DEF 14A: Definitive proxy statements

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 ss. 240.14a - 11(c) or ss. 240.14a - 12

COMMONWEALTH BIOTECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(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):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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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:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[LOGO]


Commonwealth Biotechnologies, Inc.
601 Biotech Drive
Richmond, Virginia 23235

To Our Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders,
which is to be held on May 23, 2002, at 11:00 a.m. at 601 Biotech Drive,
Richmond, Virginia 23235. The following pages contain the formal notice of the
Annual Meeting and our Proxy Statement, which describe the specific business to
be considered and voted upon at the Annual Meeting.

It is important that your shares be represented at the meeting. Whether
or not you expect to attend in person, we would greatly appreciate your efforts
to return the enclosed proxy as soon as possible. If you decide to attend the
Annual Meeting, you may withdraw your proxy should you wish to vote in person.

We look forward to seeing you at the Annual Meeting.


Sincerely yours,



/s/ Richard J. Freer

Richard J. Freer, Ph.D.,
Chairman of the Board of Directors







COMMONWEALTH BIOTECHNOLOGIES, INC.
601 Biotech Drive
Richmond, Virginia 23235

Notice of Annual Meeting of Shareholders
To Be Held
May 23, 2002

Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Commonwealth Biotechnologies, Inc. (the "Company") will be held on
May 23, 2002, at 11:00 a.m. at 601 Biotech Drive, Richmond, Virginia 23235, for
the following purposes:

(1) To elect three nominees as Class II Directors of the Company;

(2) To approve the adoption of the Company's 2002 Stock Incentive Plan;

(3) To approve an amendment to the Company's Amended and Restated Articles
of Incorporation to authorize a new class of undesignated preferred
stock, without par value per share, consisting of 2,000,000 shares of
preferred stock;

(4) To ratify the appointment of McGladrey & Pullen, LLP as independent
public accountants to audit the financial statements of the Company
for the fiscal year ending December 31, 2002; and

(5) To transact such other business as may properly come before the
meeting or any adjournments thereof.

Only shareholders of record at the close of business on March 15, 2002 will
be entitled to vote at the Annual Meeting.

The enclosed Proxy Statement contains more information pertaining to
matters to be voted on at the Annual Meeting. Please read the Proxy Statement
carefully.

Whether or not you plan to attend the Annual Meeting in person, to assure
the presence of a quorum, please complete, date, sign and return the
accompanying proxy in the enclosed, postage-paid envelope. If you attend the
meeting and wish to vote your shares personally, you may do so at any time
before the proxy is exercised.

By Order of the Board of Directors,


/s/ Thomas R. Reynolds

Thomas R. Reynolds,
Secretary

Richmond, Virginia
April 10, 2002



COMMONWEALTH BIOTECHNOLOGIES, INC.
601 Biotech Drive
Richmond, Virginia 23235


PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2002

This Proxy Statement is furnished to the holders of common stock,
without par value per share ("Common Stock"), of Commonwealth Biotechnologies,
Inc. (the "Company") in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board of Directors") to be voted at the annual
meeting of shareholders of the Company (the "Annual Meeting") to be held on May
23, 2002, at 11:00 a.m. at 601 Biotech Drive, Richmond, Virginia, and at any
adjournments or postponements thereof. This Proxy Statement and the accompanying
proxy are first being mailed on or about April 10, 2002.

Only the holders of Common Stock of record at the close of business on
March 15, 2002 (the "Record Date") will be entitled to vote at the Annual
Meeting. On such date, 2,076,164 shares of Common Stock were outstanding. Each
shareholder is entitled to one vote per share held of record on the Record Date.
The Common Stock is the Company's only outstanding voting stock.

A majority of the shares of Common Stock entitled to vote, represented
in person or by proxy, is required to constitute a quorum. If a quorum is not
present at the time of the Annual Meeting, or if for any reason the Company
believes that additional time should be allowed for the solicitation of proxies,
the Company may adjourn or postpone the Annual Meeting with or without a vote of
the shareholders. If the Company proposes adjournment, the person named on the
enclosed proxy card will vote such shares for which they have voting authority
in favor of adjournment.

