PHARMANETICS INC
8-K, 2000-03-01
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS
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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


       Date of Report (Date of earliest event reported): February 28, 2000


                               Pharmanetics, Inc.
      --------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                                 North Carolina
- --------------------------------------------------------------------------------
                 (State or other jurisdiction of incorporation)


                0-25133                                    56-2098302
- ---------------------------------------      -----------------------------------
        (Commission file Number)                    (IRS Employer ID Number)


               5301 Departure Drive, Raleigh, North Carolina 27616
- --------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code     919-954-9871
                                                       -------------------------

                                       NA
- --------------------------------------------------------------------------------
          (Former name or former address, if changed since last report)
<PAGE>
Item 5.  Other Events.
         ------------

         On February 28, 2000, the Registrant issued a press release stating as
follows:

              PHARMANETICS COMPLETES $12 MILLION PRIVATE PLACEMENT


RALEIGH, N.C. (FEBRUARY 28, 2000) - PHARMANETICS, INC. (NASDAQ NM: PHAR)
announced today that it has completed a $12 million private placement of
preferred stock convertible into common stock at $10 per share, together with
attachable 5-year warrants to purchase an additional 240,000 shares of common
stock at $10 per share, to selected institutional and other accredited
investors. The conversion price was based on the average closing prices of the
last 15 trading days. The Company plans to use the proceeds to complete its test
development of existing projects as well as to pursue new opportunities for
therapeutic management. The financing was well received which allowed the
Company to expand the offering from $5 to $12 million.

"The private placement accomplished three important strategic goals. It
broadened our institutional investor base significantly, improved our cash
reserves and liquidity position, and provided funding for pursuing new
collaborative opportunities," stated John Funkhouser, President and Chief
Executive Officer of PharmaNetics. "The ability to finance and grow the Company
is based on our technology platform which allows the Company to rapidly manage
numerous therapeutics which effect coagulation parameters. The uses of these
therapeutics are primarily for patients suffering from acute cardiac syndromes,
stroke and sepsis. The Company currently has the ability to rapidly manage 10 to
12 drugs which are all at least in Phase III clinical trials. The use of the
test is directly tied to the drug use and the physicians' need to manage dosing
rapidly," he continued.

PharmaNetics, Inc. develops, manufactures and markets rapid turnaround
diagnostics to assess blood clot formation and dissolution. The Company develops
tests based on its proprietary, dry chemistry Thrombolytic Assessment System for
its principal target market of managing powerful new drug compounds, some of
which may have narrow therapeutic ranges, as well as for monitoring routine
anticoagulants. The Company's therapeutic diagnostics are used to monitor the
effect of antithrombotic agents in the treatment of angina, myocardial
infarction (heart attack), stroke, deep venous thrombosis, and pulmonary and
arterial emboli.

The securities offered in this financing have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.

THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS REGARDING FUTURE EVENTS
AND THE FUTURE PERFORMANCE OF PHARMANETICS THAT INVOLVE RISKS AND UNCERTAINTIES,
SUCH AS RISKS RELATED TO MARKET ACCEPTANCE, CLINICAL TRIALS AND DEPENDENCE ON
THIRD-PARTY DISTRIBUTORS AND COLLABORATIVE PARTNERS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS. INFORMATION CONCERNING THESE AND OTHER OF THE FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO MATERIALLY DIFFER FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS IS CONTAINED IN THE COMPANY'S SEC FILINGS, INCLUDING FORM 10-K, FORM
10-Q AND FORM 8-K REPORTS.

                                       2
<PAGE>
         Item 7. Exhibits
                 --------

                (c)      Exhibits

                             Exhibit No.
                             -----------

                             3.4    Amended and Restated Articles of Incorpora-
                                    tion filed with the North Carolina Secretary
                                    of State on February 24, 2000

                             10.24  Series A Preferred Stock and Warrant
                                    Purchase Agreement dated February 24, 2000

                             10.25  Form of Warrant between the Company and the
                                    Series A Investors dated February 25, 2000


                                       3
<PAGE>
                                   SIGNATURES
                                   ----------


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                         PHARMANETICS, INC.



Date: February 28, 2000                   /s/ John P. Funkhouser
                                          ----------------------
                                          John P. Funkhouser
                                          President and Chief Executive Officer

                                       4

                                                                     Exhibit 3.4

                      ARTICLES OF AMENDMENT AND RESTATEMENT
                                       OF
                               PHARMANETICS, INC.


         Pursuant to Section 55-10-07 of the North Carolina General Statutes,
the undersigned corporation hereby submits the following for the purpose of
amending and restating its Articles of Incorporation and does hereby certify as
follows:

         1. The name of the corporation is PharmaNetics, Inc.

         2. The corporation's Articles of Incorporation are hereby amended and
restated in their entirety, as set forth in the text of the Amended and Restated
Articles of Incorporation attached hereto as Exhibit A.

         3. The Amended and Restated Articles of Incorporation of the
corporation were adopted by its Board of Directors without shareholder action on
the 24th day of February 2000, in the manner prescribed by law.

         4. These Amended and Restated Articles of Incorporation will be
effective upon filing.

                                    PHARMANETICS, INC.


                                    By:_________________________________________
                                        John P. Funkhouser, President and Chief
                                        Executive Officer


                                       5
<PAGE>
                                    EXHIBIT A
                                    ---------

                 AMENDED AND RESTATED ARTICLES OF INCORPORATION
                                       OF
                               PHARMANETICS, INC.


ARTICLE I.

         The name of the corporation is PharmaNetics, Inc. (the "Corporation").

ARTICLE II.

         The corporation shall have authority to issue 11,000,000 shares, no par
value per share, of which 10,000,000 shares shall be designated "Common Stock"
and 1,000,000 shall be designated "Preferred Stock ". Of the authorized shares
of Preferred Stock, 120,000 shares are designated as Series A Preferred Stock
(the "Series A Preferred"), each with the rights, preferences, privileges and
restrictions set forth below in this Article II. The Board of Directors of the
corporation is authorized to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, and within the limitations and restrictions stated in
any resolution or resolutions of the Board originally fixing the number of
shares constituting any series, to increase or decrease (but not below the
number of shares of any such series then outstanding) the number of shares of
any such series subsequent to the issue of shares of that series, to determine
the designation of any series and to fix the number of shares of any series.

         1. Dividend Rights of Series A Preferred. Subject to the rights of
additional series of Preferred Stock that may be designated by the Board from
time to time, the holders of shares of Series A Preferred shall be entitled to
receive dividends, at an annual rate of $6.00 per share of Series A Preferred
(as such dollar amount shall be appropriately adjusted for stock dividends,
stock combinations, recapitalization or the like, the "Quarterly Dividend
Amount") on each March 31, June 30, September 30 and December 31 (each, a
"Quarterly Dividend Date") after the date on which such share of Series A
Preferred was issued (the "Original Issue Date" for such share), provided that
the amount of dividends on the first Quarterly Dividend Date after the Original
Issue Date shall equal the Quarterly Dividend Amount multiplied by a fraction
(A) the numerator of which shall equal the number of days from and including the
Original Issue Date for such share to and including such first Quarterly
Dividend Date, and (B) the denominator of which is Ninety (90). Dividends with
respect to the Series A Preferred must be paid quarterly on each Quarterly
Dividend Date. The Corporation, at its option, must pay each dividend either (A)
in cash on each Quarterly Dividend Date, or (B) in shares of Common Stock of the
Corporation ("Common Stock") valued as provided in Subsection 2(b) below on any
given Quarterly Dividend Date. The Corporation shall be obligated to declare and
pay each quarterly dividend as set forth above so long as the Corporation has
funds that may be paid out as dividends without violating any law, rule, or
regulation by which the Corporation or its directors are bound.

         2.       Liquidation Preference.
<PAGE>
                  (a) Subject to the rights of additional series of Preferred
Stock that may be designated by the Board from time to time, in the event of any
liquidation, dissolution or winding up of the Corporation, either voluntarily or
involuntarily, the holders of the Series A Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock, an amount per share equal to $100.00
(the "Original Series A Purchase Price") plus any accrued but unpaid dividends
for each share of Series A Preferred then held by them, such amounts being
adjusted to reflect stock dividends, stock splits, combinations,
recapitalizations or the like after the Original Issue Date. After payment to
the holders of the Series A Preferred of the amounts set forth in this Section
2, the entire remaining assets and funds of the Corporation legally available
for distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them. If, upon
the occurrence of such event, the assets thus distributed among the holders of
the Series A Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
among the holders of the Series A Preferred in proportion to the number of
shares of Series A Preferred then held by them.

