time after the Effective Date, as set forth in Section 16, and prior to 10
years thereafter. The date of grant of a Stock Right under the Plan will be the
date specified by the Committee at the time it grants the Stock Right; provided,
however, that such date shall not be prior to the date on which the Committee
acts. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to an NSO pursuant to Section 17.
6. Minimum Price; ISO Limitations.
(a) The price per share specified in the agreement relating to each
NSO, Stock Bonus or Purchase Right granted under the Plan shall be established
by the Board or the Committee, taking into account any noncash consideration to
be received by the Parent from the recipient of Stock Rights.
(b) The price per share specified in the agreement relating to each
ISO granted under the Plan shall not be less than the fair market value per
share of Common Stock on the date of such grant. In the case of an ISO to be
granted to an employee owning stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement relating to such ISO
shall not be less than 110% of the fair market value per share of Common Stock
on the date of the grant.
(c) In no event shall the aggregate fair market value (determined at
the time an ISO is granted) of Common Stock for which ISOs granted to any
employee are exercisable for the first time by such employee during any calendar
year (under all stock option plans of the Company and any Related Corporation)
exceed $100,000; provided that this Section shall have no force or effect to the
extent that its inclusion in the Plan is not necessary for Options issued as
ISOs to qualify as ISOs pursuant to Section 422 of the Code.
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<PAGE>
(d) If, at the time an Option is granted under the Plan, the
Parent's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the time such Option is granted and
shall mean:
(i) the average as of the close of business on that date of
the high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange;
(ii) the last reported sale price as of the close of business
on that date of the Common Stock on the Nasdaq National Market System (the
"NASDAQ/NMS"), if the Common Stock is not then traded on a national securities
exchange but is then traded on the NASDAQ/NMS; or
(iii) the closing bid price or average of bid prices last
quoted on that date by an established quotation service, if the Common Stock is
not reported on the NASDAQ/NMS.
However, if the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors that it deems appropriate, including,
without limitation, recent sale and offer prices on the Common Stock in private
transactions negotiated at arm's length, but determined without regard to any
restriction other than a restriction that, by its terms, will never lapse.
7. Option Duration. Subject to earlier termination as provided in Sections
9 and 10, each Option shall expire on the date specified by the Committee, but
not more than:
(a) 10 years from the date of grant in the case of NSOs;
(b) 10 years from the date of grant in the case of ISOs generally;
and
(c) 5 years from the date of grant in the case of ISOs granted to an
employee owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Related Corporation.
Subject to earlier termination as provided in Sections 9 and 10, the
term of each ISO shall be the term set forth in the original instrument granting
such ISO, except with respect to any part of such ISO that is converted into an
NSO pursuant to Section 17.
8. Exercise of Options. Subject to the provisions of Section 9 through
Section 12 of the Plan, each Option granted under the Plan shall be exercisable
as follows:
(a) the Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify;
(b) once an installment becomes exercisable it shall remain
exercisable until expiration or termination of the Option, unless otherwise
specified by the Committee;
(c) each Option or installment may be exercised at any time or from
time to time, in whole or in part, for up to the total number of shares with
respect to which it is then exercisable; and
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<PAGE>
(d) the Committee shall have the right to accelerate the date of
exercise of any installment of any Option, provided that the Committee shall not
accelerate the exercise date of any installment of any ISO granted to any
employee (and not previously converted into an NSO pursuant to Section 17) if
such acceleration would violate the annual vesting limitation contained in
Section 422 of the Code, as described in Section 6(c).
9. Termination of Employment. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in Section 10, unless otherwise specified in the
instrument granting such ISO, the ISO optionee shall have the continued right to
exercise any ISO held by him or her, to the extent of the number of shares with
respect to which he or she could have exercised it on the date of termination,
until the ISO's specified expiration date; provided, however, in the event the
ISO optionee exercises any ISO after the date that is three months following the
date of termination of employment, such ISO will automatically be converted into
an NSO subject to the terms of the Plan. Employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment with the Company or any
Related Corporation is guaranteed by statute or by contract. A bona fide leave
of absence with the written approval of the Company or any Related Corporation
shall not be considered an interruption of employment under the Plan, provided
that such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved period
of absence. ISOs granted under the Plan shall not be affected by any change of
employment within or among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any Related Corporation.
