SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PHARMANETICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
--------
2) Aggregate number of securities to which transaction applies: N/A
---------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: N/A
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5) Total fee paid: N/A
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( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
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2) Form, Schedule, or Registration Statement No.: N/A
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3) Filing Party: N/A
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4) Date Filed: N/A
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<PAGE>
PHARMANETICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 2000
----------------------------------------
TO THE SHAREHOLDERS OF
PHARMANETICS, INC.
The Annual Meeting of Shareholders of PharmaNetics, Inc. (the "Company")
will be held at the Carolina Country Club, 2500 Glenwood Avenue, Raleigh, North
Carolina, on Tuesday May 9, 2000, at 10:30 a.m. for the following purposes:
1. To elect a board of directors;
2. To approve an amendment to the Company's Articles of Incorporation to
increase the total number of authorized shares of common stock from
10,000,000 to 40,000,000;
3. To reserve an additional 350,000 shares for issuance to employees,
consultants and directors under the Company's 1995 Stock Plan;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent auditors of the Company for the year ending December 31,
2000; and
5. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
The foregoing items are more fully described in the Proxy Statement
accompanying this Notice.
The Board of Directors has fixed the close of business on March 31, 2000
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting or any adjournment or adjournments thereof. All such
shareholders are cordially invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person, even if such shareholder returned a proxy.
The Company's Proxy Statement and proxy is submitted herewith along with
the Company's Annual Report for the year ended December 31, 1999.
IMPORTANT -- YOUR PROXY IS ENCLOSED
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, SHAREHOLDERS ARE URGED TO
EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
/s/ John P. Funkhouser
JOHN P. FUNKHOUSER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Raleigh, North Carolina
April 11, 2000
<PAGE>
PHARMANETICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited by the Board of Directors of PharmaNetics,
Inc., a North Carolina corporation (the "Company"), for use at the Company's
Annual Meeting of Shareholders to be held at the Carolina Country Club, 2500
Glenwood Avenue, Raleigh, North Carolina, at 10:30 a.m. on Tuesday, May 9,
2000, and any adjournments thereof (the "Meeting"). The cost of soliciting
proxies will be borne by the Company. In addition to solicitation of proxies by
mail, employees of the Company, without extra remuneration, may solicit proxies
personally or by telephone. The Company will reimburse brokerage firms and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy materials to beneficial owners and seeking
instruction with respect thereto. The mailing address of the principal
executive offices of the Company is 5301 Departure Drive, Raleigh, North
Carolina 27616. Copies of this Proxy Statement and accompanying proxy card were
mailed to shareholders on or about April 11, 2000.
REVOCABILITY OF PROXIES
You may revoke your proxy at any time before it is voted by giving a later
proxy or written notice to the Company (Attention: Paul Storey, Secretary), or
by attending the Meeting and voting in person.
VOTING
When the enclosed proxy is properly executed and returned (and not
subsequently properly revoked), the shares it represents will be voted in
accordance with the directions indicated thereon, or, if no direction is
indicated thereon, it will be voted: (i) FOR the election of the nominees for
director identified below; (ii) FOR approving an amendment to the Company's
Articles of Incorporation to increase the total number of authorized shares of
common stock from 10,000,000 to 40,000,000; (iii) FOR reserving an additional
350,000 shares for issuance to employees, consultants and directors under the
Company's 1995 Stock Plan; (iv) FOR ratification of the appointment of
PricewaterhouseCoopers LLP, Raleigh, North Carolina, as independent auditors of
the Company for the year ending December 31, 2000; and (v) in the discretion of
the proxies with respect to any other matters properly brought before the
shareholders at the Meeting.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Meeting but will not be counted in tabulation of votes cast on proposals
presented at the Meeting. While there is no definitive statutory or case law
authority in North Carolina with regard to these matters, the Company believes
that its intended treatment of abstentions and broker non-votes at the Meeting
is appropriate.
RECORD DATE
Only the holders of record of the Company's Common Stock and Series A
Preferred Stock at the close of business on the record date, March 31, 2000
(the "Record Date"), are entitled to notice of and to vote at the Meeting. On
the Record Date, 7,524,334 shares of Common Stock and 120,000 shares of Series
A Preferred Stock were outstanding. Shareholders will be entitled to one vote
for each share of Common Stock and ten votes for each share of Series A
Preferred Stock held on the Record Date.
1
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors constituting the
Board of Directors shall be no less than one and no more than nine. There are
currently six directors serving on the board and the number authorized for
election at the meeting is six. Therefore, six directors are to be elected to
serve for one year, until the election and qualification of their successors,
and it is intended that proxies, not limited to the contrary, will be voted FOR
all of the management nominees named below. If any nominee is unable or
declines to serve as a director at the time of the Meeting, the individuals
named in the enclosed proxy may exercise their discretion to vote for any
substitute proposed by the Board of Directors. It is not anticipated that any
nominee listed below will be unable or will decline to serve as a director.