                  (b) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of the Corporation shall, unless holders of a majority
of the then outstanding shares of Series A Preferred elect otherwise, be deemed
to be occasioned by, or to include, (A) the acquisition of the Corporation by
another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation, but
excluding any merger effected exclusively for the purpose of changing the
domicile of the Corporation) that results in the transfer of fifty percent (50%)
or more of the outstanding voting power of the Corporation; or (B) a sale of all
or substantially all of the assets of the Corporation.

                           (ii) In any of such event, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value. Any securities to be delivered to the holders of the Series A
Preferred or Common Stock, as the case may be, shall be valued as follows:

                                    (1) If traded on a securities exchange or
                  through the Nasdaq National or SmallCap Market, the value
                  shall be deemed to be the average of the closing prices of the
                  securities on such automated quotation system over the
                  thirty-day period ending three (3) days prior to the closing;

                                    (2) If actively traded over-the-counter, the
                  value shall be deemed to be the average of the closing bid or
                  sale prices (whichever is applicable) over the thirty-day
                  period ending three (3) days prior to the closing; and

                                    (3) If there is no active public market, the
                  value shall be the fair market value thereof, as mutually
                  determined by the Corporation and the holders of at least a
                  majority of the then outstanding shares of Series A Preferred.

                           (iii) In the event the requirements of this
Subsection 2(b) are not complied with, the Corporation shall forthwith either:

                                    (1) cause such closing to be postponed until
such time as the requirements of this Section 2 have been complied with; or

                                    (2) cancel such transaction, in which event
the respective rights, preferences and privileges of the holders of the Series A
Preferred shall revert to and be the same
<PAGE>
          as such rights, preferences and privileges existing immediately prior
          to the date of the first notice referred to in Subsection 2(b)(iv)
          below.

                           (iv) The Corporation shall give each holder of record
of Series A Preferred written notice of such impending transaction not later
than twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. Subject to confidentiality limitations, the first
of such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 2, and the Corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the Corporation's receipt of written consent of the holders of at least a
majority of the then outstanding shares of Series A Preferred entitled to such
notice rights or similar notice rights.

          3. Conversion. The holders of the Series A Preferred shall have
conversion rights as follows (the "Conversion Rights"):

                  (a) Right to Convert. Each share of Series A Preferred shall
be convertible, at the option of the holder thereof, at any time after the date
three (3) months following the Original Issue Date of such share, at the office
of the Corporation or any transfer agent for such stock, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
the Original Series A Purchase Price plus any accrued but unpaid dividends by
the Conversion Price (as defined below) applicable to such share, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial "Conversion Price" per share for shares of Series A
Preferred shall be $10.00 (calculated as one-tenth (1/10th) of the Original
Series A Purchase Price); provided, however, that the Conversion Price for the
Series A Preferred shall be subject to adjustment as set forth in subsection
3(d).

                  (b) Automatic Conversion. At any time after the date three
months following the Original Issue Date, each share of Series A Preferred shall
be automatically converted into shares of Common Stock at the Conversion Price
in effect at the time upon the date specified by unanimous written consent or
agreement of the holders of all of the then outstanding shares of Series A
Preferred.

                  (c) Mechanics of Conversion.

                           (i) Conversion Pursuant to Section 3 (a). Before any
holder of Series A Preferred shall be entitled to convert the same into shares
of Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred, and shall give written notice to the
Corporation at such office that he/she elects to convert the same, and shall
state therein the name or names which he/she wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to each holder
of Series A Preferred, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he/she shall be
entitled. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Series A
Preferred to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
<PAGE>
                           (ii) Conversion Pursuant to Section 3(b). If shares
of Series A Preferred are automatically converted, written notice shall be
delivered to the holder of such shares of Series A Preferred at the address last
shown on the records of the Corporation for such holder or given by such holder
to the Corporation for the purpose of notice or, if no such address appears or
is given, at the place where the principal executive office of the Corporation
is located, notifying such holder of the conversion to be effected, specifying
the date on which such conversion is expected to occur, the number of shares of
Series A Preferred to be converted and calling upon such holder to surrender to
the Corporation, in the manner and at the place designated, the certificate or
certificates therefor. Upon such conversion of the shares of Series A Preferred,
holders shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Series A
Preferred, and shall state therein the name or names which he/she wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to each holder of Series A Preferred, or to his nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which
he/she shall be entitled. Any conversion of Series A Preferred pursuant to
Section 3(b) shall be deemed to have been made immediately prior to the closing
of the issuance and sale of shares as described in Section 3(b).

                           (iii) Fractional Shares. No fractional shares shall
be issued upon conversion of the Series A Preferred. In lieu of the Corporation
issuing any fractional shares to holders upon the conversion of the Series A
Preferred, the Corporation shall pay to such holders an amount in cash equal to
the product obtained by multiplying the Conversion Price by the fraction of a
share not issued pursuant to the previous sentence.

                  (d) Adjustment of Conversion Price. The number of shares of
Common Stock into which the Series A Preferred may be converted shall be subject
to adjustment from time to time as follows:

                           (i) Adjustments for Stock Splits and Subdivisions. In
the event the Corporation should at any time or from time to time after the date
of issuance hereof fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon conversion of the Series A Preferred shall be increased in
proportion to such increase of outstanding shares.

                           (ii) Adjustments for Reverse Stock Splits. If the
number of shares of Common Stock outstanding at any time after the date hereof
is decreased by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.

                           (iii) Recapitalizations. If at any time or from time
to time there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 3 or Section 2) provision shall be made so that the
<PAGE>
holders of the Series A Preferred shall thereafter be entitled to receive upon
conversion of the Series A Preferred the number of shares of stock or other
securities or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3 with respect to the rights of
the holders of the Series A Preferred after the recapitalization to the end that
the provisions of this Section 3 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of the
Series A Preferred) shall be applicable after that event as nearly equivalent as
may be practicable.

                           (iv) Issuances at Less Than Fair Market Value. Upon
the issuance or sale by the Corporation of:

                           (1)  Common Stock for a consideration per share less
                                than the Fair Market Value (as defined below) in
                                effect immediately prior to the time of such
                                issue or sale; or

                           (2)  any Stock Purchase Rights (as defined below)
                                where the consideration per share for which
                                shares of Common Stock may at any time
                                thereafter be issuable upon exercise thereof
                                (or, in the case of Stock Purchase Rights
                                exercisable for the purchase of Convertible
                                Securities, upon the subsequent conversion or
                                exchange of such Convertible Securities) shall
                                be less than the Fair Market Value in effect
                                immediately prior to the time of the issue or
                                sale of such Stock Purchase Rights; or

                           (3)  any Convertible Securities where the
                                consideration per share for which shares of
                                Common Stock may at any time thereafter be
                                issuable pursuant to the terms of such
                                Convertible Securities shall be less than the
                                Fair Market Value in effect immediately prior to
                                the time of the issue or sale of such
                                Convertible Securities;

other than an issuance of Common Stock pursuant to Subsections 3(d)(i), 3(d)(ii)
or 3(d)(v)(6) hereof (any such issuance shall be referred to hereinafter as a
"Dilutive Issuance"), then forthwith upon such issue or sale, such applicable
Conversion Price shall be reduced to the Weighted Average Price (as defined
below).

         The "Weighted Average Price" shall be determined by the following
formula:

                                           CP(1) = CP *  N + C
                                                       --------
                                                         N + AS
         where:

                  CP(1) =  the Weighted Average Price;

                  CP    =  the former Conversion Price;

                  N     =  the number of shares of Common Stock outstanding
                           immediately prior to such issuance (or deemed
                           issuance) assuming exercise or conversion of all
                           outstanding securities exercisable for or convertible
                           into Common Stock;
<PAGE>
                  C     =  the number of shares of Common Stock that the
                           aggregate consideration received or deemed to be
                           received by the Corporation for the total number of
                           additional securities so issued or deemed to be
                           issued would purchase if the purchase price per share
                           were equal to the Fair Market Value;

         AS  =    the number of shares of Common Stock so issued or deemed to be
                  issued


Notwithstanding the foregoing, no Conversion Price shall at such time be reduced
if such reduction would be an amount less than $.01, but any such amount shall
be carried forward and deduction with respect thereto made at the time of and
together with any subsequent reduction that, together with such amount and any
other amount or amounts so carried forward, shall aggregate $.01 or more.
Provided, further, that exercise of Stock Purchase Rights or conversion of
Convertible Securities shall not be deemed a Dilutive Issuance.