NOTHING IN THE PLAN SHALL BE DEEMED TO GIVE ANY GRANTEE OF ANY STOCK RIGHT
THE RIGHT TO BE RETAINED IN EMPLOYMENT OR OTHER SERVICE BY THE COMPANY OR ANY
RELATED CORPORATION FOR ANY PERIOD OF TIME.
10. Death; Disability.
(a) If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of death, any ISO of his or hers may be exercised
to the extent of the number of shares with respect to which he or she could have
exercised it on the date of death, by his or her estate, personal representative
or beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the ISO's specified expiration date, unless
otherwise specified in the instrument granting such ISO.
(b) If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of disability, he or she shall continue to have
the right to exercise any ISO held by him or her on the date of termination
until the ISO's specified expiration date, unless otherwise specified in the
instrument granting such ISO; provided, however, in the event the optionee
exercises after the date that is one year following the date of termination,
such ISO will automatically be converted into a NSO subject to the terms of the
Plan. For the purposes of the Plan, the term "disability" shall mean "permanent
and total disability" as defined in Section 22(e)(3) of the Code.
11. Assignability. No Stock Right shall be assignable or transferable by
the grantee except with the consent of the Committee, by will or by the laws of
descent and distribution, and during the lifetime of the grantee each Stock
Right shall be exercisable only by him or her, except with the prior consent of
the Committee; provided that no such assignment shall be made in the case of an
ISO.
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<PAGE>
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in Sections 6 through 11 hereof and may contain such other
provisions as the Committee deems advisable that are not inconsistent with the
Plan, including restrictions (or other conditions deemed by the Committee to be
in the best interests of the Company) applicable to the exercise of Options or
to shares of Common Stock issuable upon exercise of Options. In granting any
NSO, the Committee may specify that such NSO shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company or any Related Corporation to
execute and deliver such instruments. The proper officers of the Company or any
Related Corporation are authorized and directed to take any and all action
necessary or advisable from time to time to carry out the terms of such
instruments.
13. Adjustments. Upon the occurrence of any of the following events, the
rights of a recipient of a Stock Right granted hereunder shall be adjusted as
hereinafter provided, unless otherwise provided in the written agreement between
the recipient and the Parent relating to such Stock Right:
(a) If the shares of Common Stock shall be subdivided or combined
into a greater or smaller number of shares or if the Parent shall issue shares
of Common Stock as a stock dividend on its outstanding Common Stock, the number
of shares of Common Stock deliverable upon the exercise of outstanding Stock
Rights shall be appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price (if any) per share
to reflect such subdivision, combination or stock dividend.
(b) If the Parent is to be consolidated with or acquired by another
entity in a merger, sale of all or substantially all of the Parent's assets or
otherwise (an "Acquisition"), unless otherwise provided by the Committee, in its
sole discretion, all conditions to the exercisability of Options and rights of
the Parent to repurchase or restrict the sale of shares of Common Stock issued
pursuant to exercise of a Stock Right shall lapse and the Committee or the board
of directors of any entity assuming the obligations of the Parent hereunder (the
"Successor Board") shall, as to outstanding Options, make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options the consideration payable with respect
to the outstanding shares of Common Stock in connection with the Acquisition.
(c) In the event of a recapitalization or reorganization of the
Parent (other than a transaction described in subsection (b) above) pursuant to
which securities of the Parent or of another corporation are issued with respect
to the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had exercised the Option
immediately prior to such recapitalization or reorganization.
(d) Notwithstanding the foregoing, any adjustments made pursuant to
subsections (a), (b) or (c) with respect to ISOs shall be made only after the
Committee determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments as to all
or some of such ISOs.
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(e) In the event of the proposed dissolution or liquidation of the
Parent, each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Committee.
(f) Except as expressly provided herein, no issuance by the Parent
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to Options. No
adjustments shall be made for dividends paid in cash or in property other than
Common Stock of the Parent.
(g) No fractional shares shall be issued under the Plan and any
optionee who would otherwise be entitled to receive a fraction of a share upon
exercise of an Option shall receive from the Parent cash in lieu of such
fractional shares in an amount equal to the fair market value of such fractional
shares, as determined in the sole discretion of the Committee.