Under the Company's Bylaws, shareholders desiring to nominate a person for
election at the Meeting were required to give notice to the Company by March
20, 2000. Because no timely notice has been received, shareholder nominations
will not be permitted. None of the nominees is related by blood, marriage or
adoption to any other nominee or any executive officer of the Company.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE DIRECTOR SINCE
- ------------------------------------- ----- ---------------
<S> <C> <C>
John P. Funkhouser .......... 46 1993
William A. Hawkins .......... 46 1995
John K. Pirotte ............. 50 1996
Stephen R. Puckett .......... 47 1996
Philip R. Tracy ............. 58 1996
Frances L. Tuttle ........... 52 1999
</TABLE>
JOHN P. FUNKHOUSER was elected President, Chief Executive Officer and a
director of the Company in October 1993 upon the Company's acquisition of Coeur
Laboratories, Inc., which manufactures and sells disposable power injection
syringes for cardiology and radiology procedures, as well as custom
angiographic procedure kit manifolds ("Coeur"). Mr. Funkhouser also served as
President and Chief Executive Officer of Coeur from 1992 to the Company's sale
of Coeur in June 1999. Before his employment with Coeur, Mr. Funkhouser was a
General Partner with Hillcrest Group, a venture capital firm, and worked for
over nine years in managing venture capital portfolio companies. Mr. Funkhouser
holds a B.A. from Princeton University and an M.B.A. from the University of
Virginia.
WILLIAM A. HAWKINS was elected a director of the Company in January 1995.
Since June 1998, Mr. Hawkins has been the President and Chief Executive Officer
of Novoste Corporation, a medical device company focused on the treatment of
coronary artery disease. From April 1997 until he joined Novoste Corporation,
Mr. Hawkins was a Vice President of American Home Products Corporation, a
pharmaceutical company. From October 1995 until he joined American Home
Products, Mr. Hawkins was President of Ethicon Endo-Surgery, Inc., a medical
device company that is a subsidiary of Johnson & Johnson. From January 1995 to
October 1995, Mr. Hawkins served as Vice President in charge of U.S. operations
of Guidant Corporation and President of Devices for Vascular Intervention, a
medical device company and a subsidiary of Guidant. Prior to joining Guidant,
Mr. Hawkins held several positions with IVAC Corporation, most recently serving
as President and Chief Executive Officer from 1991 until 1995. Mr. Hawkins
holds a B.S. in Engineering and Biomedical Engineering from Duke University and
an M.B.A. from the University of Virginia.
JOHN K. PIROTTE has been Chairman and Chief Executive Officer of CORPEX
Technologies Incorporated, a privately held company that develops and markets
surface active chemical technology, since 1990. In addition, Mr. Pirotte has
operated a private investment company, was Chief Financial Officer from 1979 to
1981 and Chairman and Chief Executive Officer from 1981 until 1988 of The
Aviation Group, Inc., and served as a manager of Acquisition Advisory Services
for an international public accounting firm. He is a founding director of North
Carolina Enterprise Corp., a venture capital fund. Mr. Pirotte holds a B.A.
from Princeton University and an M.S. from New York University Graduate School
of Business Administration.
STEPHEN R. PUCKETT has served as Chairman of the Board of Directors and
President of MedCath Incorporated, a provider of cardiology and cardiovascular
services that he founded in 1988. He has also served as Executive Vice
President and Chief Operating Officer of the Charlotte Mecklenburg Hospital
Authority. Mr. Puckett holds a B.S. and an M.S. in Health Management from the
University of Alabama.
PHILIP R. TRACY was President and CEO of Burroughs Wellcome Co., the
United States subsidiary of Wellcome plc, a global pharmaceutical company, from
1989 until the acquisition of Wellcome by Glaxo plc in 1995. Prior to 1989, he
served in various legal capacities with Burroughs-Wellcome, including Vice
President and General Counsel. He has served on the
2
<PAGE>
boards of Wellcome Plc, the Pharmaceutical Research and Manufacturers of
America, and the Non-Prescription Drug Manufacturers Association. He is
currently Of Counsel to the law firm of Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P. and serves as a venture partner with Intersouth
Partners, a venture capital firm based in North Carolina. Mr. Tracy holds a
B.A. from the University of Nebraska and an L.L.B. from George Washington
University School of Law, and has attended the Senior Executive Program at
Stanford University.
FRANCES L. TUTTLE was elected a director of the Company in July 1999.
Since February 1999, Ms. Tuttle has served as Senior Vice President -- Critical
Care Systems of Bayer Diagnostics, a Business Group of the worldwide Bayer
Group. From 1979 to 1999, Ms. Tuttle served in various positions within Chiron
Diagnostics, which was purchased by Bayer Diagnostics in September 1998, most
recently as Senior Vice President of the Immunodiagnostics division. Ms. Tuttle
holds a B.S. in accounting from the University of North Carolina at Chapel Hill
and an M.B.A. from Harvard Business School.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is under the general management of the Board
of Directors as provided by the laws of North Carolina and the Bylaws of the
Company. During the year ended December 31, 1999, the Board of Directors held
six formal meetings, excluding actions that were taken by unanimous written
consent during the year. Of the members serving on the board for the entire
year, each attended at least 75% of the 1999 meetings of the Board of Directors
and Board committees of which they were a member, except for Mr. Hawkins who
attended 67% of the meetings.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board has no Nominating Committee. The Audit
Committee currently consists of Messrs. Pirotte and Tracy. The Audit Committee
held two meetings during 1999. The Audit Committee makes recommendations to the
Board of Directors concerning its review of the Company's internal controls,
accounting system and the annual audit, and regarding the selection of
independent auditors. The Compensation Committee currently consists of Messrs.
Pirotte and Puckett. The Compensation Committee recommends employee salaries
and incentive compensation to the Board of Directors and administers the
Company's stock option plans. During 1999, the Compensation Committee held two
meetings, excluding actions that were taken by unanimous written consent during
the year.
VOTE REQUIRED
The nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted at the Meeting shall be
elected as directors of the Company.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE MANAGEMENT NOMINEES LISTED ABOVE.