                           (v) For purposes of this Section 3(d), the following
provisions will be applicable:

                           (1) "Convertible Securities" shall mean evidences of
                               indebtedness, shares of stock (including, without
                               limitation, the Series A Preferred Stock) or
                               other securities that are convertible into or
                               exchangeable for, with or without payment of
                               additional consideration, shares of Common Stock.

                           (2) "Stock Purchase Rights" shall mean any warrants,
                               options or other rights to subscribe for,
                               purchase or otherwise acquire any shares of
                               Common Stock or any Convertible Securities.

                           (3) Convertible Securities and Stock Purchase Rights
                               shall be deemed outstanding and issued or sold at
                               the time of such issue or sale.

                           (4) Determination of Consideration. The
                               "consideration actually received" by the
                               Corporation for the issuance, sale, grant or
                               assumption of shares of Common Stock,
                               irrespective of the accounting treatment of such
                               consideration, shall be valued as follows:


                                    (A) Cash Payment. In the case of cash, the
net amount received by the Corporation after deduction of any accrued interest
or dividends and before deducting any expenses paid or incurred and any
underwriting commissions or concessions paid or allowed by the Corporation in
connection with such issue or sale;

                                    (B) Noncash Payment. In the case of
consideration other than cash, the value of such consideration, which shall not
include the value of any Convertible Securities being converted or exchanged, as
determined by the Board of Directors in good faith, after deducting any accrued
interest or dividends; and

                                    (C) Stock Purchase Rights and Convertible
Securities. The total consideration, if any, received by the Corporation as
consideration for the issuance of the Stock Purchase Rights or the Convertible
Securities, as the case may be, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of such
Stock Purchase
<PAGE>
Rights or upon the conversion or exchange of such Convertible Securities, as the
case may be, in each case after deducting any accrued interest or dividends.

                           (5) Readjustment of Conversion Price. In the event of
any change in (i) the consideration, if any, payable upon exercise of any Stock
Purchase Rights or upon the conversion or exchange of any Convertible Securities
or (ii) the rate at which any Convertible Securities are convertible into or
exchangeable for shares of Common Stock, the applicable Conversion Price as
computed upon the original issue thereof shall forthwith be readjusted to the
Conversion Price that would have been in effect at such time had such Stock
Purchase Rights or Convertible Securities provided for such changed purchase
price, consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any Stock Purchase
Rights not exercised or of any right to convert or exchange under any
Convertible Securities not exercised, the applicable Conversion Price then in
effect shall forthwith be increased to the Conversion Price that would have been
in effect at the time of such expiration had such Stock Purchase Rights or
Convertible Securities never been issued. No readjustment of the Conversion
Price pursuant to this Subsection 3(d)(v)(5) shall (i) increase the applicable
Conversion Price by an amount in excess of the adjustment originally made to the
Conversion Price in respect of the issue, sale or grant of the applicable Stock
Purchase Rights or Convertible Securities or (ii) require any adjustment to the
amount paid or number of shares of Common Stock received by any holder of Series
A Preferred Stock upon any conversion of any share of Series A Preferred Stock
prior to the date upon which such readjustment to the Conversion Price shall
occur.

                           (6) Exclusions. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
any Conversion Price in the case of (i) the issuance or sale of options, or the
shares of stock issuable upon exercise of such options, to purchase shares of
Common Stock to directors, officers, employees or consultants of the Corporation
pursuant to stock options or stock purchase plans or agreements, pursuant to
plans or arrangements approved by the Board of Directors, (ii) the issuance of
Common Stock upon conversion of the Series A Preferred Stock and (iii) the
issuance of securities in connection with a bona fide business acquisition of or
by the Corporation, whether by merger, consolidation, sale of assets, sale of
stock or otherwise. The issuances or sales described in the subsections 3(d)(i)
and (ii) shall be ignored for purposes of calculating any adjustment to any
Conversion Price.

                           (7) Fair Market Value. For purposes of this Section
3(d) "Fair Market Value" shall be equal to the lesser of: (a) the closing sale
price of the Corporation's Common Stock on the effective date of issuance, or
(b) the average of the closing sale price of the Corporation's Common Stock or
the 15 trading days prior to the effective date of issuance, both prices as
reported on Nasdaq or such other principal exchange on which such Common Stock
is then traded.

                  (e) No Impairment. Except for taking the actions contemplated
by Section 6 below upon obtaining the vote or consent set forth therein, the
Corporation will not, by amendment of its Articles of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but it will at all times in good faith
assist in the carrying out of all of the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A Preferred against
impairment.

                  (f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of the Series A Preferred
pursuant to this Section 3, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with
<PAGE>
the terms hereof and prepare and furnish to each holder of such Series A
Preferred a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series A Preferred.

                  (g) Notices of Record Date. In the event of any taking by the
Corporation of the record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, the Corporation
shall mail to each holder of Series A Preferred, at least twenty (20) days prior
to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.

                  (h) Reservation of Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the shares of the
Series A Preferred such number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all outstanding shares of
Series A Preferred; and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
the then outstanding shares of the Series A Preferred, the Corporation will take
such corporate action as may be necessary, in the opinion of its counsel, to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.

                  (i) Notices. Any notice required by the provisions of this
Section 3 to be given to the holders of shares of Series A Preferred shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his or her address appearing on the books
of the Corporation.

         4. Redemption. So long as a Registration Statement covering the resale
of the Common Stock issued or issuable upon conversion of the Series A Preferred
is effective (but only for so long as such Registration Statement is required to
remain effective), at the option of the Corporation, upon at least 30 days'
written notice to the holders of Series A Preferred, the Corporation may redeem
some or all of the Series A Preferred, at a redemption price equal to the
Original Series A Purchase Price plus all accrued but unpaid dividends, promptly
following the occurrence of any of the following events:

                                            (1) the Common Stock closes at above
                                    $20.00 per share for 20 consecutive trading
                                    days on the Corporation's principal exchange
                                    or automated quotation system;

                           (2)      the completion by the Corporation of a
                                    follow-on public offering of at least $10
                                    million of the Corporation's Common Stock at
                                    a price per share of at least 15% of the per
                                    share Purchase Price of the Series A
                                    Preferred, subject to adjustment as
                                    described herein for stock splits, stock
                                    dividends, reorganizations, and the like;

                           (3)      the acquisition of the Corporation by
                                    another entity by means of any transaction
                                    or series of related transactions
                                    (including, without limitation, any
                                    reorganization, merger or consolidation, but
                                    excluding
<PAGE>
                                    any merger effected exclusively for the
                                    purpose of changing the domicile of the
                                    Corporation) that results in the transfer of
                                    50% of more of the outstanding voting power
                                    of the Corporation;

                           (4)      a sale of all or substantially all of the
                                    assets of the Corporation; or

                           (5)      at any time after the fourth (4th)
                                    anniversary of the Original Issue Date.

                  Holders of the Series A Preferred shall be entitled to convert
their shares of Series A Preferred Stock into Common Stock during the 30-day
notice period of this Section 4(a).


         5. Voting Matters. Except as otherwise required by law, each share of
Series A Preferred issued and outstanding shall have the number of votes equal
to the number of shares of Common Stock into which the Series A Preferred is
convertible pursuant to Section 3 hereof. The holder of each share of Series A
Preferred shall be entitled to notice of any shareholders' meeting in accordance
with the bylaws of the Corporation, and shall vote with the holders of the
Common Stock upon any matter submitted to a vote of shareholders, except those
matters required by law to be submitted to a class vote.

         6. Covenant. In addition to any other rights provided by law, so long
as any Series A Preferred shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of not less than two-thirds of the then outstanding shares of Series A Preferred
Stock voting together as a single class:

                  (a) alter or change the rights, preferences or privileges of
the shares of the Series A Preferred;

                  (b) increase or decrease the authorized number of shares of
the Series A Preferred; or

                  (c) authorize or create any new class of shares or additional
series of Preferred Stock having rights, preferences or privileges prior to
shares of the Series A Preferred,

                  if such Series A Preferred would be adversely affected by such
amendment in a manner different from other than outstanding shares of Preferred
Stock (it being understood that, without limiting the foregoing, different
shares of Preferred Stock shall not be affected differently because of
differences in the amounts of their respective issue prices, liquidation
preferences and redemption prices).

         7. Residual Rights. All rights accruing to the outstanding shares of
the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.

                                                        ARTICLE III.

