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 Rule 14a-11(c) or Rule 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:
(2) Aggregate number of securities to which transaction applies:
(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:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO]
911 EAST LEIGH STREET
SUITE G-19
RICHMOND, VIRGINIA 23219
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders,
which is to be held on Tuesday, April 14, 1998, at 11:00 a.m. at Crestar Bank
Auditorium, 919 East Main Street, 4th Floor, Richmond, Virginia. 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, Ph.D.
RICHARD J. FREER, PH.D.,
Chairman of the Board of Directors
<PAGE>
COMMONWEALTH BIOTECHNOLOGIES, INC.
911 EAST LEIGH STREET, SUITE G-19
RICHMOND, VIRGINIA 23219
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
APRIL 14, 1998
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Commonwealth Biotechnologies, Inc. (the "Company") will be
held on Tuesday, April 14, 1998, at 11:00 a.m. at Crestar Bank Auditorium, 919
East Main Street, 4th Floor, Richmond, Virginia, for the following purposes:
(1) To elect two nominees as Class I directors of the Company;
(2) To ratify the appointment of McGladrey & Pullen, LLP as
independent public accountants to audit the financial
statements of the Company for the fiscal year ended December
31, 1998; and
(3) 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 16,
1998 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/ Gregory A. Buck, Ph.D.
GREGORY A. BUCK, PH.D.,
Secretary
Richmond, Virginia
March 18, 1998
<PAGE>
COMMONWEALTH BIOTECHNOLOGIES, INC.
911 EAST LEIGH STREET, SUITE G-19
RICHMOND, VIRGINIA 23219
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 14, 1998
This Proxy Statement is furnished to the holders of common stock, no
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
Tuesday, April 14, 1998, at 11:00 a.m. at Crestar Bank Auditorium, 919 East Main
Street, 4th Floor, Richmond, Virginia, and at any adjournments or postponements
thereof. This Proxy Statement and the accompanying proxy are first being mailed
on or about March 18, 1998.
Only the holders of Common Stock of record at the close of business on
March 16, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting. On such date, 1,620,514 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
<PAGE>
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 will not have the effect of voting in opposition to a
director or of a vote against the other proposals.
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 Gregory A. Buck, Ph.D., the Secretary of the
Company, at 911 East Leigh Street, Suite G-19, Richmond, Virginia 23219 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 Articles of Incorporation, as amended to date, provide
that the Board of Directors shall be divided into three classes of as nearly
equal size as possible. Approximately one-third of the directors are elected
each year. The Board of Directors has nominated the two individuals named below
under the caption "Class I Nominees" for election as directors to serve until
the annual meeting of shareholders in 2001 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 has
been established at six 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.
<PAGE>
Class I Nominees:
THOMAS R. REYNOLDS - Senior Vice President, Director and Founder
Age -- 35
Director since 1992
Mr. Reynolds currently serves the Company as a Senior Vice President
and a director. From the founding of the Company in 1992 until 1997, Mr.
Reynolds served as a Vice President and a director of the Company. From 1987
until 1997, Mr. Reynolds served as the Manager of the Nucleic Acids Core
Laboratory at The Massey Cancer Center in the Department of Microbiology and
Immunology at Virginia Commonwealth University ("VCU"). From 1984 through 1986,
Mr. Reynolds served as a research assistant in Genetics at Carnegie Mellon
University. Mr. Reynolds received a bachelor's degree in Biology from the
Pennsylvania State University.
CHARLES A. MILLS, III - Director
Age -- 51
Director since 1997
Mr. Mills became a director of the Company in June 1997. Mr.
Mills has been employed by Anderson & Strudwick Incorporated, a brokerage
firm ("A&S"), as a Senior Vice President since 1986. He served as Chairman of
the Board of A&S from 1990 to 1992 and from 1994 to the present. He has
served as a director of Humphrey Hospitality Trust, Inc. since 1994.
Continuing Directors
The persons named below will continue to serve as directors until the
annual meeting of stockholders in the year indicated and until their successors
are elected and take office. Shareholders are NOT voting on the election of the
Class II and Class III directors.
Class II Directors Serving Until the 1999 Annual Meeting:
ROBERT B. HARRIS, PH.D. - President, Director and Founder
Age -- 45
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 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.
<PAGE>
PETER C. EINSELEN - Director
Age -- 58
Director since 1997
Mr. Einselen became a director of the Company in June 1997. Mr.