(h) Upon the happening of any of the foregoing events described in
subsections (a), (b) or (c) above, the class and aggregate number of shares set
forth in Section 4 hereof that are subject to Stock Rights that previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described. The Committee or the Successor Board
shall determine the specific adjustments to be made under this Section 13 and,
subject to Section 2, its determination shall be conclusive.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Parent
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the exercise price therefor
either (a) in United States dollars in cash or by check, (b) at the discretion
of the Committee, through the delivery of already-owned shares of Common Stock
having a fair market value equal as of the date of the exercise to the cash
exercise price of the Stock Right, or (c) at the discretion of the Committee, by
delivery of the grantee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Code, or (d) at the discretion of the
Committee, by any combination of (a), (b) and (c). If the Committee exercises
its discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c) or (d) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO in
question. The holder of a Stock Right shall not have the rights of a shareholder
with respect to the shares covered by the Stock Right until the date of issuance
of a stock certificate for such shares. Except as expressly provided above in
Section 13 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
15. Stock Appreciation Rights; Surrender of Options. The Committee may, in
its sole and absolute discretion and subject to such terms and conditions as it
deems appropriate, accept the surrender by an optionee of an Option granted to
him under the Plan and authorize payment in consideration therefor of an amount
equal to the difference between the purchase price payable for the shares of
Common Stock under the instrument granting the Option and the fair market value
of the shares subject to the Option (determined as of the date of such surrender
of the Option). Such payment shall be made in shares of Common Stock valued at
fair market value on the date of such surrender, or in cash, or partly in such
shares of Common Stock and partly in cash as the Committee shall determine. The
surrender shall
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be permitted only if the Committee determines that such surrender is consistent
with the purpose set forth in Section 1, and only to the extent that the Option
is exercisable under Section 8 on the date of surrender. In no event shall an
optionee surrender his Option under this Section if the fair market value of the
shares on the date of such surrender is less than the purchase price payable for
the shares of Common Stock subject to the Option. Any ISO surrendered pursuant
to the provisions of this Section 15 shall be deemed to have been converted into
a NSO immediately prior to such surrender. Notwithstanding the foregoing, if on
the date of surrender the optionee is an Insider, then any election to surrender
an Option shall not be permitted unless (a) such surrender shall occur after the
date six (6) months from the date such Option was granted, (b) the Insider shall
have made an irrevocable election to surrender the Option pursuant to this
paragraph 15 at least six (6) months prior to the date the Option is surrendered
or (c) the surrender of the Option hereunder by the Insider is otherwise exempt
pursuant to the regulations promulgated under Section 16 of the Exchange Act.
16. Term and Amendment of Plan. This Plan was adopted by the Company's
Board on September 12, 1995 (the "Effective Date") by the shareholders of the
Company in November 1995 and was assumed by the Parent in connection with the
holding company reorganization effected in December 1998. The Plan shall expire
10 years after the Effective Date (except as to Stock Rights outstanding on that
date). Subject to the provisions of Section 5 above, Stock Rights may be granted
under the Plan prior to the date of shareholder approval of the Plan. The Board
may terminate or amend the Plan in any respect at any time, except that without
the approval of the shareholders obtained within 12 months before or after the
Board adopts a resolution authorizing any of the following actions,
(a) the total number of shares that may be issued under the Plan may
not be increased (except by adjustment pursuant to Section 13);
(b) the provisions of Section 3 regarding eligibility for grants of
ISOs may not be modified;
(c) the provisions of Section 6(b) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to Section 13); and
(d) the expiration date of the Plan may not be extended.
Except as provided in Section 13(b) and the second sentence of this
Section 16, in no event may action of the Board or shareholders alter or impair
the rights of a grantee, without his or her consent, under any Stock Right
previously granted.
17. Conversion of ISOs into NSOs; Termination of ISOs. The Committee, at
the request of any optionee, may in its discretion take such actions as may be
necessary to convert such optionee's ISOs (or any installments or portions of
installments thereof) that have not been exercised on the date of conversion
into NSOs at any time prior to the expiration of such ISOs. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Committee (with the consent of the optionee) may impose
such conditions on the exercise of the resulting NSOs as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with the Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into NSOs, and no such
conversion shall occur until and unless the Committee takes appropriate action.