         The street address and county of the registered office of the
corporation are 5301 Departure Drive, Raleigh, Wake County, North Carolina 27616
and the name of the registered agent at such address is Paul T. Storey. The
mailing address of the registered office of the corporation if the same as its
street address.
<PAGE>
                                   ARTICLE IV.

         Except to the extent that the North Carolina General Statutes prohibit
such limitation or elimination of liability of directors for breaches of duty,
no director of the corporation shall be liable to the corporation or to any of
its shareholders for monetary damages for breach of duty as a director. No
amendment to or repeal of this provision or adoption of a provision inconsistent
herewith shall apply to or have any effect on the liability or alleged liability
of any director of the corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment or repeal or adoption of an
inconsistent provision. The provisions of this Article shall not be deemed to
limit or preclude indemnification of a director by the corporation for any
liability that has not been eliminated by the provisions of this Article.


                                                                   Exhibit 10.24

                      SERIES A PREFERRED STOCK AND WARRANT
                               PURCHASE AGREEMENT

                  This SERIES A PREFERRED STOCK PURCHASE AND WARRANT AGREEMENT
(the "Agreement") dated February 24, 2000 is entered into by and between
PharmaNetics, Inc., a North Carolina corporation (together with its successors,
the "Company"), and the investor set forth on the signature page attached hereto
("Investor").

                  Unless otherwise defined herein, capitalized terms used herein
and not defined herein shall have the meanings given to them under the
Securities Act of 1933, as amended (the "Securities Act").

                  The parties hereto agree as follows:

                  1. Purchase and Sale. In consideration of and upon the basis
of the representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:

                           a. Investor agrees to purchase from the Company, and
the Company agrees to sell to Investor, on the Closing Date specified in Section
2 hereof, the number of shares of the Company's Series A Preferred Stock (the
"Preferred Shares") set forth on the signature page attached hereto for a price
per share equal to $100.00 (the "Purchase Price") and a warrant, in the form
attached hereto as Exhibit A, to purchase that number of shares of Common Stock
of the Company equal to two (2) times the number of the Preferred Shares
purchased hereunder (rounded to the nearest whole number) at an exercise price
per share equal to one-tenth (1/10th) of the Purchase Price (the "Warrant"). On
or before the Closing Date (as defined below), the Company will have authorized
the sale and issuance to Investor of the Preferred Shares, having the rights,
preferences and privileges set forth in the Articles of Amendment and
Restatement attached hereto as Exhibit B (the "Articles of Amendment").

                           b. The term "Conversion Stock" shall mean any shares
of the Company's common stock, no par value per share (the "Common Stock"),
issued or to be issued to Investor upon conversion of the Preferred Shares
pursuant to the terms of this Agreement and the Articles of Amendment, including
shares of Common Stock issued as payment of in-kind dividends, or upon the
exercise of the Warrant.

                           c. The Company will use the proceeds from the sale of
the Preferred Shares to fund new product and research development and support
working capital needs.

                  2.       Closing.
                           -------

                           a. The closing of the sale of the Preferred Shares
and the Warrant (the "Closing") shall take place on February 25, 2000 upon
satisfaction or, if applicable, waiver of the conditions set forth in Sections 6
and 7 hereof, or at such other date and time as the Investor and the Company
shall mutually agree (such date and time and any subsequent closing being
referred to herein as the "Closing Date").

                           b. At the Closing, the Company shall deliver to
Investor (i) a certificate representing the Preferred Shares that Investor is
purchasing and (ii) the Warrant, duly registered on the

<PAGE>

books of the Company in the name of Investor, against payment by Investor of the
Purchase Price by check or wire transfer of immediately available funds.

                           c. The Company may sell up to the balance of the
authorized number of shares of Series A Preferred Stock not sold at the Closing
to such purchasers as it shall select, such new purchasers to become parties
hereto by executing a signature page hereto.

                  3. Representations and Warranties of the Company. The Company
hereby represents and warrants to Investor as follows:

                           a. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Carolina and has all requisite power and authority to carry on its business as
now conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.

                           b. All corporate action on the part of the Company,
its officers and directors necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of the Company
hereunder and thereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Preferred Shares and the Warrant being sold
hereunder and the Conversion Stock has been taken or will be taken prior to the
Closing, and this Agreement constitute a valid and legally binding obligation of
the Company, enforceable in accordance with their respective terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

                           c. The Company is not in violation or default of any
provision of its Articles of Incorporation or bylaws, or of any judgment, order,
writ or decree by which it is bound. The Company is not in violation or default
in any material respect of any instrument or contract to which it is a party or
by which it is bound, or of any provision of any federal or state statute, rule
or regulation applicable to the Company, which violation or default would have a
material adverse effect on its business or properties. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event that results in the creation of any lien, charge or
encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization, or approval applicable to the Company, its business or operations
or any of its assets or properties.

                           d. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except (i) the filing of the Articles of Amendment with the
Secretary of State of North Carolina; and (ii) the filing pursuant to Regulation
D promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act, which filing will be effected within 15 days of the sale of the
Preferred Shares hereunder, or such other post-closing filings as may be
required.

                           e. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of this Agreement or the right
of the Company to enter into such agreements, or to consummate the transactions
<PAGE>

contemplated hereby, and there is no action, suit, proceeding or public
investigation pending or, to the knowledge of the Company, currently threatened
against the Company, or against any executive officer or director of the Company
which might result, either individually or in the aggregate, in any material
adverse change in the business, properties, financial condition or operating
results of the Company, as such business is presently conducted.

                           f. The Company has filed all filings with the SEC
under the Securities Act or under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or under the rules and
regulations promulgated by the SEC (any such filing, an "SEC Filing") required
to be filed by the Company pursuant to such acts and no SEC Filing contained, on
the date on which such document was filed with the SEC, any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in SEC Filings (including any similar
documents filed after the date of this Agreement) comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto), and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).

                           g. There has not been any development that has not
otherwise been publicly disclosed that is reasonably likely to result in any
material adverse change in the financial condition or results of operations of
the Company.

                           h. Except as disclosed in the SEC Filings and as
contemplated hereby, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, pre-emptive, subscription or
similar rights to any person or entity, nor has it made any commitments in that
regard.

                           i. As of February 17, 2000, the authorized capital
stock of the Company consisted of 1,000,000 shares of Preferred Stock, none of
which were issued and outstanding, and 10,000,000 shares of Common Stock,
7,505,681 shares of which were issued and outstanding (the "Preferred Stock" and
the "Common Stock" are collectively referred to herein as the "Capital Stock").
All of the issued and outstanding shares of Capital Stock have been duly
authorized, validly issued and are fully paid and nonassessable. There has been
no change in the capitalization of the Company from February 17, 2000 to the
date of this Agreement.

                           j. The Preferred Shares and the Warrant that are
being purchased by the Investor hereunder, when issued, sold or delivered in
accordance with the terms hereof, for the consideration expressed herein, and
the Conversion Stock, upon issuance in accordance with the terms of the Articles
of Amendment, will be duly and validly issued, fully paid and nonassessable and
will be free of any liens and encumbrances created by the Company and, subject
to the accuracy of the representations of the Investor in this Agreement, will
be issued in compliance with all applicable federal and state securities laws.

                           k. The materials delivered to the Investor in
connection with the offer and sale of the Preferred Shares do not contain any
untrue statement of a material fact or omit to state any
<PAGE>

material fact required to be stated or necessary to make the statements in such
materials not misleading. If at any time prior to the Closing or other
termination of this Agreement any event shall occur as a result of which it may
be necessary to amend or supplement such materials so that they do not include
any untrue fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances then existing, not
misleading, the Company will supply the Investor with amendments or supplements
correcting such statement or omission. The Company will also provide the
Investor any information, documents and instruments which the Company deems
necessary to comply with applicable state and federal law.

                           l. The Company owns or possesses all of the patents,
trademarks, service marks, trade names, copyrights, proprietary rights, trade
secrets, and licenses or rights necessary for the conduct of the Company's
business as conducted and as proposed to be conducted. To the best of the
Company's knowledge, the business proposed by the Company will not cause the
Company to infringe or violate any of the patents, trademarks, service marks,
trade names, copyrights, licenses, trade secrets or other proprietary rights of
any other person or entity.

                           m. The Company is not obligated to pay any finders'
fees, brokerage commissions or similar payments relating to this Agreement or
the transactions contemplated hereby, except for commissions and fees payable to
Davenport & Company LLC as the Company's placement agent.

                  4. Representations and Warranties of Investor. Investor hereby
represents and warrants to the Company on the date hereof, and agrees with the
Company (unless otherwise specified as provided in the paragraphs below), as
follows:

                           a. Investor understands that no United States federal
or state agency has passed on, reviewed or made any recommendation or
endorsement of the Preferred Shares, the Warrant or the Conversion Stock.