All shares of Common Stock represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
properly revoked will be voted at the Annual Meeting in accordance with the
instructions indicated thereon. If no specification is made, the proxies will be
voted in favor of the matters listed on the proxy card and for the
recommendation of the Board of Directors on any other proposal that may properly
come before the meeting. Directors must be elected by a plurality of votes cast
(in person or by proxy) by the holders of Common Stock entitled to vote at the
Annual Meeting if a quorum is present. All other matters shall be determined
based upon the vote of the majority of votes cast (in person or by proxy) by the
holders of Common Stock entitled to vote at the Annual Meeting if a quorum is
present. Abstentions and broker non-votes will be counted for purposes of
constituting a quorum, but, with the exception of Proposal 3, will not have the
effect of voting in opposition to a director or of a vote against the other
proposals. With respect to Proposal 3, abstentions and broker non-votes will
have the same effect as negative votes.

The Company will pay all expenses of the Annual Meeting, including the
cost of soliciting proxies. The Company may reimburse persons holding shares in
their names for others, or holding shares for others who have the right to give
voting instructions, such as brokers, banks, fiduciaries and nominees, for such
persons' reasonable expenses in forwarding the proxy materials to their
principals. Certain directors, officers and other employees of the Company, not
specially employed for this



purpose, may solicit proxies, without additional remuneration therefor, by
personal interview, mail, telephone, facsimile or other electronic means.

Any shareholder giving a proxy may revoke it by delivering a written
notice of such revocation to Thomas R. Reynolds, the Secretary of the Company,
at 601 Biotech Drive, Richmond, Virginia 23235 prior to the Annual Meeting, by
submitting to the Company a more recently dated proxy or by attending the Annual
Meeting and voting at any time before it is exercised.

PROPOSAL 1: ELECTION OF DIRECTORS

The Company's Amended and Restated Articles of Incorporation provide
that the Board of Directors shall be divided into three classes of as nearly
equal size as possible. The Board of Directors has nominated the three
individuals named below under the caption "Class II Nominees" for election as
directors to serve until the annual meeting of shareholders in 2004 or until
their successors have been elected and qualified. All of the Class I Nominees
are currently serving on the Board of Directors of the Company with terms
expiring at this Annual Meeting.

The Company's Bylaws, as amended to date, provide that the Board of
Directors shall consist of not less than five nor more than nine directors as
established by the Board of Directors. The size of the Board of Directors
currently consists of eight directors.

Required Vote

Directors must be elected by a plurality of votes cast (in person or by
proxy) by the holders of Common Stock entitled to vote at the Annual Meeting if
a quorum is present.

Class II Nominees:

ROBERT B. HARRIS, PH.D. - President, Director and Founder
Age -- 49
Director since 1992

Since founding the Company in 1992, Dr. Harris has served as the
President and a director of the Company. Until 1997, Dr. Harris was employed in
the Department of Biochemistry and Molecular Biophysics at Virginia Commonwealth
University ("VCU"), first as an Assistant, then Associate and finally a full
Professor. Dr. Harris received a joint bachelor's degree in Chemistry and
Biology from the University of Rochester, and a master's degree and a doctorate
degree in Biochemistry/Biophysical Chemistry from New York University.

SAMUEL P. SEARS, JR. - Director
Age -- 58

Since March 1999, Mr. Sears has been in private practice as an
attorney and has been providing business consulting services. From December 1998
through February 1999, Mr. Sears served as Vice Chairman of American
Prescription Providers, Inc., a specialty pharmacy network offering
prescriptions and nutriceuticals to patients with chronic diseases. From 1995
through May 1998, Mr. Sears was Chief Executive Officer and Chairman of Star
Scientific, Inc., a tobacco company focusing on demonstrating the commercial
viability of potentially less harmful tobacco products. Mr. Sears is a graduate
of Harvard College and Boston College Law School.

2


L. McCARTHY DOWNS III - Director
Age -- 49
Director since 2000

Mr. Downs is Chairman of the Board of Anderson & Strudwick Investment
Corporation, the parent company of Anderson & Strudwick, Incorporated, a
registered broker-dealer ("A&S"). Mr. Downs is a Senior Vice President with A&S.
He has been the manager of A&S' Corporate Finance department since 1990 and has
been involved in several public and private financings for real estate
investment trusts and other companies including the Company. Prior to 1990, Mr.
Downs was employed by another investment banking and brokerage firm for seven
years. In addition, Mr. Downs is a director of Hersha Hospitality Trust, a real
estate investment trust. Mr. Downs received a Bachelor of Science degree in
Business Administration from The Citadel and obtained a master's degree in
Business Administration from The College of William and Mary.

