SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 ( Amendment No. )
Filed by the Registrant ( )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(x) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ETS International, Inc.
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(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) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a(i)(3).
( ) 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:
Common Stock without par value
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(2) Aggregate number of securities to which transaction applies:
13,415,697
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(3) Per unit 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:
$125
- - - -----------------------------------------------------------------------
( ) 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 date of
its filing.
(1) Amount Previously Paid:
- - - -----------------------------------------------------------------------
<PAGE>
(2) Form, Schedule or Registration Statement No.:
- - - -----------------------------------------------------------------------
(3) Filing Party:
- - - -----------------------------------------------------------------------
(4) Date Filed:
- - - -----------------------------------------------------------------------
<PAGE>
September 27, 1996
Dear Fellow Shareholder:
The Fiscal 1997 Annual Shareholders' Meeting of ETS International, Inc.
("ETSI" or the "Company") will be held at 10:00 a.m. on Friday, October 25,
1996, at ETSI headquarters, 1401 Municipal Road, NW, Roanoke, Virginia 24012.
Enclosed you will find formal Notice of Annual Meeting, Proxy and Proxy
Statement, detailing the matters which will be acted upon. Directors and
Officers of the Company will be present to help host the meeting and to
respond to any questions from our shareholders. I hope you will be able to
attend.
Please sign, date and return the enclosed Proxy without delay in the
enclosed envelope. If you attend the Meeting, you may vote in person even if
you have previously mailed a Proxy by withdrawing your Proxy vote at the
meeting.
The Company's Board of Directors believes that a favorable vote for each
matter described in the attached Notice of Annual Meeting and Proxy Statement
is in the best interest of the Company and its shareholders and unanimously
recommends a vote "FOR" each such matter. Accordingly, we urge you to review
the accompanying material carefully and to return the enclosed Proxy promptly.
Thank you for your investment and continued interest in ETS International,
Inc.
Sincerely,
John D. McKenna, Ph.D.
President and Chairman
<PAGE>
NOTICE OF FISCAL 1997 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ETS INTERNATIONAL, INC.:
NOTICE is hereby given that the Fiscal 1997 Annual Meeting of
Shareholders (the "Meeting") of ETS International, Inc. ("ETSI") will be held
at the ETSI headquarters, 1401 Municipal Road, NW, Roanoke, Virginia 24012 on
Friday, October 25, 1996, at 10:00 a.m., local time, for the following
purposes:
1. Election of Directors for the ensuing year.
2. Approval of the appointment of independent auditors for fiscal year 1997.
3. Approval of an amendment to ETSI's Articles of Incorporation which
would increase the authorized number of shares of common stock without par
value from 20,000,000 shares to 30,000,000 shares.
4. Approval of an amendment to the Articles of Incorporation of ETSI which
would authorize the issuance of 5,000,000 shares of preferred stock without
par value.
5. Transaction of such other business as may properly come before the
Meeting, or any adjournments thereof.
Only shareholders of record at the close of business on August 31, 1996
are entitled to notice of and to vote at the Meeting or any adjournments
thereof.
Your attention is directed to the Proxy Statement accompanying this
notice for a more complete statement regarding matters proposed to be acted
upon at the meeting.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY, FOR WHICH A RETURN
ENVELOPE IS PROVIDED. YOUR PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
EXERCISE.
BY ORDER OF THE BOARD OF DIRECTORS
John C. Mycock
Secretary to the Board of Directors
September 27, 1996
<PAGE>
PROXY STATEMENT
FOR FISCAL 1997 ANNUAL MEETING OF SHAREHOLDERS
ETS INTERNATIONAL, INC.
1401 Municipal Road
Roanoke, Virginia USA
24012-1309
Solicitation of the enclosed fiscal 1997 proxy is made by and on behalf
of the Board of Directors (the "Board of Directors") of ETS International,
Inc. ("ETSI" or the "Company") to be used at the Fiscal 1997 Annual Meeting
of Shareholders to be held at the ETSI headquarters, 1401 Municipal Road, NW,
Roanoke, Virginia 24012 on Friday, October 25, 1996 at 10:00 a.m., and at any
adjournments thereof. The mailing date of the Proxy Statement and the
accompanying Proxy is September 27, 1996.
The cost of the solicitation of proxies will be borne by the Company.
Solicitations will be made only by use of the mails, except that, if
necessary, officers, directors and regular employees of ETSI, or its
subsidiaries, ETS, Inc. ("ETS"), ETS Analytical Services, Inc. ("ETSAS") and
ETS Water and Waste Management, Inc. ("ETSW") may solicit proxies by
telephone, telegram, facsimile or by personal contact. It is contemplated
that brokerage houses and nominees may be requested to forward proxy
solicitation material to the beneficial owners of the stock held of record by
such persons; and ETSI may reimburse them for their charges and expenses in
this connection.