                           b. Investor has full power and authority to enter
into this Agreement and such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

                           c. This Agreement is made with Investor in reliance
upon Investor's representation to the Company, which by Investor's execution of
this Agreement Investor hereby confirms, that the Preferred Shares to be
received by Investor, the Warrant and the Conversion Stock (collectively, the
"Securities") will be acquired for investment for Investor's own account, not as
a nominee or agent, and not with a present view to the resale or distribution of
any part thereof, and that Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, Investor further represents that Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.

                           d. Investor is an investor in securities of companies
in the development stage and acknowledges that it can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities. Investor also represents it has not been organized for the
purpose of acquiring the Securities.
<PAGE>

                           e. Investor is an "accredited investor" within the
meaning of SEC Rule 501 (a) of Regulation D, as presently in effect and all
representations made by Investor in that certain Investor Questionnaire
completed by Investor and delivered to the Company are true and correct in all
respects as if made on the date hereof.

                           f. Investor understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of Federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Investor set forth herein
in order to determine the applicability of such exemptions and the suitability
of the Investor to acquire the Securities.

                           g. Investor understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.

                           h. Without in any way limiting the representations
set forth above, Investor further agrees not to make any disposition of all or
any portion of the Securities unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by the terms of this
Agreement provided and to the extent such terms are then applicable, and:

                                   (1) There is then in effect a Registration
Statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such Registration Statement; or

                                   (2) (i) Investor shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, Investor shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in circumstances that
require a designation of an entity's status as an "affiliate".

                           i. It is understood that the certificates evidencing
the Securities will bear the following legends:

                  "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO
RULE 144 OF SUCH ACT."

                           j. The execution, delivery and performance of this
Agreement and the consummation by Investor of the transactions contemplated
hereby do not and will not (i) with respect to Investor's that are entities
result in a violation of Investor's charter documents or bylaws or (ii) conflict
<PAGE>

with any material agreement, indenture or instrument to which Investor is a
party, or (iii) result in a violation of any order, judgment or decree of any
court or governmental agency applicable to Investor or, to the Investor's
knowledge, of any law, rule or regulation. Investor is not required to obtain
any consent or authorization or any governmental agency in order for it to
perform its obligations under this Agreement.

                  5.       Covenants.
                           ---------

                           a. The Company covenants and agrees with Investor as
follows:

                                   (1) For so long as any of the Preferred
Shares are outstanding, and in any case for a period of 40 calendar days
thereafter, the Company will undertake best efforts to cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
will comply in all material respects with its reporting and filing obligations
under said act, and will not knowingly and voluntarily take any action or file
any document (whether or not permitted by the Securities Act or the Exchange Act
or the rules thereunder) to terminate or suspend its reporting and filing
obligations under said acts, except as permitted herein. For so long as any of
the Preferred Shares are outstanding, and in any case for a period of 40
calendar days thereafter, the Company will use commercially reasonable efforts
to continue the listing of trading of its Common Stock on the Nasdaq Stock
Market ("Nasdaq") or on a national securities exchange (as defined in the
Exchange Act) and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers and Nasdaq. Notwithstanding the
foregoing, the provisions of this subsection shall not in any way restrict the
Company's ability to negotiate and consummate the consolidation, reorganization
or merger of the Company with or into any other corporation or corporations or a
sale, conveyance, or other disposition of all or substantially all of the
Company's property or business.

                                   (2) For so long as any of the Preferred
Shares and the Warrant are outstanding, the Company shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock, for issuance upon conversion of such Preferred Shares or
upon exercise of such Warrant, not less than the maximum number of shares of
Conversion Stock then so issuable.

                           b. The Investor covenants and agrees with the Company
that (i) neither Investor nor any of Investor's affiliates nor any person acting
on its or their behalf will at any time offer or sell any Preferred Shares, the
Warrant or any Conversion Stock other than pursuant to registration under the
Securities Act or pursuant to an available exemption therefrom, and (ii) that
such Investor shall report to the Company sales made pursuant to a registration
statement under Section 6 below.

                           c. The covenants contained in this Section 5 shall
terminate upon the consummation of any consolidation, reorganization or merger
of the Company with and into any other corporation or corporations or a sale,
conveyance or other disposition of all or substantially all of the Company's
property or business.

                           d. With a view to making available the benefits of
certain rules and regulations of the SEC that may at any time permit the sale of
the restricted securities to the public without registration, the Company agrees
to:

                                   (1) Use its best efforts to make and keep
public information available, as those terms are understood and defined in Rule
144 under the Securities Act;
<PAGE>

                                   (2) Use its best efforts to file with the SEC
in a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and

                                   (3) So long as Investor owns any Preferred
Shares, to furnish to the Investor upon request, a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and of the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as the Investor may reasonably request in availing itself of any
rule or regulation of the SEC allowing the Investor to sell any such securities
without registration.

                  6.       Registration Rights.

                           a. Registration of Shares. The Company shall file
with the SEC, as promptly as practicable following the Closing, a registration
statement under the Securities Act covering the resale to the public by the
Investor of the Conversion Stock (the "Registration Statement"). The Company's
obligation to register the Conversion Stock shall include any shares of Common
Stock issued as an in-kind dividend on the Preferred Shares. The Company shall
use its best efforts to cause the Registration Statement to be declared
effective by the SEC as soon as practicable after the Closing, but in any event
within 120 days following Closing (See Section 6.g for penalties). The Company
shall cause the Registration Statement to remain effective until the earlier of
two (2) years from the Closing Date or such time as all Conversion Stock may be
sold under Rule 144 within a ninety (90) day period (assuming exercise of all
Warrants and conversion of all Preferred Shares) or such earlier time as all of
the Conversion Stock covered by the Registration Statement has been sold
pursuant thereto (the "Registration Period").

                           b. Limitations on Registration Rights.

                                   (1) The Company may, by written notice to the
Investor, suspend (for up to a total of thirty (30) days within any twelve-month
period) the Registration Statement after effectiveness and require that the
Investor immediately cease sales of shares pursuant to the Registration
Statement, in the event and during such period as the Company determines that
the existence of any fact or the happening of any event (including without
limitation pending negotiations relating to, or the consummation of, a
transaction or the occurrence of any other event) would require additional
disclosure of material information by the Company in the Registration Statement
the confidentiality of which the Company has a business purpose to preserve or
which fact or event would render the Company unable to comply with SEC
requirements (in either case, a "Suspension Event"). In the case of any
Suspension Event occurring prior to and delaying the filing of the Registration
Statement, the Company shall be required to keep the Registration Statement
effective until the earlier of (x) such time as all of the shares offered
thereby have been disposed of in accordance with the intended methods of
distribution set forth in the Registration Statement or (y) the period required
by Section 6.a above plus an extended period equal to the number of days during
which any such suspension was in effect.

                                   (2) If the Company delays or suspends the
Registration Statement or requires the Investor to cease sales of shares
pursuant to paragraph (1) above, the Company shall, as promptly as practicable
following the termination of the circumstance which entitled the Company to do
so, take such actions as may be necessary to file or reinstate the effectiveness
of the Registration Statement and/or give written notice to all Investors
authorizing them to resume sales pursuant to the Registration Statement. If as a
result thereof the prospectus included in the Registration Statement has
<PAGE>

been amended to comply with the requirements of the Securities Act, the Company
shall enclose such revised prospectus with the notice to Investor given pursuant
to this paragraph (2), and the Investor shall make no offers or sales of shares
pursuant to the Registration Statement other than by means of such revised
prospectus.

                           c.       Registration Procedures.

                                   (1) In connection with the filing by the
Company of the Registration Statement, the Company shall furnish to each
Investor a copy of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act and such additional
copies as are reasonably requested by the Investor.

                                   (2) The Company shall use its best efforts to
register or qualify the Conversion Stock covered by the Registration Statement
under the securities laws of such states as the Investor shall reasonably
request; provided however that the Company shall not be required in connection
with this paragraph (2) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.

                                   (3) If the Company has delivered final
prospectuses to the Investor and after having done so the prospectus is amended
to comply with the requirements of the Securities Act, the Company shall
promptly notify the Investor and, if requested by the Company, the Investor
shall immediately cease making offers or sales of shares under the Registration
Statement and return all prospectuses to the Company. The Company shall promptly
provide the Investor with revised prospectuses and, following receipt of the
revised prospectuses, the Investor shall be free to resume making offers and
sales under the Registration Statement.