Continuing Directors

The persons named below will continue to serve as directors until the
annual meeting of shareholders in the year indicated and until their successors
are elected and take office. Shareholders are NOT voting on the election of the
three Class III directors and the two Class I Directors noted below.

Class III Directors Serving Until the 2003 Annual Meeting:

RICHARD J. FREER, PH.D. - Chairman of the Board, Director and Founder
Age -- 59
Director since 1992

Since founding the Company in 1992, Dr. Freer has served as the
Chairman of the Board and a director of the Company. From 1975 until 1997, Dr.
Freer was employed in the Department of Pharmacology and Toxicology at VCU,
first as an Associate Professor and then a full Professor. In addition, from
1988 through 1995, Dr. Freer was first Director and then Chair of the Biomedical
Engineering Program. From 1996 through 1997, Dr. Freer served as Professor in
VCU's Department of Biochemistry and Molecular Biophysics. Dr. Freer received a
bachelor's degree in Biology from Marist College and a doctorate degree in
Pharmacology from Columbia University.

DONALD A. MCAFEE, PH.D. - Director
Age -- 60

Dr. McAfee is co-founder, Chief Technical Officer, and a director of
Aderis Pharmaceuticals, Inc. (formerly Discovery Therapeutics, Inc.), a
Richmond, Virginia-based clinical stage pharmaceutical company ("Aderis"). Dr.
McAfee has been a scientist and manager in academia and industry for more than
35 years. From May 1994 to September 2000, Dr. McAfee served as Chief Executive
Officer of Discovery Therapeutics. Before organizing Discovery Therapeutics in
1994, Dr. McAfee served for eight years as Vice President, Research, at Whitby
Research, Inc. (formerly Nelson Research and Development), managing the drug
discovery programs. Prior to entering industry, Dr. McAfee served as Chairman of
the Division of Neurosciences at the Beckman Research Institute (City of Hope)
and held faculty appointments at the Yale University School of Medicine and the
University of Miami School of Medicine. He has authored more than 100 articles
and book chapters in neuroscience and pharmacology. He is currently an adjunct
professor at the University of California, Irvine and at the Medical College of
Virginia, and is a frequent lecturer to the industry in drug discovery for the
Pharmaceutical Education and Research Institute. Dr. McAfee received his Ph.D.
in Physiology from the University of Oregon School of Medicine.

3


Class I Directors Serving Until the 2004 Annual Meeting:

THOMAS R. REYNOLDS - Senior Vice President, Secretary, Director and Founder
Age -- 39
Director since 1992

Mr. Reynolds currently serves the Company as a Senior Vice President
and a director. He assumed the role of the Company's Secretary in 1998. From the
founding of the Company in 1992 until 1997, Mr. Reynolds served as a Vice
President of the Company. From 1987 until 1997, Mr. Reynolds served as the
Manager of the Nucleic Acids Core Laboratory at The Massey Cancer Center at VCU.
Mr. Reynolds received a bachelor's degree in Biology from the Pennsylvania State
University.

EVERETTE G. ALLEN, JR. - Director
Age -- 61

Mr. Allen is the Chairman and senior partner of Allen & Allen, PC, a
Richmond, Virginia law firm. From 1970 to 2001, Mr. Allen served as the Chairman
of and a senior partner in the law firm of Hirschler, Fleischer, Weinberg, Cox &
Allen, P.C. in Richmond, Virginia. Mr. Allen concentrates his practice in
litigation, real estate development, commercial disputes law, finance and debt
restructuring. Mr. Allen was admitted to the Virginia State Bar in 1965. He
served as Executive Editor of the Virginia Law Review from 1964 to 1965 and
served as a Law Clerk to Fourth Circuit Judge Albert V. Bryan of the U.S. Court
of Appeals during 1965 and 1966. He was a member of the Board of Trustees of
Randolph-Macon College from 1988 to 1992 and a Trustee of the Virginia Student
Aid Foundation from 1996 to 1999. Mr. Allen currently is a member of the
American College of Trial Lawyers, a member of the Board of Directors of
Virginia Gas Company and a Trustee of the Metropolitan Richmond Sports
Authority. In addition, Mr. Allen is a director of Hersha Hospitality Trust, a
real estate investment trust. Mr. Allen is a Phi Beta Kappa graduate of Randolph
Macon College in 1962 and received his law degree from the University of
Virginia in 1965.