All properly executed proxies delivered pursuant to this solicitation
will be voted at the Annual Meeting in accordance with any instructions
thereupon. Any person signing and mailing the enclosed proxy may,
nevertheless, revoke the proxy at any time prior to the actual voting thereof
by attending the Annual Meeting and voting in person, by providing written
notice of revocation of the proxy or by submitting a signed proxy bearing a
later date. Any written notice of revocation should be sent to the attention
of the Secretary of the Board at the address above.
A copy of the Company's Annual Report for the fiscal year ended May 31,
1996, is being mailed to you concurrently with this Proxy Statement, but
should not be considered proxy solicitation material.
Shareholder nominations for Directors and shareholder proposals for the
Fiscal 1998 Annual Meeting should be sent to the Company in writing on or
before July 31, 1997. ETSI has received no shareholder nominations or
proposals for the Fiscal 1997 Annual Meeting.
ETSI has only one class of shares outstanding. The Company has fixed
the close of business on August 31, 1996 as the record date for determination
of shareholders entitled to notice of and to vote at the meeting or any
adjournments thereof. As of July 31, 1996, there were outstanding 12,550,733
shares of common stock without par value ("Shares of Common Stock").
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
As of July 31, 1996, there were 12,550,733 Shares of Common Stock
outstanding and entitled to vote at the Annual Meeting. Each Share of Common
Stock is entitled to one vote on each of the matters to be voted on at the
Annual Meeting. The following table sets forth, as of July 31, 1996, the
beneficial ownership of each current director, each of the executive officers
named in the Summary Compensation Table, the executive officers and directors
as a group and each shareholder, known to management of the Company, to own
beneficially more than 5% of the outstanding Common Stock. Unless otherwise
indicated, the Company believes that the beneficial owner set forth in the
table has sole voting and investment power.
Title of Name of Amount and Nature Percent of
Class Beneficial Owner of Beneficial Class
Ownership
Common Stock Dr. John D. McKenna (2) 1,228,100 (1) (3) 9.8%
Common Stock John C. Mycock (2) 336,450 (1) (4) 2.7%
Common Stock Coleman S. Lyttle (2) 1,091,334 (1) (5) (11) 8.7%
Common Stock Navin D. Sheth (2) 532,208 (1) (6) 4.2%
Common Stock David F. Tompkins (2) 6,106 (1) (7) 0.1%
Common Stock Thomas W. Marmon 1,084,288 (1) (8) (10) 8.6%
Common Stock Lee A. Raver 341,800 (1) (9) 2.7%
Common Stock Roberta Greiner 1,276,000 10.2%
Common Stock Dr. Allen Kahn 971,834 (1) 7.7%
Common Stock Directors and executive
officers as a group 4,620,286 36.7%
1. Pursuant to the rules of the Securities and Exchange Commission, Shares
of Common Stock which are not outstanding but which a person has the right
to acquire within 60 days of July 31, 1996 are considered as shares
outstanding for purposes of computing the percentage of Shares of Common
Stock owned by such person, but such shares are not deemed outstanding for
the purposes of computing the percentage of Shares of Common Stock owned by
any other person.
2. Named executive officer.
3. Includes 120,000 shares issuable upon the exercise of options as follows:
100,000 shares pursuant to the 1992 Nonstatutory Option Plan and 20,000
shares pursuant to the 1994 Nonstatutory Option Plan.
<PAGE>
4. Includes 80,000 shares issuable upon the exercise of options as follows:
60,000 shares pursuant to the 1992 Nonstatutory Option Plan and 20,000 shares
pursuant to the 1994 Nonstatutory Option Plan.
5. Includes 20,000 shares pursuant to the 1994 Nonstatutory Option Plan.
6. Includes 20,000 shares pursuant to the 1994 Nonstatutory Option Plan.
7. Includes 64,604 shares issuable upon the exercise of options as follows:
6,000 options issued to laboratory employees in 1992, 4,000 shares pursuant
to the 1992 Incentive Option Plan and 20,000 shares pursuant to the 1994
Nonstatutory Option Plan.
8. Includes 120,000 shares issuable upon the exercise of options as follows:
100,000 shares pursuant to warrants issued in February, 1992 and 20,000
shares pursuant to the 1994 Nonstatutory Option Plan.