                                   (4) The Company shall pay the expenses
incurred by it in complying with its obligations under this Section 6, including
all registration and filing fees, exchange listing fees, fees and expenses of
counsel for the Company, and fees and expenses of accountants for the Company,
but excluding (x) any brokerage fees, selling commissions or underwriting
discounts incurred by the Investor in connection with sales under the
Registration Statement and (y) the fees and expenses of any counsel retained by
Investor.

                           d. Requirements of Investor. The Company shall not be
required to include any Conversion Stock in the Registration Statement unless
the Investor owning such shares furnishes to the Company in writing such
information regarding such Investor and the proposed sale of Conversion Stock by
such Investor as the Company may reasonably request in writing in connection
with the Registration Statement or as shall be required in connection therewith
by the SEC or any state securities law authorities.

                           e. Assignment of Rights. An Investor may assign any
of its rights under this Section 6 in connection with the transfer of some or
all of its Preferred Shares or Conversion Stock to any party so long as the
transfer complies with the provisions of Section 4 of this Agreement.

                           f.       Indemnification.

                                   (1) To the extent permitted by law, the
Company shall indemnify and hold each Investor, the partners or officers,
directors and stockholders of each Investor, legal counsel and accountants for
each Investor, any underwriter (as defined in the Securities Act) for such
Investor and each person, if any, who controls such Investor or underwriter
within the meaning of the Securities
<PAGE>

Act or the Exchange Act, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or any state securities laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations in
connection with the Registration Statement (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities laws or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
laws; and the Company will reimburse each such Investor, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 6.f(l) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Investor, underwriter or controlling person; provided
further, however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Investor or
underwriter, or any person controlling such Investor or underwriter, from whom
the person asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if the Company shall have furnished to the Investor a
revised prospectus (by amendment or supplement) which cures the defect giving
rise to such loss, claim, damage or liability and if a copy of such revised
prospectus (as then amended or supplemented) was not sent or given by or on
behalf of such Investor or underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of the
shares to such person.

                                   (2) To the extent permitted by law, each
selling Investor shall indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, legal counsel and accountants for the Company, any underwriter, any other
Investor selling securities in such registration statement and any controlling
person of any such underwriter or other Investor, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or any state
securities laws, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Investor expressly for use in connection with such registration; and each such
Investor will reimburse any person intended to be indemnified pursuant to this
subsection 6.f(2), for any legal or other expenses reasonably incurred by such
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 6.f(2) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor (which consent shall
not be unreasonably withheld), provided that in no event shall any indemnity in
the aggregate under this subsection 6.f(2) exceed the gross proceeds from the
offering received by such Investor.

                                   (3) Promptly after receipt by an indemnified
party under this Section 6.f of notice of the commencement of any action
(including any governmental action), such
<PAGE>

indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6.f, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 6.f, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 6.f.

                                   (4) If the indemnification provided for in
this Section 6.f is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any loss, liability, claim, damage or
expense referred to herein, then the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relevant intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

                                   (5) Notwithstanding the foregoing, to the
extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.

                           g. Payments by the Company. The Company shall use its
best efforts to cause the Registration Statement required to be filed pursuant
to Section 6.a hereof to become effective as soon as practicable, but in no
event later than the 120th day after the Closing Date (the "Registration
Deadline"). If (i) the Registration Statement(s) covering the Conversion Stock
required to be filed by the Company pursuant to Section 6.a hereof is not
declared effective by the SEC on or before the Registration Deadline, (ii) after
the Registration Statement has been declared effective by the SEC and prior to
the expiration of the Registration Period, sales of all the Registrable
Securities cannot be made pursuant to the Registration Statement or (iii) the
Common Stock is not listed or included for quotation on the Nasdaq National
Market, the Nasdaq SmallCap Market, the New York Stock Exchange, the America
stock Exchange, the OTC Bulletin Board, or such other exchange or market as the
Company may designate and qualify under as its principal exchange at any time
during the Registration Period, then the Company will make payments to the
Investor in such amounts and at such times as shall be determined pursuant to
this Section 6.g as liquidated damages to the Investor by reason of any such
delay in or reduction of their ability to sell the Conversion Stock. The Company
shall pay to each holder an amount equal to (i) the Purchase Price of the
Preferred Shares then held by such holder (and, in the case of holders of
Conversion Stock, the Purchase Price of Preferred Shares from which such
Conversion Stock was converted) (in each case, the "Aggregate Share Price"),
multiplied by (ii) one percent, multiplied by (iii) the sum of (x) the number of
months (pro rated for partial months) after the Registration Deadline and prior
to the date the Registration Statement filed pursuant to Section 6.a is declared
effective by the SEC, plus (y) the number of months (prorated for partial
months) prior to the expiration of the Registration Period that sales of all the
Registrable Securities cannot be made pursuant
<PAGE>

to the Registration Statement after the Registration Statement has been declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's failure to properly supplement or amend the prospectus included
therein in accordance with the terms of this Agreement or otherwise); provided,
however, that there shall be excluded from each such period any delays which are
solely attributable to (i) the Investor's failure to timely provide information
to the Company in accordance with Section 6.d hereof, or (ii) changes required
by the Investor in the Registration Statement with respect to information
relating to the Investor, including, without limitation, changes to the plan of
distribution. For example, if the Registration Statement is not effective by the
Registration Deadline, the Company would pay $10,000 for each $1,000,000 of
Aggregate Share Price for each month after the Registration Deadline until the
Registration Statement becomes effective (prorated for partial months). Such
amount shall be paid in cash with fifteen days after the end of each period that
gives rise to such obligation. If any such payments of cash are not timely made,
each Investor holding Preferred Shares can elect to add the amount of such
payments to the stated value of the Preferred Stock then held by such Investor
and such amounts shall thereafter be convertible into Common Stock at the
"Conversion Price" (as defined in the Articles of Amendment).

                  7. Conditions Precedent to Investor's Obligations. The
obligations of Investor under subsection 1.a of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions,
unless expressly waived in writing by the Investor:

                           a. The representations and warranties of the Company
contained in Section 3 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of such Closing, except for representations and warranties made as of a
particular date, which shall be true and correct as of such date.

                           b. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

                           c. The President of the Company shall deliver to
Investor at the Closing a certificate stating that the conditions specified in
Sections 7.a and 7.b have been fulfilled and stating that there shall have been
no material adverse change in the business, affairs, operations, properties,
assets or financial condition of the Company since the date of this Agreement.

                           d. The Company shall have caused the Articles of
Amendment to be filed with the Secretary of State of the State of North Carolina
in accordance with the laws thereof.

                           e. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

                           f. The Company shall have delivered to Investor a
certificate representing the Preferred Shares, duly registered on the books of
the Company in the name of the Investor.

                           g. The Company shall have delivered to Investor the
Warrant.

                           h. Investor shall have received from Wyrick Robbins
Yates & Ponton LLP, counsel for the Company, an opinion, dated as of the Closing
Date, in form and substance reasonably satisfactory to counsel for the Davenport
& Company LLC.
<PAGE>

                  8. Conditions Precedent to the Company's Obligations. The
obligations of the Company to Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investor, unless expressly waived in writing by the Company:

                           a. The representations and warranties of the Investor
contained in Section 4 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of such Closing, except for representations and warranties made as of a
particular date, which shall be true and correct as of such date.

                           b. The Investor shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.

                           c. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

                           d. The Investor shall have delivered the aggregate
Purchase Price for the Preferred Shares and the Warrant.

                  9. Fees and Expenses. Each of Investor and the Company agrees
to pay its own expenses incident to the performance of its obligations
hereunder, including, but not limited to the fees, expenses and disbursements of
such party's counsel, except as is otherwise expressly provided in this
Agreement.

                  10. Survival of the Representations, Warranties, etc. The
respective representations, warranties, and agreements made herein by or on
behalf of the parties hereto shall remain in full force and effect for a period
of two years from the Closing Date, regardless of any investigation made by or
on behalf of the other party to this Agreement or any officer, director or
employee of, or person controlling or under common control with, such party and
will survive delivery of and payment for the Preferred Shares and any Conversion
Stock issuable hereunder.

                  11.      Termination.

                           a. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing as follows:

                                   (i) by mutual written consent of the Company
and the Investor; or

                                   (ii) by either the Company or the Investor if
the Closing shall not have occurred on or before April 30, 2000 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 11 shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the Termination
Date.