RAYMOND HAROLD CYPESS - Director
Age -- 62
Director since 1999

Since 1993, Dr. Cypess has been the President and Chief Executive
Officer of American Type Culture Collection ("ATCC"), a leading non-profit
repository for microbiologicals. Since 2000, Dr. Cypess has been Chairman of
Biodominion Corp., a wholly-owned subsidiary of ATCC, and he is currently a
director of Mid-Atlantic Medical Services, Inc. Dr. Cypess received a bachelor's
degree in Biology from Brooklyn College, a bachelor's degree in Agriculture from
the University of Illinois, Urbana, a doctorate degree in Veterinary Medicine
from the University of Illinois, Urbana and a doctorate degree in Parasitology
from the University of North Carolina, Chapel Hill.


4


In voting by proxy for the election of the three nominees as Class II directors
to serve until the annual meeting of shareholders in 2004, shareholders may vote
in favor of all nominees, withhold their votes as to all nominees, or withhold
their votes as to a specific nominee. If no instructions are indicated, such
proxies will be voted FOR the election of all nominees as directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE ELECTION OF ALL OF THE PROPOSED CLASS II
NOMINEES TO THE BOARD OF DIRECTORS.

Information Regarding the Board of Directors

The Board of Directors held seven meetings during 2001, including
regular and special meetings. Each director attended at least 75% of the
meetings of the Board of Directors and the committees thereof on which the
director serves.

The Committees of the Board of Directors consist of an Audit Committee,
a Compensation Committee, a Nominating Committee, and a Strategic Planning
Committee. The Audit Committee is currently comprised of Mr. Allen, Mr. Sears,
and Dr. Cypess. The Compensation Committee is currently comprised of Dr. Cypess,
Dr. McAfee and Mr. Sears. The Nominating Committee is comprised of Mr. Reynolds,
Mr. Downs, and Dr. Harris. The Strategic Planning Committee is comprised of Dr.
Harris, Mr. Downs, Mr. Allen, Dr. McAfee, and Mr. Reynolds. During 2001, the
Audit Committee met four times, the Compensation Committee met six times, the
Nominating Committee did not meet, and the Strategic Planning Committee met
three times. The Audit Committee recommends the annual appointment of
independent auditors, with whom the Audit Committee reviews the scope of audit
and non-audit assignments and related fees, accounting principles used by the
Company in financial reporting, internal auditing procedures and the adequacy of
the internal control procedures of the Company. The Compensation Committee
administers the Company's 1997 Stock Incentive Plan and 2000 Stock Incentive
Plan (collectively, the "Incentive Plans") and makes recommendations to the
Board of Directors regarding compensation and benefits for the executive
officers. The Compensation Committee also has oversight responsibilities for all
broad-based compensation and benefit programs. The Nominating Committee
recommends to the Board of Directors candidates for election as director of the
Company and makes recommendations to the Board of Directors regarding director
compensation. The Strategic Planning Committee is responsible for developing,
modifying, and monitoring the implementation of the Company's long-term
strategic plan.

Compensation of Directors

All directors receive a fee of $2,500 for each regularly scheduled
quarterly Board meeting attended (the "Director's Fee"). In addition to the
Director's Fee, all directors receive reimbursement for travel and other related
expenses incurred in attending Board meetings and committee meetings. Since
November 2001, the Company's directors have opted to defer payment of all
Director's Fees and travel reimbursements.

In December 2001, the Board appointed Mr. Sears to serve as an
executive consultant to the Company for the purpose of analyzing the Company's
operational and financial positioning. The term of this arrangement ended on
February 28, 2002, but was extended for an indefinite term. For such services,
the Company shall pay Mr. Sears a flat fee of $40,000. In connection with this
arrangement, the Company has also agreed to reimburse Mr. Sears for all
reasonable travel, hotel and rental car expenses.