PROPOSAL NO. 2 -- APPROVAL OF AN INCREASE IN THE NUMBER
OF AUTHORIZED SHARES OF THE COMPANY
The Board of Directors has approved and recommends that the shareholders
adopt an amendment to the Amended and Restated Articles of Incorporation of the
Company to increase the total authorized common shares of the Company from
10,000,000 shares to 40,000,000 shares.
Of the 10,000,000 shares of common stock currently authorized, 7,524,334
shares have been issued, 1,200,000 shares have been reserved for issuance upon
conversion of the Series A Preferred Stock and 1,412,771 have been reserved for
issuance upon exercise of outstanding options and warrants. Thus, additional
shares of common stock are needed to enable the Company to fulfill its existing
and future obligations to its Preferred Shareholders and obligations under the
Company's stock option plan for employees, directors and consultants upon
exercise of options. The Board believes that the increased number of authorized
shares of common stock also will provide several long-term advantages to the
Company and its shareholders. The Company could pursue acquisitions or enter
into other transactions involving the issuance of stock that provide the
potential for growth and profit. In addition, the availability of additional
shares of authorized common stock would make any future transactions dependent
on the issuance of additional shares less likely to be undermined by delays and
uncertainties occasioned by the need to obtain shareholder authorization prior
to the consummation of such transactions.
VOTE REQUIRED
Approval of the increase in the number of authorized shares of the Company
requires the affirmative vote of the holders of at least at majority of the
outstanding shares of the Company's common stock and Preferred Stock eligible
to vote and voting together as a single class.
3
<PAGE>
Votes withheld on this proposal will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
and will be treated as shares represented and voting on this proposal at the
Meeting. In accordance with North Carolina law, abstentions and broker
non-votes will be counted for the purpose of determining whether a quorum is
present at the Meeting. Abstentions and broker non-votes, if any, will have the
same effect as a negative vote on this proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS VOTING
"FOR" THE APPROVAL OF AN INCREASE IN THE NUMBER OF AUTHORIZED COMMON SHARES OF
THE COMPANY.
PROPOSAL NO. 3 -- APPROVAL OF AMENDMENT TO THE 1995 STOCK PLAN
GENERAL
The Company's 1995 Stock Plan (the "1995 Plan") was adopted by the Board
of Directors in September 1995 and approved by the shareholders in November
1995. The 1995 Plan, as amended, authorizes for issuance a maximum of 1,188,150
shares of Common Stock, 350,000 of which are subject to shareholder approval at
the Meeting. As of March 31, 2000, without giving effect to the proposed
amendment, 824,525 shares had either been issued under the 1995 Plan or were
subject to outstanding options thereunder and only 13,625 shares remained
available for future grant thereunder, which the Board of Directors believes is
insufficient to meet the Company's anticipated needs with respect to the
issuance of additional options to employees (including new hires), consultants
and directors of the Company.
The 1995 Plan provides for grants of options to employees, consultants and
directors of the Company and its affiliates. It also allows for the grant of
stock bonuses and purchase rights, but no purchase rights have been granted to
date. As of March 31, 2000, all employees are eligible to receive grants under
the 1995 Plan. Each stock option granted under the 1995 Plan is evidenced by a
written stock option agreement between the Company and the optionee. The
acceptable methods of payment for shares issued upon exercise of an option
consist of cash, check, and, in the discretion of the Board of Directors, by
promissory note, net exercise or any combination of the foregoing. The Company
has full recourse with respect to any promissory note given by an optionee. The
exercise price of options granted under the 1995 Plan is determined on the date
of grant, and in the case of incentive stock options (within the meaning of
Section 422 of the Code) must be at least 100% of the fair market value at the
time of grant. As of March 31, 2000, the fair market value of the Company's
Common Stock, as quoted on the Nasdaq Stock Market, was $14.875 per share.
At the time an option is granted, the Board (or its committee) determines
the period within which the option may be exercised. Options granted to
employees under the 1995 Plan generally become exercisable in increments, based
on the optionee's continued employment with the Company, over a period of four
years. The form of option agreement generally provides that options granted
under the 1995 Plan expire ten years from the date of grant. Options granted
pursuant to the 1995 Plan are not transferable by the optionee, other than by
will or the laws of descent and distribution, and are exercisable during the
optionee's lifetime only by the optionee.
The 1995 Plan may be administered by the Board of Directors of the Company
or a committee of directors designated by the Board. The Compensation Committee
currently administers the 1995 Plan. The Board or Committee may amend the 1995
Plan at any time or from time to time or may terminate the 1995 Plan without
the approval of the shareholders, provided that shareholder approval is
required for any amendment to the 1995 Plan requiring shareholder approval
under applicable law as in effect at the time. However, no action by the Board
of Directors, Committee or shareholders may alter or impair any option
previously granted under the 1995 Plan. The Board or Committee may accelerate
the exercisability of any option or waive any condition or restriction
pertaining to such option at any time. The 1995 Plan will terminate in
September 2005, unless terminated sooner by the Board or Committee.
TAX CONSEQUENCES OF OPTIONS
An optionee who is granted an incentive stock option will generally not
recognize taxable income either at the time the option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and more than one year after exercising the option, any
gain or loss upon disposition will be treated as long-term capital gain or
loss. If these holding periods are not satisfied, the optionee will recognize
ordinary income at the time of sale or exchange equal to the difference between
the exercise price and the lower of the fair market value of the shares at the
date of the option exercise or the sale price of the shares. The Company will
be entitled to a deduction in the same amount as the ordinary income, if any,
recognized by the optionee. Any gain or loss recognized on such a premature
disposition of the shares in excess of the amount treated as ordinary income
will be characterized as long-term or short-term capital gain or loss,
depending on the holding period.