Einselen has served as Senior Vice President of A&S since 1990. From 1983 to
1990, Mr. Einselen was employed by Scott & Stringfellow, Incorporated, a
brokerage firm in Richmond, Virginia.
Class III Directors Serving Until the 2000 Annual Meeting:
RICHARD J. FREER, PH.D. - Chairman of the Board, Director and Founder
Age -- 55
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 by VCU, first as an Associate Professor, and then a
Professor, in the Department of Pharmacology and Toxicology. 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 a 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 in Pharmacology
from Columbia University.
GREGORY A. BUCK, PH.D. - Senior Vice President, Chief Scientific Officer,
Secretary, Director and Founder
Age -- 46
Director since 1992
Dr. Buck co-founded the Company in 1992. From 1992 until 1997, Dr. Buck
served as Secretary, a Vice President and a director of the Company. In 1997,
Dr. Buck assumed the roles of Chief Scientific Officer and Senior Vice President
while retaining his positions as Secretary and a director. From 1996 until 1997,
Dr. Buck was employed as a Professor in the Department of Microbiology and
Immunology at VCU. From 1991 through 1996, Dr. Buck served as an Associate
Professor in the Department of Microbiology and Immunology at VCU. Dr. Buck
received a bachelor's degree in Genetics from the University of
Wisconsin-Madison and a doctorate degree in Microbiology and Immunology from the
University of Washington.
Information Regarding the Board Of Directors
The Board of Directors held two meetings during 1997, 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.
<PAGE>
The Committees of the Board of Directors consist of an Audit Committee,
a Compensation Committee and a Nominating Committee. The Audit Committee and the
Compensation Committee are comprised of Mr. Mills and Mr. Einselen. The
Nominating Committee is comprised of Dr. Buck and Mr. Mills. During 1997, the
Audit Committee met two times, and the Compensation Committee met two times. The
Nominating Committee did not meet in 1997. The Audit Committee recommends the
annual appointment of 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 (the "Incentive
Plan") 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, including the Incentive Plan. 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.
Compensation of Directors
All directors receive a fee of $2,500 for each regularly scheduled
quarterly Board meeting attended (the "Director's Fee"). The Director's Fee is
adjusted upwards or downwards on an annual basis in an amount equal to the
percentage change in the market price of the Company's Common Stock as compared
to the market price of the Common Stock for the previous fiscal year. 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.
In voting by proxy for the election of two nominees as Class I
directors to serve until the annual meeting of shareholders at which such
director's class will stand for reelection, shareholders may vote in favor of
both nominees, withhold their votes as to both nominees, or withhold their votes
as to a specific nominee. If no instructions are indicated, such proxies will be
voted FOR the election of both nominees as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE ELECTION OF ALL OF THE PROPOSED CLASS I
NOMINEES TO THE BOARD OF DIRECTORS.
<PAGE>
PROPOSAL 2: 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, 1998. 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.
Goodman & Company, L.L.P. ("Goodman") served as the Company's
independent public accountants for the fiscal years ended December 31, 1995,
December 31, 1996 and December 31, 1997. For various business reasons, the Audit
Committee recommended the dismissal of Goodman to the Company's Board of
Directors, and on February 23, 1998, the Board officially terminated its
business relationship with Goodman. Goodman's reports on the Company's financial
statements for each of the last two fiscal years did not contain an adverse
opinion or disclaimer of opinion. Similarly, Goodman did not modify either such
report as to uncertainty, audit scope or accounting principles. There were no
disagreements between the Company and Goodman regarding any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
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 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 ENDED DECEMBER 31, 1998.
<PAGE>
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 executive officers of the Company named in the Summary Compensation Table
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.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Shares Beneficially Owned (1) Percent of Class
------------------------------------ ----------------------------- ----------------
<S> <C>
Richard J. Freer, Ph.D. (2) 41,798 2.6%
Robert B. Harris, Ph.D. (3) 38,297 2.4%
Gregory A. Buck, Ph.D. (4) 43,359 2.7%
Thomas R. Reynolds (5) 27,935 1.7%
Charles A. Mills, III (6) 163712 10.1%
Peter C. Einselen (7) 10,000 *
James T. Martin (8) 162,465 10.0%
All directors and executive officers as a
group (six persons) (9) 297,166 18.3%
</TABLE>
* Less than 1%
(1) Includes shares of Common Stock subject to options which may be
exercised within 60 days of March 16, 1998. Such shares are deemed to
be outstanding for the purposes of computing the percentage ownership
of the individual holding such shares, but are not deemed outstanding
for purposes of computing the percentage of any other person shown in
the table.