5


Report of the Audit Committee

In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. Each of the members
of the Audit Committee is independent as defined by Rule 4200(a)(14) of the
National Association of Securities Dealers, Inc.'s listing standards.

In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. The
Audit Committee also discussed with management and the independent auditors the
quality and adequacy of the Company's internal controls, organization,
responsibilities, budget and staffing.

The Audit Committee discussed and reviewed with the independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.

The Audit Committee reviewed the audited financial statements of the
Company as of and for the year ended December 31, 2001, with management and the
independent auditors. Management has the responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.

Based on the above-mentioned review and discussions with management and
the independent auditors, the Audit Committee recommended to the Board of
Directors that the Company's audited financial statements be included in its
Annual Report on Form 10-KSB for the year ended December 31, 2001, for filing
with the Securities and Exchange Commission. The Audit Committee also
recommended the reappointment, subject to shareholder approval, of the
independent auditors and the Board of Directors concurred in such
recommendation.

Samuel P. Sears, Jr., Audit Committee Chairman
Everett G. Allen, Jr., Audit Committee Member
Raymond Harold Cypess, Audit Committee Member


6


Principal Accounting Firm Fees

The following table sets forth the aggregate fees billed to the Company
for the fiscal year ended December 31, 2001 by the Company's principal
accounting firm, McGladrey & Pullen, LLP:

Audit Fees (1) $39,750

Financial Information
Systems Design and

Implementation Fees $ -

All Other Fees (2) $29,637

$69,387

- ----------
(1) Includes fees for the annual audit of the financial statements and the
quarterly review of the financial statements.

(2) Includes fees for tax return preparation, post audit and due diligence
procedures related to registration statements, services in connection with a
proposed acquisition and consultation on various accounting matters. The Audit
Committee has considered whether the provision of these services is compatible
with maintaining the principal accountant's independence.


7


PROPOSAL 2: APPROVAL OF THE COMPANY'S 2002 STOCK INCENTIVE PLAN

The Company is asking its shareholders to approve the Commonwealth
Biotechnologies, Inc. 2002 Stock Incentive Plan that was adopted by the Board of
Directors on March 27, 2002. As adopted, the plan makes available up to 300,000
shares of Common Stock for grants of restricted stock awards and stock options
in the form of incentive stock options and non-statutory stock options to
employees, directors and consultants of the Company. The more significant
features of the plan are described below. A copy of the plan, as adopted by the
Board of Directors, is attached as Exhibit A hereto.
---------

Purpose

The purpose of the plan is to promote the success of the Company by
providing greater incentive to employees, directors and consultants to associate
their personal interests with the long-term financial success of the Company and
with growth in shareholder value. The plan is designed to provide flexibility to
the Company in its ability to motivate, attract, and retain the services of
employees, directors and consultants upon whose judgment, interest, and special
effort the successful conduct of the Company's operations largely depends. The
plan terminates on March 27, 2012, unless sooner terminated by the Board of
Directors.

Administration

The plan is administered by the Company's Compensation Committee. The
Committee has the power to select plan participants and to grant stock options
and stock awards on terms the Committee considers appropriate. In addition, the
Committee has the authority to interpret the plan, to adopt, amend or waive
rules or regulations for the plan's administration, and to make all other
determinations for administration of the plan.

Stock Options

Stock options granted under the plan may be incentive stock options or
non-statutory stock options. A stock option entitles the employee to purchase
shares of Common Stock at the option price. The Committee will fix the option
price at the time the stock option is granted, but in the case of an incentive
stock option the exercise price cannot be less than 100% of the shares' fair
market value on the date of grant (or, in the case of an incentive stock option
granted to a 10% shareholder of the company, 110% of the shares fair market
value on the date of grant). The value in incentive stock options, based on the
exercise price, that can be exercisable for the first time in any calendar year
under the plan or any other similar plan maintained by the Company is limited to
$100,000. The option price may be paid in cash or with shares of Common Stock,
or a combination of cash and Common Stock. Stock options may be exercised at
such times and subject to such conditions as may be prescribed by the Committee,
including the requirement that they will not be exercisable after ten years from
the grant date.