                           b. In the event of termination of this Agreement by
either the Company or Investor as provided in this Section 11, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of the Company or Investor, other than the provisions of
<PAGE>

this Section 11 and Section 13, and except to the extent that such termination
results from the willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.

                  12. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon delivery by confirmed facsimile or reliable international
courier service or upon personal delivery to the party to be notified.

                  13.      Miscellaneous.

                           a. This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.

                           b. This Agreement shall inure to the benefit of and
be binding upon the parties hereto, their respective successors and assigns.

                           c. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware without regard to
principles of conflict of laws.

                           d. The provisions of this Agreement are severable,
and if any clause or provision hereof shall be held invalid, illegal or
unenforceable in whole or in part, such invalidity or unenforceability shall not
in any manner affect any other clause or provision of this Agreement.

                           e. The headings of the sections of this document have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.

                           f. This Agreement (including the terms and conditions
of the Articles of Amendment relating to the Preferred Shares) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties hereto with respect to the subject matter
of this Agreement and is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.

                           g. The term "affiliate" is used herein as defined in
Rule 144(a)(1) under the Securities Act.

                           h. Except as otherwise expressly set forth in this
Agreement, the observance of any term of this Agreement may be waived (either
generally or in a particular in-stance and either retroactively or
prospectively), with the written consent of the Company and the Investor.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.



                                                      PHARMANETICS, INC.


                                                      By:______________________
                                                      Name:  John P. Funkhouser
                                                      Title: President and CEO

No. of Preferred Shares                           INVESTOR
                        --------------------



                                                      __________________________
                                                              (Print Name)

                                                      By:_______________________
                                                      Name:
                                                      Title:






                                                                   Exhibit 10.25

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

                        WARRANT TO PURCHASE COMMON STOCK
                                       of
                               PHARMANETICS, INC.

                          VOID AFTER FEBRUARY 25, 2005

No. __

                  This Warrant is issued to ________________ ("Holder")
by PHARMANETICS, INC., a North Carolina corporation (the "Company"), on February
25, 2000 (the "Warrant Issue Date"). This Warrant is issued pursuant to the
terms of that certain Series A Preferred Stock and Warrant Purchase Agreement
dated as of February 24, 2000 (the "Purchase Agreement") by and between the
Company and Holder.

                  1. Purchase Shares. Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at
the principal office of the Company (or at such other place as the Company shall
notify the Holder in writing), to purchase from the Company up to
_________________ fully paid and nonassessable shares of Common Stock of the
Company, as constituted on the Warrant Issue Date (the "Common Stock"). The
number of shares of Common Stock issuable pursuant to this Section 1 (the
"Shares") shall be subject to adjustment pursuant to Section 8 hereof.

                  2. Exercise Price. The purchase price per share for the Shares
shall be $10.00, as adjusted from time to time pursuant to Section 8 hereof (the
"Exercise Price").

                  3. Exercise Period. This Warrant shall be exercisable, in
whole or in part, during the term commencing on the date three months following
the Warrant Issue Date and ending at 5:00 p.m. on February 25, 2005; provided,
however, that in the event of (a) the closing of the Company's sale or transfer
of all or substantially all of its assets, or (b) the closing of the acquisition
of the Company by another entity by means of merger, consolidation or other
transaction or series of related transactions, resulting in the exchange of the
outstanding shares of the Company's capital stock such that at least 50% of the
voting power of the Company is transferred, this Warrant shall, on the date of
such event, no longer be exercisable and become null and void. In the event of a
proposed transaction of the kind described above, the Company shall notify the
Holder at least fifteen (15) business days prior to the consummation of such
event or transaction.
<PAGE>

                  4. Method of Exercise. While this Warrant remains outstanding
and exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:

                           (a) the surrender of the Warrant, together with a
duly executed copy of the form of Notice of Election attached hereto, to the
Secretary of the Company at its principal offices; and

                           (b) the payment to the Company of an amount equal to
the aggregate Exercise Price for the number of Shares being purchased.

                  5. Net Exercise. In lieu of exercising this Warrant pursuant
to Section 4, the Holder may elect to receive, without the payment by the Holder
of any additional consideration, shares of Common Stock equal to the value of
this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:

                                              Y (A - B)
                                              ---------
                                   X =            A

         Where:            X  =    The number of shares of Common Stock to be
                                   issued to the Holder pursuant to this net
                                   exercise;

                           Y  =    The number of Shares in respect of which the
                                   net issue election is  made;

                           A  =    The fair market value of one share of the
                                   Common Stock at the time the net issue
                                   election is made;

                           B =     I The Exercise Price (as adjusted to the date
                                   of the net issuance).

For purposes of this Section 5, the fair market value of one share of Common
Stock as of a particular date shall be determined as follows: (i) if traded on a
securities exchange or through the Nasdaq National or SmallCap Market, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the thirty (30) day period ending three (3) days prior to the
net exercise election; (ii) if traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty (30) day period ending three (3) days prior to the
net exercise; and (iii) if there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the Board of
Directors of the Company.

                  6. Certificates for Shares. Upon the exercise of the purchase
rights evidenced by this Warrant, one or more certificates for the number of
Shares so purchased shall be issued as soon as practicable thereafter (with
appropriate restrictive legends, if applicable), and in any event within thirty
(30) days.

                  7. Issuance of Shares. The Company covenants that the Shares,
when issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof.
<PAGE>

                  8. Adjustment of Exercise Price and Number of Shares. The
number of and kind of securities purchasable upon exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time as follows:

                           (a) Subdivisions, Combinations and Other Issuances.
If the Company shall at any time prior to the expiration of this Warrant
subdivide its Common Stock, by split-up or otherwise, or combine its Common
Stock, or issue additional shares of its Common Stock as a dividend with respect
to any shares of its Common Stock, the number of Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.

                           (b) Reclassification, Reorganization and
Consolidation. In case of any reclassification, capital reorganization, or
change in the Common Stock of the Company (other than as a result of a
subdivision, combination, or stock dividend provided for in Section 8(a) above),
then, as a condition of such reclassification, reorganization, or change, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so that the
Holder shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall be made
with respect to the rights and interest of the Holder so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.

                           (c) Issuances at Less Than Fair Market Value. Upon
the issuance or sale by the Company of:

                                    (4) Common Stock for a consideration per
                               share less than the Fair Market Value (as defined
                               below) in effect immediately prior to the time of
                               such issue or sale; or

                                    (5) any Stock Purchase Rights (as defined
                               below) where the consideration per share for
                               which shares of Common Stock may at any time
                               thereafter be issuable upon exercise thereof (or,
                               in the case of Stock Purchase Rights exercisable
                               for the purchase of Convertible Securities, upon
                               the subsequent conversion or exchange of such
                               Convertible Securities) shall be less than the
                               Fair Market Value in effect immediately prior to
                               the time of the issue or sale of such Stock
                               Purchase Rights; or

                                    (6) any Convertible Securities where the
                               consideration per share for which shares of
                               Common Stock may at any time thereafter be
                               issuable pursuant to the terms of such
                               Convertible Securities shall be less than the
<PAGE>

                               Fair Market Value in effect immediately prior to
                               the time of the issue or sale of such Convertible
                               Securities;

other than an issuance of Common Stock pursuant to Subsections 8(a), 8(b) or
8(d)(6) hereof (any such issuance shall be referred to hereinafter as a
"Dilutive Issuance"), then forthwith upon such issue or sale, the Exercise Price
shall be reduced to the Weighted Average Price (as defined below).

         The "Weighted Average Price" shall be determined by the following
formula:

                                             EP(1) = EP *  N + C
                                                           -------
                                                           N + AS
         where:

                  EP(1) =    the Weighted Average Price;

                  EP    =    the former Exercise Price;

                  N     =    the number of shares of Common Stock outstanding
                             immediately prior to such issuance (or deemed
                             issuance) assuming exercise or conversion of all
                             outstanding securities exercisable for or
                             convertible into Common Stock;

                   C    =    the number of shares of Common Stock that the
                             aggregate consideration received or deemed to be
                             received by the Company for the total number of
                             additional securities so issued or deemed to be
                             issued would purchase if the purchase price per
                             share were equal to the Fair Market Value;

         AS  =    the number of shares of Common Stock so issued or deemed to
                  be issued



Notwithstanding the foregoing, no Exercise Price shall at such time be reduced
if such reduction would be an amount less than $.01, but any such amount shall
be carried forward and deduction with respect thereto made at the time of and
together with any subsequent reduction that, together with such amount and any
other amount or amounts so carried forward, shall aggregate $.01 or more.
Provided, further, that exercise of Stock Purchase Rights or conversion of
Convertible Securities shall not be deemed a Dilutive Issuance.