4
<PAGE>
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. Generally, an optionee will not recognize
any taxable income at the time he or she is granted a nonstatutory option.
However, upon its exercise, the optionee will recognize taxable income
generally measured as the excess of the then fair market value of the shares
purchased over the purchase price. Any taxable income recognized in connection
with exercise of such option by an optionee who is also an employee of the
Company will be subject to tax withholding by the Company. The Company will be
entitled to a tax deduction in the same amount as the ordinary income
recognized by the optionee with respect to shares acquired upon exercise of a
nonstatutory option. Upon resale of such shares by the optionee, any difference
between the sales price and the optionee's purchase price, to the extent not
recognized as taxable income as described above, will be treated as long-term
or short-term capital gain or loss, depending on the holding period.
The foregoing is only a summary, based on the Code as currently in effect,
of the effect of federal income taxation upon the optionee and the Company with
respect to the grant and exercise of options under the 1995 Plan, does not
purport to be complete, and does not discuss the tax consequences of the
optionee's death or the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
PROPOSED AMENDMENT
On March 16, 2000, the Board of Directors adopted an amendment to the 1995
Plan increasing the number of shares reserved for issuance thereunder by
350,000. Prior to this amendment, a total of only 13,625 shares remained
available for future grant under the 1995 Plan, which the Board of Directors
believes is insufficient to meet the Company's anticipated needs with respect
to the issuance of additional options to employees (including new hires),
consultants and directors of the Company.
At the Meeting, the shareholders are being asked to approve the
above-described amendment to the 1995 Plan increasing the number of shares
authorized for issuance thereunder by 350,000 shares.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock and Preferred Stock, voting together as one class,
present or represented by proxy and voting on this proposal at the Meeting will
be required to approve the amendment to the 1995 Plan.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE
"FOR" THE PROPOSED AMENDMENT TO THE 1995 PLAN.
PROPOSAL NO. 4 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm
PricewaterhouseCoopers LLP ("PWC"), Raleigh, North Carolina, to serve as the
independent auditors of the Company for the year ending December 31, 2000, and
recommends that the shareholders ratify such action. If the appointment of PWC
is not ratified by the shareholders, the Board of Directors will reconsider its
selection. PWC has audited the accounts of the Company since 1994 and has
advised the Company that it does not have, and has not had, any direct or
indirect financial interest in the Company or its subsidiaries in any capacity
other than that of serving as independent auditors. Representatives of PWC are
expected to attend the Meeting. They will have an opportunity to make a
statement, if they desire to do so, and will also be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting on this proposal at
the Meeting shall constitute ratification of the appointment of PWC.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF PWC AS INDEPENDENT AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 2000.
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of shares of the Company's Common Stock and Series A Preferred Stock as of the
Record Date by (1) each person known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock or Series A Preferred Stock,
(2) each current director of the Company, (3) each of the Company's President
and four most highly compensated executive officers other than the President
whose
5
<PAGE>
cash compensation for the year ended December 31, 1999 exceeded $100,000 and
one additional executive officer who otherwise would have been includable in
the table on the basis of his 1999 compensation but for the fact that he was no
longer an executive officer of the Company at the end of 1999 (collectively,
the "Named Executive Officers"), and (4) all current directors and executive
officers of the Company as a group. As of the Record Date, the Company had
7,524,334 shares of Common Stock and 120,000 shares of Series A Preferred Stock
outstanding. Each share of Series A Preferred Stock is convertible into ten
shares of Common Stock. Except as indicated in footnotes to this table, the
persons named in this table have sole voting and investment power with respect
to all shares of Common Stock indicated. Share ownership in the case of Common
Stock includes shares issuable upon conversion of Series A Preferred Stock and
upon exercise of outstanding options and warrants that may be exercised within
60 days after the Record Date for purposes of computing the percentage of
Common Stock owned by such person but not for purposes of computing the
percentage owned by any other person. Percentage voting power is calculated
assuming the Common Stock and the Series A Preferred Stock vote together as one
class with each share of Common Stock entitled to one vote and each share of
Series A Preferred Stock entitled to ten votes.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------------------------
COMMON STOCK SERIES A PREFERRED STOCK
------------------------------- ------------------------ PERCENTAGE
NUMBER OF PERCENT OF NUMBER OF PERCENT OF TOTAL VOTING
SHARES CLASS SHARES CLASS POWER
------------------ ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Bayer Diagnostics Corporation ....................... 600,000 8.0% -- -- 6.9%
63 North Street
Medfield, MA 02052
Davenport & Co ...................................... 654,535(1) 8.7% -- -- 7.5%
901 E. Cary Street, Suite 1100
Richmond, VA 23219
Joseph H. Sherrill, Jr .............................. 540,597(2) 7.1% 6,000 5.0% 6.1%
1510 Stickney Point Road
Sarasota, FL 34231
Special Situations Funds(3) ......................... 300,000(4) 3.8% 25,000 20.8% 2.9%
153 East 53rd Street
New York, NY 10022
Elliot Bossen ....................................... 120,000(5) 1.6% 10,000 8.3% 1.1%
3100 Tower Boulevard, #1104
Durham, NC 27707
Leonardo, L.P. ...................................... 240,000(6) 3.1% 20,000 16.7% 2.3%
245 Park Avenue
New York, NY 10167
HCI Healthcare Investments, Limited ................. 240,000(7) 3.1% 20,000 16.7% 2.3%
c/o Bermuda Trust (Cayman) Limited
P.O. Box 513
Grand Cayman, Cayman Islands
Hull Capital Corp.(8) ............................... 84,000(9) 1.1% 7,000 5.8% *
152 West 57th Street, 11th Floor
New York, NY 10019
AIG Sound Shore Funds(3) ............................ 78,000(10) 1.0% 6,500 5.4% *
1281 East Main Street, 3rd Floor
Stamford, CT 06902
John P. Funkhouser .................................. 367,410(11) 4.7% -- -- *
Michael D. Riddle ................................... 74,751(12) 1.0% -- -- *
Dick D. Timmons II .................................. 40,000(13) * -- -- *
Peter J. Scott ...................................... 26,000(14) * -- -- *
Cynthia G. Pritchard, Ph.D. ......................... 36,164(15) * -- -- *
Andras Gruber, M.D.(19) ............................. -- -- -- -- --
William A. Hawkins .................................. 10,532(16) * -- -- *
Stephen R. Puckett .................................. 9,000(17) * -- -- *
John K. Pirotte ..................................... 8,000(17) * -- -- *
Philip R. Tracy ..................................... 8,000(17) * -- -- *
Frances L. Tuttle ................................... -- -- -- -- --
All current executive officers and directors
as a group (5 directors and 6 executive officers) .. 588,607(18) 7.3% -- -- *
</TABLE>
6
<PAGE>
- ---------
* Less than one percent.