The Committee, with the consent of the optionee, may also terminate any portion
of any ISO that has not been exercised at the time of such termination.
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18. Application of Funds. The proceeds received by the Parent from the
sale of shares pursuant to Stock Rights shall be used for general corporate
purposes.
19. Governmental Regulation. The Parent's obligation to sell and deliver
shares of the Common Stock under the Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
20. Withholding of Additional Income Taxes.
(a) Upon the exercise of an NSO, or the grant of a Stock Bonus or
Purchase Right for less than the fair market value of the Common Stock, the
making of a Disqualifying Disposition (as defined in Section 21), the vesting of
restricted Common Stock acquired on the exercise of a Stock Right hereunder or
the surrender of an Option pursuant to Section 15, the Parent, in accordance
with Section 3402(a) of the Code and any applicable state statute or regulation,
may require the optionee, Stock Bonus recipient or purchaser to pay to the
Parent additional withholding taxes in respect of the amount that is considered
compensation includable in such person's gross income. With respect to (a) the
exercise of an Option, (b) the grant of a Stock Bonus, (c) the grant of a
Purchase Right of Common Stock for less than its fair market value, (d) the
vesting of restricted Common Stock acquired by exercising a Stock Right, or (e)
the acceptance of a surrender of an Option, the Committee in its discretion may
condition such event on the payment by the optionee, Stock Bonus recipient or
purchaser of any such additional withholding taxes.
(b) At the sole and absolute discretion of the Committee, the holder
of Stock Rights may pay all or any part of the total estimated federal and state
income tax liability arising out of the exercise or receipt of such Stock
Rights, the making of a Disqualifying Disposition, or the vesting of restricted
Common Stock acquired on the exercise of a Stock Right hereunder (each of the
foregoing, a "Tax Event") by tendering already-owned shares of Common Stock or
(except in the case of a Disqualifying Disposition) by directing the Parent to
withhold shares of Common Stock otherwise to be transferred to the holder of
such Stock Rights as a result of the exercise or receipt thereof in an amount
equal to the estimated federal and state income tax liability arising out of
such event. In such event, the holder of Stock Rights must, however, notify the
Committee of his or her desire to pay all or any part of the total estimated
federal and state income tax liability arising out of a Tax Event by tendering
already-owned shares of Common Stock or having shares of Common Stock withheld
prior to the date that the amount of federal or state income tax to be withheld
is to be determined. If the holder of Stock Rights is an Insider, an election by
an Insider to pay all or any part of the total estimated federal and state
income tax liability arising out of any Tax Event (other than a Disqualifying
Disposition) by having shares of Common Stock withheld (i) shall be made at
least six (6) months prior to the date of the Tax Event and shall be irrevocable
(except that an Insider can revoke such election upon six months' notice to the
Committee by making a written irrevocable election to revoke the prior
election); or (ii) shall be made in accordance with paragraph 15 of the Plan or
as otherwise may be permitted pursuant to the regulations promulgated under
Section 16 of the Exchange Act. For purposes of this paragraph 20, shares of
Common Stock shall be valued at their fair market value on the date that the
amount of the tax withholdings is to be determined.
21. Notice to Parent of Disqualifying Disposition. Each employee who
receives an ISO must agree to notify the Parent in writing immediately after the
employee makes a Disqualifying Disposition (as defined below) of any Common
Stock acquired pursuant to the exercise of an ISO. A "Disqualifying Disposition"
is any disposition (including any sale) of such Common Stock before either
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(a) two years after the date the employee was granted the ISO, or (b) one year
after the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
22. Governing Law; Construction. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of North Carolina. In construing this Plan, the singular shall include the
plural and the masculine gender shall include the feminine and neuter, unless
the context otherwise requires.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
PharmaNetics, Inc. (the "Company") on Form S-8 of our report dated February 12,
1998, on our audits of the consolidated financial statements and Schedule II
Valuation and Qualifying Accounts of Cardiovascular Diagnostics, Inc. and
subsidiaries, a wholly owned subsidiary of the Company, as of December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
December 2, 1998