(2) Dr. Freer's address is 911 East Leigh Street, Suite G-19, Richmond,
Virginia 23219. The number of shares deemed to be beneficially held by
Dr. Freer includes vested options to purchase an aggregate of 16,666
shares of Common Stock.
(3) Dr. Harris' address is 911 East Leigh Street, Suite G-19, Richmond,
Virginia 23219. The number of shares deemed to be beneficially held by
Dr. Harris includes vested options to purchase an aggregate of 16,666
shares of Common Stock.
(4) Dr. Buck's address is 911 East Leigh Street, Suite G-19, Richmond,
Virginia 23219. The number of shares deemed to be beneficially held by
Dr. Buck includes (i) vested options to purchase an aggregate of 16,666
shares of Common Stock and (ii) vested options to purchase an aggregate
of 500 shares of Common Stock held by Dr. Buck's spouse. Dr. Buck
disclaims beneficial ownership of such shares.
(5) Mr. Reynolds' address is 911 East Leigh Street, Suite G-19, Richmond,
Virginia 23219. The number of shares deemed to be beneficially held by
Mr. Reynolds includes vested options to purchase an aggregate of 16,666
shares of Common Stock.
(6) Mr. Mills' address is 707 East Main Street, 20th Floor, Richmond,
Virginia 23219. The shares indicated are held by investment advisory
clients of Mills Value Adviser, Inc., a registered investment adviser
("MAI"). Mr. Mills serves as Chairman of MAI. MAI possesses shared
dispositive power over, and can vote, such shares. Mr. Mills disclaims
beneficial ownership of such shares. MAI further holds and has shared
dispositive power over 142,465 of the 162,465 shares owned by James T.
Martin, but cannot vote such shares.
(7) Mr. Einselen's address is 707 East Main Street, 20th Floor, Richmond,
Virginia 23219.
(8) Mr. Martin's address is Tupenny House, Tuckerstown, Bermuda.
(9) Includes vested options to purchase an aggregate of 67,164 shares of
Common Stock.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of a registered
class of the Company's securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Based solely on a review of copies of reports filed with the Securities
and Exchange Commission and written representations from certain of the
Company's directors and executive officers that no other reports were required,
the Company notes that each of the Company's executive officers and directors
inadvertently failed to timely file Form 3 information prior to the effective
date of the registration statement relating to the Company's initial public
offering. In addition, Mr. Einselen inadvertently failed to timely file a Form 4
relating to the acquisition of an aggregate of 2,000 shares of the Company's
Common Stock. Such filings were subsequently made.
EXECUTIVE COMPENSATION
Executive Officers of the Company
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C>
Richard J. Freer, Ph.D. 55 Chairman of the Board and Director
Robert B. Harris, Ph.D. 45 President and Director
Gregory A. Buck, Ph.D. 46 Senior Vice President, Chief Scientific Officer,
Secretary and Director
Thomas R. Reynolds 35 Senior Vice President and Director
</TABLE>
See "Proposal 1: Election of Directors" for information regarding
the backgrounds of the executive officers.
<PAGE>
The following table sets forth summary information concerning
compensation paid or accrued by the Company in 1997 on behalf of (i) the
Company's Chairman of the Board and (ii) the three other executive officers of
the Company (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($)
-------- ---- ---------- --------- ---------------- ----------- ----------------
<S> <C>
Richard J. Freer, Ph.D. 1997 97,411 43,421 -- 78,157 33,073 (1)
1996 8,729 -- -- -- 23,024 (2)
1995 -- -- -- -- --
Robert B. Harris, Ph.D. 1997 91,908 43,421 -- 78,157 33,073 (1)
1996 -- -- -- -- 23,024 (2)
1995 -- -- -- -- --
Gregory A. Buck, Ph.D. 1997 83,237 43,421 -- 78,157 33,073 (1)
1996 -- -- -- -- 23,024 (2)
1995 -- -- -- -- --
Thomas R. Reynolds 1997 70,154 19,737 -- 35,529 17,632 (1)
1996 -- -- -- -- 10,963 (2)
1995 -- -- -- -- --
</TABLE>
- --------------
(1) Represents the sum of Director's Fees paid by the Company and
distributions to pay income taxes incurred by the recipient as a result
of the Company's status, prior to June 1997, as a corporation taxed in
accordance with Subchapter S of the Internal Revenue Code of 1986, as
amended.