Restricted Stock Awards

The plan permits the grant of restricted stock awards (shares of Common
Stock) to plan participants. A restricted stock award may be, but is not
required to be, forfeitable or otherwise restricted until certain conditions are
satisfied. These conditions may include, for example, a requirement that the
plan participant complete a specified period of service or that certain
objectives be achieved. Any restriction imposed on a restricted stock award will
be determined by the Compensation Committee.


8


Transferability

In general, stock options and restricted stock awards granted may not
be assigned, transferred, pledged or otherwise encumbered by a participant,
other than by will or the laws of descent and distribution.

Shares Subject to the Plan

Up to 300,000 shares of Common Stock may be issued to plan participants
under the plan. No stock options or restricted stock awards have been granted
under the plan. The maximum number of shares with respect to which stock options
or restricted stock may be granted under the plan in any calendar year to an
employee is 50,000 shares. In general, if any stock option or restricted stock
award granted terminates, expires or lapses for any reason other than as a
result of being exercised, or if shares issued pursuant to the plan are
forfeited, the Common Stock subject to the stock option or restricted stock
award will be available for further stock options and awards.

Certain Federal Income Tax Consequences

Generally, no federal income tax liability is incurred by a plan
participant at the time a stock option is granted. If the stock option is an
incentive stock option, no income will be recognized upon the participant's
exercise of the stock option. Income is recognized by participant when he or she
disposes of shares acquired under an incentive stock option. The exercise of a
non-statutory stock option generally is a taxable event that requires the
participant to recognize, as ordinary income, the difference between the shares'
fair market value and the option exercise price. For restricted stock awards,
income is recognized by a participant when the shares first become transferable
or are no longer subject to a substantial risk of forfeiture. At that time, the
participant recognizes income equal to the fair market of the Common Stock. The
Company will be entitled to claim a federal business expense tax deduction on
account of the exercise of a non-statutory stock option or the vesting of a
restricted stock award. The amount of the deduction is equal to the ordinary
income recognized by the participant. The Company generally will not be entitled
to a federal income tax deduction on account of the grant or exercise of an
incentive stock option, but may claim a federal income tax deduction on account
of certain disqualifying dispositions of stock acquired upon the exercise of an
incentive stock option. This summary of federal income tax consequences does not
purport to be complete. There may also be state and local income taxes
applicable to these items.

Changes in Capitalization and Similar Changes

In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend, stock split, recapitalization or otherwise, the
aggregate number of shares of Common Stock reserved under the plan, and the
terms, exercise price and number of shares of any outstanding stock options or
restricted stock awards will be equitably adjusted by the Committee in its
discretion to preserve the benefits of the stock options and stock awards for
plan participants. For instance, a two-for-one stock split would double the
number of shares reserved under the plan. Similarly, for outstanding stock
options it would double the number of shares covered by each stock option and
reduce its exercise price by one-half.

Option Grants

The Company has not granted any options under the 2002 Stock Incentive
Plan.


9


Stock Price

On April 4, 2002, the closing price of the Company's Common Stock on
the Nasdaq SmallCap Market was $1.86 per share.

Vote Required

Approval of the plan requires that more shares of Common Stock vote in
favor of the plan than against it.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.

10


PROPOSAL 3: APPROVAL OF THE CREATION OF BLANK CHECK PREFERRED STOCK

The Board of Directors of the Company adopted a resolution unanimously
approving and recommending to the Company's shareholders for their approval an
amendment to the Company's Amended and Restated Articles of Incorporation to
provide for the creation of a new class of 2,000,000 shares of what is commonly
known as "blank check" preferred stock. If this resolution is approved by the
shareholders, it will be effected by the filing of Articles of Amendment to the
Company's Amended and Restated Articles of Incorporation (the "Amendment"),
which will occur promptly after the Annual Meeting. The following discussion is
qualified in its entirety by reference to the text of the proposed Amendment
attached to this proxy statement as Exhibit B.
---------

The Board of Directors believes the creation of the preferred stock is
in the best interests of the Company and its shareholders and believes it
advisable to authorize such shares to have them available for, among other
things, possible issuance in connection with such activities as public or
private offerings of shares for cash, dividends payable in stock of the Company,
acquisitions of other companies, implementation of employee benefit plans,
pursuit of financing opportunities and otherwise. The term "blank check"
preferred stock refers to stock for which the designations, preferences,
conversion rights, and cumulative, relative, participating, optional or other
rights, including voting rights, qualifications, limitations or restrictions
thereof, are determined by the Board of Directors of a company.