(1) As reported in the Schedule 13G dated January 7, 2000 filed with the
Securities and Exchange Commission by Davenport & Company LLC. Consists of
shares held by individuals who are customers, or representatives (or
members of a representatives' immediate family), of Davenport & Company
LLC, which disclaims beneficial ownership.
(2) As reported in the Schedule 13G dated January 14, 2000 filed with the
Securities and Exchange Commission by Joseph H. Sherrill Jr. Includes
60,000 shares of common stock issuable to Mr. Sherrill upon conversion of
shares of Series A Preferred Stock and a warrant to purchase 12,000 shares
of Common Stock, both of which he acquired in February 2000.
(3) Consists of three separate but affiliated limited partnerships or
companies.
(4) Consists of 250,000 shares of Common Stock issuable upon conversion of
Series A Preferred Stock and 50,000 shares issuable upon exercise of a
warrant, both acquired in February 2000.
(5) Consists of 100,000 shares of Common Stock issuable upon conversion of
Series A Preferred Stock and 20,000 shares issuable upon exercise of a
warrant, both acquired in February 2000.
(6) Consists of 200,000 shares of Common Stock issuable upon conversion of
Series A Preferred Stock and 40,000 shares issuable upon exercise of a
warrant, both acquired in February 2000.
(7) Consists of 200,000 shares of Common Stock issuable upon conversion of
Series A Preferred Stock and 40,000 shares issuable upon exercise of a
warrant, both acquired in February 2000.
(8) Consists of two separate but affiliated limited partnerships or companies.
(9) Consists of 70,000 shares of Common Stock issuable upon conversion of
Series A Preferred Stock and 14,000 shares issuable upon exercise of a
warrant, both acquired in February 2000.
(10) Consists of 65,000 shares of Common Stock issuable upon conversion of
Series A Preferred Stock and 13,000 shares issuable upon exercise of a
warrant, both acquired in February 2000.
(11) Includes 340,410 shares underlying options.
(12) Consists solely of shares underlying options.
(13) Includes 35,000 shares underlying options.
(14) Includes 25,000 shares underlying options.
(15) Includes 19,528 shares underlying options.
(16) Includes 4,532 shares underlying options.
(17) Includes 2,000 shares underlying options.
(18) Includes shares referenced in footnotes (11) through (17).
(19) Left the Company in October 1999.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION.
The following table reflects all cash and noncash compensation paid by the
Company to the Named Executive Officers for their services in all capacities
during the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS COMPENSATION
- ------------------------------------- ------ ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
John P. Funkhouser, 1999 $ 225,000 $ 11,000 120,000 --
President, Chief Executive Officer 1998 185,000 25,000 -- --
1997 185,000 -- 30,000 37,900(1)
Michael D. Riddle, 1999 150,000 15,000 78,000 --
Vice President, Sales, 1998 125,000 -- -- --
Marketing & Business Development 1997 125,000 10,000 5,000 --
Dick Timmons II 1999 140,000 7,000 40,000 --
Chief Operating Officer 1998 125,000 -- -- --
1997 28,767 -- 50,000 --
Peter J. Scott 1999 120,000 6,000 20,000 --
Vice President, Quality 1998 95,000 -- -- --
Assurance and Regulatory Affairs 1997 19,000 -- 40,000 --
Cynthia G. Pritchard, Ph.D. 1999 110,000 5,000 14,000 --
Executive Director, Research & 1998 105,000 -- -- --
Development 1997 105,000 -- 5,000 --
Andras Gruber, M.D. 1999 150,000 -- -- --
Chief Scientific and Medical 1998 23,333 -- 50,000 --
Officer(2) 1997 -- -- -- --
</TABLE>
- ---------
(1) Consists of club initiation fees
(2) Left the Company in October 1999.
OPTION GRANTS, EXERCISES AND HOLDINGS AND FISCAL YEAR-END OPTION VALUES.