9. Includes 470,000 shares issuable upon the exercise of options as follows:
100,000 shares pursuant to warrants issued in February, 1992, 350,000 shares
pursuant to options issued in July, 1993 and 20,000 shares pursuant to the
1994 Nonstatutory Option Plan.
10. Includes shares registered in the name of the Thomas W. Marmon Trust.
11. Does not include shares in the name of the Estate of Stamie E. Lyttle of
which Coleman Lyttle is executor and certain trusts created thereby of which
he is trustee. Mr. Lyttle is not a beneficiary of the estate or the
beneficial owner of Shares of Common Stock owned by the estate or by any such
trust.
SUMMARY COMPENSATION TABLE
Unless the context otherwise requires, the term the "Company" as used in
connection with executive compensation refers to ETSI and its wholly owned
operating subsidiaries, ETSl, ETSAS and ETSW. All employees are paid cash
compensation by the various subsidiaries and not by ETSI. The following table
provides information as to annual, long-term and other compensation paid by
the Company to its Chief Executive Officer and to each of the other named
executive officers of the Company who earned in excess of $100,000 per year
for services rendered in all capacities to the Company and/or its
subsidiaries.
<PAGE>
Annual Compensation Long Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other All
Principal Fiscal Salary Bonus Annual Restricted Options LTIP Other
Position Year ($) ($) Compen- Stock SARs Payouts Compen-
sation Awards # ($) sation
($) ($)
John D. 1996 $93,783
Mckenna.
President
and
Chairman
of the
Board
Coleman
Lyttle 1996 $150,943
Presi-
dent of
a sub-
sidiary
and a
Director
1. Compensation did not exceed $100,000.
<PAGE>
Option/SAR Grants in Last Fiscal Year Table
The following table provides information as to options granted to the
named executive officers during fiscal 1996. No separate stock appreciation
rights ("SARs") were granted in fiscal 1996.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants For Option Term
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/share) Date 5%($) 10%($)
John D.
McKenna
Coleman
S. Lyttle
The following tables sets forth certain information concerning the
number of stock options held by the named Officers as of May 31, 1995.
Number of
Shares Dollar value
underlying of unexercised
unexercised (in-the-money)
options/warrants options/warrants
on 05/31/96 on 5/31/96
Number Number of
of Options Exer- Non- Non-
Options Warrants cise Exer- Exer- Exer- Exer
Name Title Granted Exercised Price cisable cisable cisable cisable
John D.
McKenna Pres. 120,000 $-0-
John C. Sec/
Mycock Treas. 80,000 $-0-
David F.
Tompkins Dir. 66,604 $-0-
Lee A.
Raver Dir. 470,000 $-0-
Thomas W.
Marmon Dir. 120,000 $-0-
Coleman
S. Lyttle Dir 20,000 $-0-
Navin D.
Sheth 20,000 $-0-
<PAGE>
Compensation of Directors
Directors who are not employees of the Company are entitled to receive
the base level of stock options awarded to executives. Outside directors do
not receive any fees for attending meetings of the Board but are reimbursed
for their out-of pocket expenses in connection therewith.
Board of Directors' Report on Executive Compensation
The compensation of the Company's executive officers and key managers,
("executives") is reviewed and approved annually by the Board of Directors.
In addition to reviewing and approving executive officers' salary and bonus
arrangements, the Board of Directors establishes policies and guidelines for
other benefits and administers the awards of stock options pursuant to the
Company's stock option plans.
Compensation Policies and Procedures Applicable to Executives for Fiscal 1996
General. Compensation of the Company's executives is intended to
attract, retain and award persons who are essential to the corporate
enterprise. The fundamental policy of the Company's executive compensation
program is to offer competitive compensation to executives that appropriately
rewards the individual executive's contribution to corporate performance. The
Board of directors utilizes subjective criteria for evaluation of individual
performance and relies substantially on the key managers in doing so. the
Board focuses on two primary components of the Company's executive
compensation program, each of which is intended to reflect individual and
corporate performance: base salary compensation and long-term incentive
compensation. The Company has not paid cash incentive bonuses during fiscal
1996.
Base Salary Compensation. Executives' base salaries are determined
primarily by reference to compensation packages for similarly situated
executives of companies of similar size or in comparable lines of business
with whom the Company expects to compete for executive talent. The Board also
assesses subjective qualitative factors to discern a particular executive's
relative value to the corporate enterprise in establishing base salaries.
Each year, base salaries of executives are increased by increases in an
average of local and national of cost of living indexes. In fiscal 1996, each
executive accepted decreases in salary as a result of the Company's
operational losses. No bonuses were awarded to executives in fiscal 1996.