(2) Represents distributions to pay income taxes incurred by the recipient
as a result of the Company's status, for the fiscal year ended December
31, 1996, as a corporation taxed in accordance with Subchapter S of the
Internal Revenue Code of 1986, as amended.
<PAGE>
The following table sets forth information concerning the stock options
granted to the Named Executive Officers in 1997.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Name Number of Securities % of Total Options
Underlying Granted to Employees Exercise Price
Options Granted in Fiscal Year ($/Share) Expiration Date
<S> <C>
Richard J. Freer, Ph.D. 20,263 (1) 6.4% $6.00 10-28-07
57,894 (2) 18.4% $9.90 10-28-07
Robert B. Harris, Ph.D. 20,263 (1) 6.4% $6.00 10-28-07
57,894 (2) 18.4% $9.90 10-28-07
Gregory A. Buck, Ph.D. 20,263 (1) 6.4% $6.00 10-28-07
57,894 (2) 18.4% $9.90 10-28-07
Thomas R. Reynolds 9,211 (3) 2.9% $6.00 10-28-07
26,318 (4) 8.4% $9.90 10-28-07
</TABLE>
- --------------
(1) Such options vest as follows: 16,666 options vested on October 28,
1997 and 3,597 options vest on October 28, 1998.
(2) Such options vest as follows: 13,069 options vest on October 28, 1998;
16,666 options vest on October 28, 1999; 16,666 options vest on October
28, 2000 and 11,493 options vest on October 28, 2001.
(3) Such options vested on October 28, 1997.
(4) Such options vest as follows: 7,455 options vested on October 28,
1997; 16,666 options vest on October 28, 1998 and 2,197 options vest on
October 28, 1999.
The following table sets forth information with respect to unexercised
options held as of December 31, 1997 by the Named Executive Officers. No Named
Executive Officer exercised any options for the purchase of shares of Common
Stock during 1997.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Exercisable/Unexercisable Options at Exercisable/Unexercisable In-the
Name Fiscal Year End Money Options at Fiscal Year End
---- ------------------------------------ --------------------------------
<S> <C>
Richard J. Freer, Ph.D. 16,666 / 61,491 $39,582 / $8,543
Robert B. Harris, Ph.D. 16,666 / 61,491 $39,582 / $8,543
Gregory A. Buck, Ph.D. 16,666 / 61,491 $39,582 / $8,543
Thomas R. Reynolds 16,666 / 18,863 $21,876 / --
</TABLE>
- --------------
(1) Based upon the closing sales price of the Common Stock ($8.375 per
share) as reported on the Nasdaq SmallCap Market on December 31, 1997.
<PAGE>
The Company has not awarded stock appreciation rights to any of its
executive officers, directors or employees. The Company has no long-term
incentive, defined benefit or actuarial plans, as those terms are defined in
Securities and Exchange Commission regulations, covering employees of the
Company.
Employment Contracts and Termination and Change-In-Control Arrangements
On June 24, 1997, the Company entered into employment agreements with
each of Drs. Freer, Harris and Buck and Mr. Reynolds. Each of these agreements
has a term of five years and will be extended for successive one-year terms
beginning on the first anniversary of its commencement, unless either the
executive officer or the Company shall have given notice to the other of an
election not to extend the term of the employment agreement. The employment
agreements provide for base salaries of $165,000 for Drs. Freer, Harris and Buck
and $120,000 for Mr. Reynolds, which are adjustable annually at the discretion
of the Compensation Committee. In addition, the employment agreements provide
the Company's executive officers with annual bonuses equal to, in the aggregate,
15% of the Company's pre-tax net income for the preceding fiscal year. Such
bonuses will be paid within 30 days following the release of the Company's
annual audited financial statements. Notwithstanding the foregoing, however, the
bonuses for the executive officers for the fiscal year ending December 31, 1997
collectively equaled $150,000. Under each of the employment agreements, the
Company may terminate the executive officers employment at any time for "Cause"
as such term is defined in the employment agreement, without incurring any
continuing obligations to the executive officer. If the Company terminates an
executive officer's employment for any reason other than for "Cause" or if an
executive officer terminates his or her employment for "Good Reason," as such
term is defined in the employment agreement, the Company will remain obligated
to continue to provide the compensation and benefits specified in the executive
officer's employment agreement for the duration of what otherwise would have
been the term of the employment agreement. In addition, each employment
agreement contains non-competition provisions which prohibit each executive
officer from competing with the Company or soliciting its employees under
certain circumstances. A court may, however, determine that these
non-competition provisions are unenforceable or only partially enforceable.