The following table summarizes all option grants during the year ended
December 31, 1999 to the Named Executive Officers.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN OR BASE OPTION TERM(2)
OPTIONS FISCAL YEAR PRICE PER EXPIRATION ----------------------
NAME GRANTED 1999 SHARE(1) DATE 5% 10%
- --------------------------------- --------------- -------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
John P. Funkhouser ............. 20,000(3) 4% $ 5.25 1/7/09 $ 66,034 $167,343
100,000(4) 22% $ 6.00 11/24/09 $377,337 $956,245
Michael D. Riddle .............. 15,000(3) 3% $ 5.25 1/7/09 $ 49,525 $125,550
63,000(4) 14% $ 6.00 11/24/09 $237,510 $602,280
Dick D. Timmons II ............. 5,000(3) 1% $ 5.25 1/7/09 $ 16,500 $ 41,850
35,000(4) 8% $ 6.00 11/24/09 $131,950 $334,600
Peter J. Scott ................. 5,000(3) 1% $ 5.25 1/7/09 $ 16,500 $ 41,850
15,000(4) 3% $ 6.00 11/24/09 $ 56,550 $143,400
Cynthia G. Pritchard, Ph.D. .... 14,000(4) 3% $ 6.00 11/24/09 $ 52,800 $133,900
Andras Gruber, M.D. ............ -- -- -- -- -- --
</TABLE>
- ---------
8
<PAGE>
(1) The exercise price may be paid in cash, in shares of Common Stock with a
market value as of the date of exercise equal to the option price or a
combination of cash and shares of Common Stock.
(2) The compounding assumes a 10-year exercise period for all option grants.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, and overall stock market conditions. The
amounts reflected in this table may not necessarily be achieved.
(3) This grant was made in January 1999 and becomes exercisable over four years
from the date of grant, based on continued employment with the Company. To
the extent not already exercisable, the options become fully vested by
their terms upon the consummation of a merger in which the Company is not
the surviving corporation, a transfer of all of the Company's stock, a
sale of substantially all of the Company's assets or a dissolution or
liquidation of the Company, unless the successor corporation assumes the
outstanding options or substitutes substantially equivalent options.
(4) This grant was made in November 1999 and becomes exercisable in full five
years from the date of grant, based on continued employment with the
Company. The vesting of such shares shall be accelerated, not more than
25% per year, if certain share prices are achieved for a 20 day trading
period during each year for the next four years. To the extent not already
exercisable, the options become fully vested by their terms upon the
consummation of a merger in which the Company is not the surviving
corporation, a transfer of all of the Company's stock, a sale of
substantially all of the Company's assets or a dissolution or liquidation
of the Company, unless the compounded rate of return of the Company's
stock price from the date of grant is less than 35% and unless the
successor corporation assumes the outstanding options or substitutes
substantially equivalent options.
The following table sets forth information concerning option, exercises
and holdings as of December 31, 1999 by the Named Executive Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
DECEMBER 31, 1999 OPTIONS AT DECEMBER 31, 1999 (1)
----------------------------------- ----------------------------------
SHARES VALUE
ACQUIRED REALIZED
NAME ON EXERCISE $ EXERCISABLE(2) UNEXERCISABLE(2) EXERCISABLE(2) UNEXERCISABLE(2)
- ---------------------------------- ------------- --------- ---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John P. Funkhouser .............. -- -- 310,410 135,000 $2,352,755 $468,750
Michael D. Riddle ............... -- -- 54,001 80,500 $ 399,260 $278,500
Dick D. Timmons ................. -- -- 25,000 65,000 $ 106,250 $240,000
Peter J. Scott .................. -- -- 20,000 40,000 $ 85,000 $153,750
Cynthia G. Pritchard, Ph.D. ..... 5,064 $16,888 37,242 16,500 $ 254,353 $ 56,125
Andras Gruber, M.D. ............. -- -- -- -- -- --
</TABLE>
- ---------
(1) Calculated by subtracting the exercise price from $9.25, the closing price
of the Company's Common Stock as reported by the Nasdaq National Market on
December 31, 1999, the last business day of the fiscal year ended December
31, 1999, and multiplying the difference by the number of shares
underlying each option.
(2) The first number represents the number or value (as called for by the
appropriate column) of exercisable options; the second number represents
the number or value (as appropriate) of unexercisable option
CHANGE OF CONTROL ARRANGEMENTS
In the interest of promoting organizational stability in the context of a
potential acquisition or change of control, the Company entered into a change
of control agreement with Mr. Funkhouser in October 1997. Under this agreement,
if Mr. Funkhouser resigns or his employment by the Company is terminated for
any reason within two (2) years following a change of control of the Company,
he is entitled to receive a severance payment from the Company, payable in full
and in cash within 30 days, equal to two (2) times the total compensation paid
by the Company to Mr. Funkhouser, including all wages, salary, bonuses and
incentive compensation, during the twelve (12) months preceding the year in
which the severance obligation becomes payable.
COMPENSATION OF DIRECTORS
Each of the Company's non-employee directors receives $2,500 per year,
$1,000 per Board meeting, and $500 per committee or telephonic meeting, that he
or she attends. In 1999, each non-employee director received 3,000 shares of
Common Stock upon re-election to the Board. All directors are reimbursed by the
Company for expenses incurred to attend Board meetings.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors, approves all policies under
which compensation is paid or awarded to the Company's executive officers. The
Committee is currently composed of Messrs. Pirotte and Puckett. The Committee
also administers the Company's stock plans.
9
<PAGE>
Neither the material in this report nor the performance graph included in
this proxy statement under the heading " -- Performance Graph" (the
"Performance Graph") is soliciting material, is or will be deemed filed with
the Securities and Exchange Commission or is or will be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Exchange Act, whether made before or after the date of this
proxy statement and irrespective of any general incorporation language in such
filing.