As such, the Board of Directors of the Company will, in the event of
the approval of this proposal by the Company's shareholders, be entitled to
authorize the creation and issuance of 2,000,000 shares of preferred stock in
one or more series with such limitations and restrictions as may be determined
in the sole discretion of the Board of Directors, with no further authorization
by shareholders required for the creation and issuance of the preferred stock.
Any preferred stock issued would have priority over the Common Stock upon
liquidation and might have priority rights as to dividends, voting and other
features. Accordingly, the issuance of preferred stock could decrease the amount
of earnings and assets allocable to or available for distribution to holders of
Common Stock and adversely affect the rights and powers, including voting
rights, of the Common Stock.

Generally, except in connection with a shareholder rights or "poison
pill" plan, preferred stock would be issued to investors in connection with
raising additional equity capital, and would typically contain terms and
conditions intended to protect the interests of investors. Such terms and
conditions typically would include preference over the holders of Common Stock
in the proceeds of a sale or liquidation of the Company (including the
distribution of assets upon a sale of substantially all of its assets and
businesses) and priority dividend rights (which may include cumulative
dividends), and might include special voting rights, special conversion rights
and redemption rights. Such rights, either alone or in combination under
particular circumstances, can provide the holders of preferred stock with a
disproportionate share of current distribution of earnings by way of dividends,
or of the proceeds of a sale or liquidation, or disproportionate rights of
approval with respect to certain kinds of transactions, compared to those of the
holders of Common Stock.

The Board of Directors does not believe that the approval of this
proposal will have an anti-takeover effect, and, as noted below, has represented
that such preferred stock will not be issued for such purpose. The Board of
Directors and management believe that it is in the best interests of the Company
and its shareholders to have the flexibility to raise additional capital or to
pursue acquisitions to support the Company's business plan, including the
ability to authorize and issue preferred stock having terms and conditions
satisfactory to investors or to acquisition candidates, including preferred
stock which contains some features which could be viewed as having an
anti-takeover effect or a potentially adverse effect on the holders of Common
Stock. The Board of Directors and management of the Company represent that they


11


will not, without prior shareholder approval, issue any preferred stock (i) the
principal intent of which is any defensive or anti-takeover purpose or (ii) to
implement any shareholder rights plan. No preferred stock will be issued to any
individual or group for the purpose of creating a block of voting power to
support management on a controversial issue. While the Company may consider
issuing preferred stock in the future for purposes of raising additional capital
or in connection with acquisition transactions, the Company presently has no
agreements or understanding with any person to effect any such issuance, and the
Company may never issue any preferred stock. Therefore, the terms of any
preferred stock subject to this proposal cannot be stated or predicted with
respect to any or all of the securities authorized.

Vote required

Approval of this proposal requires the affirmative vote of a majority
of all of the outstanding shares of Common Stock present or represented and
entitled to vote at the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 3.

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PROPOSAL 4: SELECTION OF AUDITORS

Upon the recommendation of the Audit Committee, the Board of Directors
of the Company has appointed, subject to the approval of the shareholders, the
firm McGladrey & Pullen, LLP as independent public accountants to audit the
Company's financial statements for the fiscal year ended December 31, 2002. If
the appointment of McGladrey & Pullen, LLP is not approved by the shareholders,
the matter will be referred to the Audit Committee for further review.

The Company appointed McGladrey & Pullen, LLP to serve as the Company's
independent public accountants on February 23, 1998. It is anticipated that
representatives of McGladrey & Pullen, LLP will attend the Annual Meeting and
will have an opportunity to make a statement, if they determine to do so, and
will be available to respond to appropriate questions at that time.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE SELECTION OF MCGLADREY & PULLEN, LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE
COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2002.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The following table sets forth certain information regarding beneficial
ownership as of the Record Date (unless otherwise indicated) by (i) each
director and nominee for director, (ii) each person known by the Company to be
the beneficial owner of more than 5% of the Common Stock of the Company, (iii)
the Named Executive Officers (as defined herein), and (iv) all directors and
officers as a group. Except as otherwise indicated, the beneficial owners listed
below have sole voting and investment power with respect to all shares owned by
them, except to the extent such power is shared by a spouse under applicable
law.