The Company has entered into severance agreements with each of its
executive officers. Each severance agreement (all of which are substantially
similar) has an initial term of five years and will be extended for successive
one-year periods beginning on the first anniversary of its commencement, unless
either the executive officer or the Company shall have given notice to the other
of an election not to extend the term of the severance agreement. If the
employment of any of these executive officers is terminated (with certain
exceptions) within 60 months following a "Change in Control," as such term is
defined in the severance agreement, the executive officer will be entitled to
receive a cash payment equal to two times the annual salary for the most recent
twelve-month period and three times the bonus paid with respect to such period.
To the extent the aggregate benefits available to an executive officer,
whether under his respective severance agreement or otherwise, exceed the limit
of three times the executive's average base compensation provided in Section
280G of the Internal Revenue Code of 1986, as amended, resulting in the
executive officer incurring an excise tax under Section 4999 of the Internal
Revenue Code or any other taxes or penalties (other than ordinary income or
capital gains taxes), the severance agreements require the Company to pay the
executive officer an additional amount to cover any such excise taxes or
penalties incurred. The Company will not be entitled to a deduction for the
amount in excess of this limit.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors during 1997
consisted of Mr. Mills and Mr. Einselen. None of the members of the Compensation
Committee has at any time been an officer or employee of the Company or any of
its subsidiaries. Except as noted under "Certain Relationships and Related
Transactions," no member of the Compensation Committee has any relationship with
the Company requiring disclosure by the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 25, 1997, the Company issued warrants to purchase shares of
Common Stock to the Company's executive officers (the "Management Warrants").
The Management Warrants are exercisable commencing June 25, 1998 and for a
period of nine years thereafter at an exercise price of $9.90 per share. The
Management Warrants were issued as noted below:
Richard J. Freer, Ph.D. 28,947 Warrants
Robert B. Harris, Ph.D. 28,947 Warrants
Gregory A. Buck, Ph.D. 28,948 Warrants
Thomas R. Reynolds 13,158 Warrants
The Company, as an S Corporation during the period from January 1, 1997
through June 30, 1997, made distributions to the executive officers, who were
the Company's only shareholders during that period. These distributions totaled
an aggregate of $96,851.
Two directors of the Company, Charles A. Mills, III and Peter C.
Einselen, also serve as executive officers of A&S. The Company paid commissions
to A&S in connection with (i) the closing of the Company's private placement of
subordinated convertible notes completed on June 25, 1997 (the "Private
Placement") and (ii) the closing of the Company's initial public offering of
Common Stock completed on October 28, 1997 (the "Initial Public Offering"). In
connection with the Private Placement, the Company paid sales commissions to
A&S. In connection with the Initial Public Offering, the Company paid A&S an
underwriting discount and issued warrants to purchase an aggregate of 101,500
shares of Common Stock at an exercise price of $9.90 per share to A&S. In
addition, A&S is currently serving as underwriter for the Company's contemplated
issuance of industrial development revenue bonds in an aggregate principal
amount of $4,000,000. This transaction should be completed by the end of March
1998, and A&S' underwriting fee associated with the issuance of such bonds will
be approximately $160,000.
<PAGE>
On June 25, 1997, the Company entered into an agreement with Chester M.
Trzaski, a former executive officer of the Company, pursuant to which the
Company agreed to pay certain amounts due to Mr. Trzaski, and Mr. Trzaski agreed
to relinquish certain rights to acquire shares of the capital stock of the
Company in exchange for $110,000. This amount was paid in full on January 5,
1998.
The Company believes that all of the transactions noted above were made
or will be made on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties. All future transactions between the
Company and its officers, directors and principal shareholders will be approved
in accordance with the Virginia law by a majority of the Board of Directors,
including a majority of the independent and disinterested directors of the Board
of Directors, and will be on terms no less favorable to the Company than could
be obtained from unaffiliated third parties.
SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal considered for inclusion in
the Company's proxy materials for the 1999 Annual Meeting of Shareholders, the
proposal must comply with the Securities and Exchange Commission's proxy rules,
be stated in writing and be submitted on or before November 20, 1998. Any
proposals should be mailed to the Company at 911 East Leigh Street, Suite G-19,
Richmond, Virginia 23219, Attention: Gregory A. Buck, Ph.D., Secretary.
In addition to any other applicable requirements, for business to be
properly brought before the annual meeting by a shareholder, even if a proposal
is not to be included in the Company's Proxy Statement, the Company's Bylaws
provide that the shareholder must give timely notice in writing to the Secretary
of the Company not later than 90 days prior to the annual meeting. As to each
matter, the notice must contain (i) a brief description of the business to be
brought before the annual meeting (including the specific proposal to be
presented) and the reasons for addressing it at the annual meeting, (ii) the
name of, record address of and class and number of shares beneficially owned by
the shareholder proposing such business and (iii) any material interest of the
shareholder in such business. The 1999 annual meeting of shareholders of the
Company will be held on April 20, 1999.
The Company's Bylaws provide that a shareholder of the Company entitled
to vote for the election of directors may nominate persons for election to the
Board of Directors by mailing written notice to the Secretary of the Company not
later than (i) with respect to an election to be held at an annual meeting of
shareholders, 90 days prior to such meeting, and (ii) with respect to an
election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is given to shareholders. Any such shareholder's notice
shall include (a) the name and address of the
<PAGE>
shareholder and of each person to be nominated, (b) a representation that the
shareholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate each person specified, (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other person
(naming such person) pursuant to which the nomination is to be made by the
shareholder, (d) such other information regarding each nominee as would be
required to be included in a Proxy Statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, and (e) the consent of each nominee
to serve as a director of the Company if so elected.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be brought
before the Annual Meeting of Shareholders. If any other matters, however, are
properly brought before the Annual Meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote all proxies with respect
to such matters in accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY HOLDER OF THE COMPANY'S COMMON STOCK
ENTITLED TO VOTE AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS, THE COMPANY WILL
FURNISH, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 1997, INCLUDING FINANCIAL STATEMENTS, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED TO THE
COMPANY AT 911 EAST LEIGH STREET, SUITE G-19, RICHMOND, VIRGINIA, 23219,
ATTENTION: GREGORY A. BUCK, PH.D., SECRETARY.
By Order of the Board of Directors,
/s/ Gregory A. Buck, Ph.D.
GREGORY A. BUCK, PH.D.
Secretary
<PAGE>
COMMONWEALTH BIOTECHNOLOGIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 14, 1998
The undersigned hereby appoints Richard J. Freer, Ph.D. and Robert B.
Harris, Ph.D., or either of them, with power of substitution, as proxies to vote
all stock of Commonwealth Biotechnologies, Inc. (the "Company") owned by the
undersigned at the Annual Meeting of Shareholders to be held at Crestar Bank
Auditorium, 919 East Main Street, 4th Floor, Richmond, Virginia, at 11:00 a.m.
on April 14, 1998, and any adjournment thereof, on the following matters as
indicated below and such other business as may properly come before the meeting.
1. [ ] FOR the election as director of all nominees listed:
Thomas R. Reynolds and Charles A. Mills, III (except as marked
to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed: Thomas R.
Reynolds and Charles A. Mills, III.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR INDIVIDUAL NOMINEES,
WRITE THEIR NAMES IN THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of McGladrey & Pullen, LLP as the
independent public accountants of the Company for the fiscal year ended
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES NAMED ABOVE MAY VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY MUST BE DATED AND SIGNED. THIS PROXY IS SOLICITED ON BEHALF OF THE
COMPANY'S BOARD OF DIRECTORS.
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 (i) FOR the two nominees as Class I directors of the Company; and (ii)
FOR the proposal to ratify the appointment of McGladrey & Pullen, LLP as the
independent public accountants of the Company for the fiscal year ended December
31, 1998.
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership or limited liability entity, please
sign in full name such entity by authorized person.
Dated: ______________________, 1998
---------------------------------
Signature of Shareholder
---------------------------------
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