COMPENSATION PHILOSOPHY. The Company's executive compensation program has
three objectives: (1) to align the interests of the executive officers with the
interests of the Company's shareholders by basing a significant portion of an
executive's compensation on the Company's performance; (2) to attract and
retain highly talented and productive executives; and (3) to provide incentives
for superior performance by the Company's executives. To achieve these
objectives, the Committee has crafted a program that consists of base salary,
short-term incentive compensation in the form of cash bonuses and long-term
incentive compensation in the form of stock and stock options. These
compensation elements are in addition to the general benefits programs which
are offered to all of the Company's employees.
Each year, the Committee reviews the Company's executive compensation
program. In its review, the Committee uses compensation survey data prepared by
outside consultants to study the compensation packages for executives of
companies at a comparable stage of development and in the Company's geographic
area. The Committee assesses the competitiveness of the Company's executive
compensation program and reviews the Company's financial and operational
performance for the previous fiscal year. The Committee also gauges the success
of the compensation program in achieving its objectives in the previous year
and considers the Company's overall performance objectives. For compensation
paid to the Chief Executive Officer and other Named Executive Officers in 1999,
no reference was made to the data for comparable companies included in the
Performance Graph.
Each element of the Company's executive compensation program is discussed
below.
BASE SALARIES. The Committee annually reviews the base salaries of the
Company's executive officers. The base salaries for the Company's executive
officers for fiscal 1999 were established by the Committee at the beginning of
that fiscal year. In addition to considering the factors listed in the
foregoing section that support the Company's executive compensation program
generally, the Committee reviews the responsibilities of the specific executive
position and the experience and knowledge of the individual in that position.
The Committee also measures individual performance based upon a number of
factors, including a measurement of the Company's historic and recent financial
and operational performance and the individual's contribution to that
performance, the individual's performance on non-financial goals and other
contributions of the individual to the Company's success, and gives each of
these factors relatively equal weight without confining its analysis to a
rigorous formula. As is typical of most corporations, the actual payment of
base salary is not conditioned upon the achievement of any predetermined
performance targets.
INCENTIVE COMPENSATION. Cash bonuses established for executive officers
are intended to motivate the individual to work hard to achieve the Company's
financial and operational performance goals or to otherwise incent the
individual to aim for a high level of achievement on behalf of the Company in
the coming year. Because it had been in the early stages of development, the
Company did not pay cash bonuses prior to fiscal 1995. In 1999, the Company
paid cash bonuses to its executive officers based on the achievement of Company
objectives established in the beginning of 1999.
LONG-TERM INCENTIVE COMPENSATION. The Company's long-term incentive
compensation plan for its executive officers is based upon the Company's stock
plans. The Company believes that placing a portion of its executives' total
compensation in the form of stock or stock options achieves three objectives.
It aligns the interest of the Company's executives directly with those of the
Company's shareholders, gives executives a significant long-term interest in
the Company's success and helps the Company retain key executives. Options
generally vest over four years based on continued employment. In determining
the number of options to grant an executive, the Board primarily considered the
executive's past performance and the degree to which an incentive for long-term
performance would benefit the Company, as well as the number of shares and
options already held by the executive officer. It is the Committee's policy to
grant options at fair market value unless particular circumstances warrant
otherwise.
BENEFITS. The Company believes that it must offer a competitive benefits
program to attract and retain key executives. During fiscal 1999, the Company
provided the same medical and other benefits to its executive officers that are
generally available to its other employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer's
compensation is based on the same elements and measures of performance as is
the compensation for the Company's other executive officers. The Committee
10
<PAGE>
approved a base salary for Mr. Funkhouser for fiscal 1999 of $225,000 based on
the same factors as were considered in determining the base salaries of the
other executive officers.
SECTION 162(M) OF THE CODE. It is the responsibility of the Committee to
address the issues raised by Section 162(m) of the Code. Revisions to this
Section made certain non-performance based compensation in excess of $1,000,000
to executives of public companies non-deductible to the companies beginning in
1994. The Committee has reviewed these issues and has determined that it is not
necessary for the Company to take any action at this time with regard to these
issues.
Submitted by: THE COMPENSATION COMMITTEE
John K. Pirotte
Stephen R. Puckett
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are currently Messrs. Pirotte
and Puckett. Messrs. Pirotte and Puckett were not at any time during the fiscal
year ended December 31, 1999 or at any other time an officer or employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
11
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
returns for the Company, the CRSP Total Market Return Index of the NASDAQ Stock
Market and the CRSP NASDAQ Pharmaceutical Stocks Total Return Index. (The
"CRSP" is the Center for Research in Securities Prices at the University of
Chicago.)
COMPARISON OF CUMULATIVE TOTAL RETURN (1)
[GRAPH APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
12/95 12/96 12/97 12/98 12/99
------- ------- ------- ------- -------
NASDAQ $100.00 $123.04 $150.76 $212.39 $386.09
PEER GROUP - PHARMA 100.00 100.31 103.58 131.92 245.51
PHARMANETICS 100.00 35.23 72.73 47.73 84.09
- ---------
(1) Assumes $100 invested on December 11, 1995 (the effective date of the
Company's initial public offering) in each of the Company's Common Stock,
the Nasdaq CRSP Total Market Return Index, and the Nasdaq Pharmaceutical
Stocks Total Return Index (the "Pharmaceutical Index"). Total return
assumes reinvestment of dividends.