                           (d) For purposes of this Section 8, the following
provisions will be applicable:

                               (6)  "Convertible Securities" shall mean
                                    evidences of indebtedness, shares of stock
                                    (including, without limitation, the Series A
                                    Preferred Stock) or other securities that
                                    are convertible into or exchangeable for,
                                    with or without payment of additional
                                    consideration, shares of Common Stock.

                               (7)  "Stock Purchase Rights" shall mean any
                                    warrants, options or other rights to
                                    subscribe for, purchase or otherwise acquire
                                    any shares of Common Stock or any
                                    Convertible Securities.

                               (8)  Convertible Securities and Stock Purchase
                                    Rights shall be deemed outstanding and
                                    issued or sold at the time of such issue or
                                    sale.
<PAGE>

                               (9)  Determination of Consideration. The
                                    "consideration actually received" by the
                                    Company for the issuance, sale, grant or
                                    assumption of shares of Common Stock,
                                    irrespective of the accounting treatment of
                                    such consideration, shall be valued as
                                    follows:


                                    (A) Cash Payment. In the case of cash, the
net amount received by the Company after deduction of any accrued interest or
dividends and before deducting any expenses paid or incurred and any
underwriting commissions or concessions paid or allowed by the Company in
connection with such issue or sale;

                                    (B) Noncash Payment. In the case of
consideration other than cash, the value of such consideration, which shall not
include the value of any Convertible Securities being converted or exchanged, as
determined by the Board of Directors in good faith, after deducting any accrued
interest or dividends; and

                                    (C) Stock Purchase Rights and Convertible
Securities. The total consideration, if any, received by the Company as
consideration for the issuance of the Stock Purchase Rights or the Convertible
Securities, as the case may be, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such Stock
Purchase Rights or upon the conversion or exchange of such Convertible
Securities, as the case may be, in each case after deducting any accrued
interest or dividends.

                               (10) Readjustment of Conversion Price. In the
                                    event of any change in (i) the
                                    consideration, if any, payable upon exercise
                                    of any Stock Purchase Rights or upon the
                                    conversion or exchange of any Convertible
                                    Securities or (ii) the rate at which any
                                    Convertible Securities are convertible into
                                    or exchangeable for shares of Common Stock,
                                    the applicable Conversion Price as computed
                                    upon the original issue thereof shall
                                    forthwith be readjusted to the Conversion
                                    Price that would have been in effect at such
                                    time had such Stock Purchase Rights or
                                    Convertible Securities provided for such
                                    changed purchase price, consideration or
                                    conversion rate, as the case may be, at the
                                    time initially granted, issued or sold. On
                                    the expiration of any Stock Purchase Rights
                                    not exercised or of any right to convert or
                                    exchange under any Convertible Securities
                                    not exercised, the applicable Conversion
                                    Price then in effect shall forthwith be
                                    increased to the Conversion Price that would
                                    have been in effect at the time of such
                                    expiration had such Stock Purchase Rights or
                                    Convertible Securities never been issued. No
                                    readjustment of the Exercise Price pursuant
                                    to this Subsection shall require any
                                    adjustment to the amount paid or number of
                                    shares of Common Stock received by any
                                    Warrant holder upon any exercise of the
                                    Warrant prior to the date upon which such
                                    readjustment to the Exercise Price shall
                                    occur.

                                    (6) Exclusions. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment of the Exercise Price in the case of (i) the issuance or sale of
options, or the shares of stock issuable upon exercise of such options, to
purchase shares of Common Stock to directors, officers, employees or consultants
of the Corporation pursuant to stock options or stock purchase plans or
agreements, pursuant to plans or arrangements approved by the Board of
Directors, (ii) the issuance of Common Stock upon conversion of the Series A
Preferred Stock and (iii) the issuance of securities in connection with a bona
fide business acquisition of or by the
<PAGE>

Company, whether by merger, consolidation, sale of assets, sale of stock or
otherwise. The issuances or sales described in the subsections 8(a) and (b)
shall be ignored for purposes of calculating any adjustment to the Exercise
Price.

                                    (7) Fair Market Value. For purposes of this
Section 8 "Fair Market Value" shall be equal to the lesser of: (a) the closing
sale price of the Company's Common Stock on the effective date of issuance, or
(b) the average of the closing sale price of the Company's Common Stock or the
15 trading days prior to the effective date of issuance, both prices as reported
on Nasdaq or such other principal exchange on which such Common Stock is then
traded.

                                     (e) Notice of Adjustment. When any
adjustment is required to be made in the number or kind of shares purchasable
upon exercise of the Warrant, or in the Warrant Price, the Company shall
promptly notify the Holder of such event and of the number of shares of Common
Stock or other securities or property thereafter purchasable upon exercise of
this Warrant.

                  9. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.

                  10. No Stockholder Rights. Prior to exercise of this Warrant,
the Holder shall not be entitled to any rights of a stockholder with respect to
the Shares, including (without limitation) the right to vote such Shares,
receive dividends or other distributions thereon, exercise preemptive rights or
be notified of stockholder meetings, and such Holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company. However, nothing in this Section 10 shall limit the right of the Holder
to be provided any notices required under this Warrant or the Purchase
Agreement.

                  11. Transfers of Warrant. Subject to compliance with
applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable in whole or in part by the Holder to any person or
entity upon written notice to the Company. The transfer shall be recorded on the
books of the Company upon the surrender of this Warrant, properly endorsed, to
the Company at its principal offices, and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer and, if
so requested by the Company, an opinion of counsel to the effect that the
transfer may be effected in accordance with applicable securities laws. In the
event of a partial transfer, the Company shall issue to the holders one or more
appropriate new warrants.

                  12. Successors and Assigns. The terms and provisions of this
Warrant and the Purchase Agreement shall inure to the benefit of, and be binding
upon, the Company and the Holders hereof and their respective successors and
assigns.

                  13. Amendments and Waivers. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Holder. Any
waiver or amendment effected in accordance with this Section shall be binding
upon each holder of any Shares purchased under this Warrant at the time
outstanding (including securities into which such Shares have been converted),
each future holder of all such Shares, and the Company.

                  14. Notices. All notices required under this Warrant shall be
deemed to have been given or made for all purposes (i) upon personal delivery,
(ii) upon confirmation receipt that the communication was successfully sent to
the applicable number if sent by facsimile; (iii) one day after
<PAGE>

being sent, when sent by professional overnight courier service, or (iv) five
days after posting when sent by registered or certified mail. Notices to the
Company shall be sent to the principal office of the Company (or at such other
place as the Company shall notify the Holder hereof in writing). Notices to the
Holder shall be sent to the address of the Holder on the books of the Company
(or at such other place as the Holder shall notify the Company hereof in
writing).

                  15. Attorneys' Fees. If any action of law or equity is
necessary to enforce or interpret the terms of this Warrant, the prevailing
party shall be entitled to its reasonable attorneys' fees, costs and
disbursements in addition to any other relief to which it may be entitled.

                  16. Captions. The section and subsection headings of this
Warrant are inserted for convenience only and shall not constitute a part of
this Warrant in construing or interpreting any provision hereof.

                  17. Governing Law. This Warrant shall be governed by the laws
of the State of Delaware.

<PAGE>


                  IN WITNESS WHEREOF, the Company caused this Warrant to be
executed by an officer thereunto duly authorized.

                                             PHARMANETICS, INC.

                                             By:______________________________
                                             John P. Funkhouser, President and
                                             Chief Executive Officer



<PAGE>

                               .NOTICE OF EXERCISE
                               --------------------

To:   Chief Executive Officer
      PharmaNetics, Inc.
      5301 Departure Drive
      Raleigh, NC  27616

         The undersigned hereby elects to [CHECK APPLICABLE SUBSECTION]:
_______  (a)       Purchase ______________ shares of Common Stock of
                  PharmaNetics, Inc., pursuant to the terms of the attached
                  Warrant and payment of the Exercise Price per share required
                  under such Warrant accompanies this notice;

                  OR

_______   (b)     Exercise the attached Warrant for [all of the shares] [____ of
                  the shares] [CROSS OUT INAPPLICABLE PHRASE] purchasable under
                  the Warrant pursuant to the net exercise provisions of Section
                  5 of such Warrant.

                                           WARRANTHOLDER:


                                           By:_____________________________

                                           Name:___________________________

                                           Title:__________________________

                                           Address:________________________
                                                   ________________________

Date:_________________

Name in which shares should be registered:

____________________________



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