The Board intends to award year-end bonuses to executives, but only in the
event the Company is profitable. The total of all bonuses will be based on
the Company's overall economic performance. Relative bonuses will be awarded
pursuant to the Board's subjective analysis of each executive's performance.
<PAGE>
Long Term Incentive Compensation. It is the Board's philosophy that
significant stock ownership by management creates a powerful incentive for
executives to build long-term shareholder value. Accordingly, the Board
believes that an integral component of executive compensation is the award of
equity-based compensation, which is intended to align executives' long-term
interests with those of the Company's shareholders. Awards of stock options
to executives have historically been at then-current market prices and, in
keeping with the Company's objective to link pay with corporate loyalty,
generally vest over a period of one to five years. The Board believes that
option grants should be considered on an annual basis. In general, a fixed
minimum option grant is awarded to all executives and additional grants may
be awarded from time to time consistent with the relative pay levels of the
executives.
CEO John McKenna's Compensation. In reviewing and approving Dr.
McKenna's fiscal 1996 compensation, the Board of Directors considered the
same criteria detailed herein with respect to executives in general. Dr.
McKenna's base salary for fiscal 1996 (effective December 1, 1995) was
established at $97,594 which is below the midpoint of base compensation for
CEO's of comparable companies. This amount represented a 3% cost of living
increase over the base salary which was awarded to Dr. McKenna in fiscal
1995.
Audit Committee. This committee makes recommendations to the Board of
Directors with respect to the Company's financial statements and the
appointment of independent auditors, reviews significant audit and accounting
policies and practices, meets with the Company's independent public
accountants concerning, among other things, the scope of audits and reports,
and reviews the performance of the overall accounting and financial controls
of the Company. Members of the Audit Committee are John D McKenna, John C.
Mycock and Lee A Raver.
The Board of Directors does not have a standing compensation committee
and responsibility for reviewing and approving the salaries, bonuses and
other compensation and benefits of executive officers, reviewing and advising
management regarding benefits and other terms and conditions of compensation
of management and administering the Company's stock option plans are the
responsibility of the entire Board of Directors.
<PAGE>
The Board of Directors does not have a standing nominating committee.
Nominations for election to the Board of Directors may be made by the Board
of Directors, or by any shareholder entitled to vote for the election of
directors, Nominations made by shareholders must be made by written notice
received by the Secretary of the Company by July 31 of the year preceding the
annual meeting or within ten days of the date on which notice of a special
meeting for the election of directors is first given to shareholders.
The Board of Directors meets on a quarterly basis. Special meetings are
held from time to time to consider matters for which approval of the Board of
Directors is desirable or is required by law. Four meetings of the Board of
Directors were held during fiscal 1996. The Audit Committee meet three times
in Fiscal 1996. Each incumbent director had an attendance record of 75% or
greater at meetings, including meetings of the Audit Committee.
PERFORMANCE GRAPH
The following graph compares the cumulative returns of $100 invested on
June 1, 1992 in (a) the Company, (b) the index of companies which are trading
on the Emerging Company Marketplace of the American Stock Exchange and (c)
the service sub-index of the American Stock Exchange assuming reinvestment of
all dividends.
Graph
5/31/92 5/31/93 5/31/94 5/31/95 5/31/96
ETS International, Inc. $100 $ 58 $ 56 $ 63 $ 32
AMEX Market Value Index $100 $111 $111 $125 $145
AMEX Service Sub-Index $100 $130 $119 $141 $169
<PAGE>
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Directors elected at the Annual Meeting will serve until the next
Annual Meeting of Shareholders and until their successors are elected and
qualified. The Board of Directors of ETSI has nominated John D. McKenna, John
C. Mycock, Coleman S. Lyttle, Navin D. Sheth, David F. Tompkins, Thomas W.
Marmon, and Lee A. Raver. All directors were elected by shareholders at the
last Annual Meeting.
JOHN D. MCKENNA, Ph.D. (age 56) has been President of the ETSI since
1988, and serves as Chief Executive Officer of ETS and ETSAS and ETSW. He was
President of ETS from 1978 to 1991 and has been a Director of ETS since its
incorporation in 1973. Dr. McKenna received his B.S. in Chemical Engineering
from Manhattan College in 1961. He received his M.S. in Chemical Engineering
from New Jersey Institute of Technology in 1968 and his M.B.A. from Rider
University in 1974. In 1991, Dr. McKenna received his Ph.D. from Walden
University, Minneapolis, MN. Dr. McKenna's expertise in air and water
pollution control applications includes economic evaluation applications,
pilot plant and full scale studies of alternative pollution control
techniques. He has written a textbook on air pollution technology and has
authored or co-authored 31 publications on the subject of air pollution
control. On May 1, 1992, Dr. McKenna was chosen by the Centennial Committee
to Select Outstanding Engineering Graduates of Manhattan College of
Engineering as one of Manhattan College's Outstanding Engineering Graduates.