CERTAIN TRANSACTIONS
In August 1998, the Company entered into a Common Stock Purchase Agreement
with Chiron Diagnostics Corporation ("Chiron Diagnostics"), pursuant to which
the Company issued and sold to Chiron Diagnostics an aggregate of 600,000
shares of its Common Stock in exchange for $6,000,000 cash, or $10.00 per
share. In November 1998, Bayer acquired Chiron Diagnostics and made it a part
of Bayer Diagnostics. Bayer Diagnostics currently owns approximately 8.0% of
the Company's outstanding Common Stock. The Common Stock Purchase Agreement
provides, among other things, that Bayer Diagnostics will not acquire more than
20% of the Company's voting securities, except where a third party accumulates
or attempts to buy specified percentages of the Company's voting stock. Except
under limited circumstances, Bayer Diagnostics cannot transfer its shares to an
unaffiliated person unless the Company is first offered the right to purchase
such shares. Except with respect to certain significant events (including a
sale or dissolution of the Company), Bayer Diagnostics also agreed to vote its
shares in accordance with the recommendation of the Company's Board or in not
less than the proportion as the votes cast by other shareholders. In addition,
the Company agreed to include in the slate of nominees recommended by the
Company for election as directors of the Company at the 1999 annual meeting one
person designated by Bayer Diagnostics and reasonably acceptable to the
Company. Last year's Board nominee designated by Bayer Diagnostics and approved
by the Company was Frances L. Tuttle. Ms. Tuttle has been nominated by the
Company again this year. The Company also granted to Bayer Diagnostics
registration rights with respect to the purchased shares and the right to
receive notification of and to make a competing bid with respect to certain
change of control transactions. In the event of a change in control transaction
at less than $10.00 per share, the Company must pay Bayer Diagnostics the
difference between $10.00 and the price per share in the transaction, unless
Bayer Diagnostics has failed to meet its minimum purchase requirements under
the Distribution Agreement between them.
In February 2000, the Company 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. Joseph Sherrill Jr., a greater than 5% shareholder,
participated in this financing by investing $600,000.
12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Company's Common
Stock (collectively, "Insiders"), to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Insiders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1999, all Section
16(a) reports were filed on a timely basis except for Forms 5 on behalf of Dick
Timmons and Peter Scott, each an executive officer of the Company, which forms
were filed late to report the grant of options to purchase 50,000 and 40,000
shares, respectively, in December 1997.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders having proposals that they desire to present at next year's
annual meeting of shareholders of the Company should, if they desire that such
proposals be included in the Company's Proxy Statement relating to such
meeting, submit such proposals in time to be received by the Company at its
principal executive office in Raleigh, North Carolina, not later than December
11, 2000. To be so included, all such submissions must comply with the
requirements of Rule 14a-8 promulgated under the Exchange Act and the Board of
Directors directs the close attention of interested shareholders to that Rule.
Proposals may be mailed to Secretary, PharmaNetics, Inc., 5301 Departure Drive,
Raleigh, North Carolina 27616.
OTHER MATTERS
The Board of Directors knows of no other business to be brought before the
Meeting, but it is intended that, as to any such other business, the shares
will be voted pursuant to the proxy in accordance with the best judgment of the
person or persons acting thereunder.
By Order of the Board of Directors
/s/ John P. Funkhouser
JOHN P. FUNKHOUSER,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
13
<PAGE>
********************************************************************************
APPENDIX
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
PROXY
PHARMANETICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 9, 2000
The undersigned hereby appoints John P. Funkhouser and Paul T. Storey, and
each of them, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all the shares
of Common Stock and/or Series A Preferred Stock of PharmaNetics, Inc., a North
Carolina corporation (the "Company"), held of record by the undersigned on
March 31, 2000, at the Annual Meeting of Shareholders to be held at the
Carolina Country Club, 2500 Glenwood Avenue, Raleigh, North Carolina, on
Tuesday, May 9, 2000, at 10:30 a.m., or at any adjournment(s) thereof. The
following proposals to be brought before the meeting are more specifically
described in the accompanying Proxy Statement.
(1) Election of Directors:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY TO VOTE FOR ALL
(except as marked to NOMINEES LISTED BELOW
the contrary)
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below.
John P. Funkhouser William A. Hawkins John K. Pirotte
Stephen R. Puckett Philip R. Tracy Frances L. Tuttle
(2) To approve an amendment to the Company's Articles of Incorporation to
increase the total number of authorized shares of common stock from
10,000,000 to 40,000,000
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(3) To reserve an additional 350,000 shares for issuance to employees,
consultants and directors under the Company's 1995 Stock Plan
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(4) To ratify the selection of PricewaterhouseCoopers LLP as auditors of the
Company for the fiscal year ending December 31, 2000.
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(5) In their discretion, the proxies are authorized to vote upon such
other matters as may properly come before the meeting.
[ ] GRANT AUTHORITY [ ] WITHHOLD AUTHORITY
<PAGE>
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR MANAGEMENT'S NOMINEES FOR DIRECTOR LISTED ABOVE, FOR
PROPOSALS 2, 3, AND 4 AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY
OTHER MATTERS PROPERLY BROUGHT BEFORE THE SHAREHOLDERS AT THE MEETING.
-------------------------------
Signature
-------------------------------
Additional Signature,
if held Jointly
Please date and sign exactly
as name appears on your stock
certificate. Joint owners
should each sign personally.
Trustees, custodians,
executors and others signing
in a representative capacity
should indicate the capacity
in which they sign.
Date:_____________, 2000
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU
PLAN TO BE PRESENT AT THE
MEETING. IF YOU ATTEND THE
MEETING, YOU CAN VOTE EITHER
IN PERSON OR BY YOUR PROXY.