He is a member of the Tau Beta Pi, the National Honor Society of Engineering;
the National Association of Environmental Professionals; and is listed in
Who's Who in Engineering, Environmental Registry, Finance and Industry, the
World and Science and Engineering. He is past Chairman of the State of
Virginia Advisory Board on Air Pollution.
JOHN C. MYCOCK (age 57) has been Secretary/Treasurer and Director of
ETSI since 1988 and serves as and Secretary/Treasurer of ETS and ETSAS. He
has been an Officer and Director of ETS since 1979. He has more than twenty
years experience in the field of air pollution control. Mr. Mycock currently
is responsible for all precontract sales and marketing activities of ETS. He
has been involved in startup and testing of scrubbers, precipitators and
fabric filters. His experience has been heavily oriented to utility boiler
control systems for both particulate and sulfur oxide emissions. He is the
author of the handbook of Air Pollution Control Engineering and Technology
and author or co-author of fifteen publications. Mr. Mycock attended Mercer
County Junior College and Trenton State College.
<PAGE>
COLEMAN S. LYTTLE (age 43) has served as President of ETS Water and
Waste Management, Inc. since June 1994. From 1982 to 1994, he was President
of Stamie E. Lyttle Company, Inc. and Lyttle Utilities, Inc. From 1975 to
1982, he was Senior Estimator and Project Manager of Stamie E. Lyttle
Company, Inc. Mr. Lyttle received his B.S. in Business Administration from
Virginia Polytechnic and State University in 1975.
NAVIN D. SHETH (age 50) has served as Executive Vice-President of ETS
Water and Waste Management, Inc. since June 1994 and Chief Operating Office
since January 1996. From 1972 to May 1994, he was associated with Stamie E.
Lyttle Company, Inc. in the following capacities: from 1982 to 1994 - Vice
President-Finance; from 1979 to 1982 - Controller; from 1972 to 1979 -
Operations Analyst. Mr. Sheth was Assistant Professor, Virginia College,
Lynchburg, Virginia from 1971 to 1972. He received his B.S. in chemistry in
1967 from Bombay University and his MBA in 1971 from Atlanta University,
Atlanta, Georgia.
DAVID F. TOMPKINS (age 48) has been President of ETSAS since its
formation in 1990. From 1978 to 1990, he was employed by Centec Analytical
Services, Inc. for which he served as President from 1985. In his positions
with ETSAS and, previously with Centec, he has been responsible for technical
administration of the Inorganic Analytical section as well as strategy,
policy and financial planning and control of business operations. Mr.
Tompkins received his B.S. in Geology from Kent State University in 1971; his
B.A. in Chemistry from Kent State University in 1973 and his M.Ad. in
Business Management from Lynchburg College in 1985. He was appointed a
Director of the Company in 1992. He holds a patent and was the recipient of
an IR 100 Award in 1984 on the PCB Field Test Kit of which he was a co-
inventor.
THOMAS W. MARMON (age 64), a retired businessman, became a Director of
ETSI in 1992. He has, since 1990, served as a Director of Ceres, Inc., an
incentive motivation company. From 1989 to 1991, he was a Director of Western
Canada Water, Vancouver, B.C., a bottled water company. From 1971 to 1987,
he was a partner in Darmon, and from 1973 to 1984, he was President and a
principal stockholder of Forest View Psychiatric Hospital, a provider of
inpatient and outpatient psychiatric services. From 1981 to 1987, he was
President and a principal stockholder of Comus, Inc., a consumer electronic
manufacturer and distributor. The assets of these Grand Rapids, Michigan-
based businesses were sold upon the retirement of the principals from active
participation.
<PAGE>
LEE A. RAVER (age 54) has served as a Director of ETSI since its
incorporation in 1987. His educational background includes a B.S. degree in
Business Administration from the University of Tennessee in 1966. For the
past fifteen years, Mr. Raver has acted principally as a venture capitalist
and private investor in multifamily real estate and emerging growth
companies. He presently is President of Raver Realty, Inc., a real estate
brokerage firm located in Richmond, VA and a director of Claycomb Press,
Inc., a private publishing company located in Chevy Chase, Maryland.
It is the intention of the persons named as proxies in the accompanying
proxy, unless instructed otherwise, to vote for the persons nominated by the
Board. If any nominee should become unavailable to serve, the proxy may be
voted for the election of such substitute nominee as may be designated by the
Board. The Board has no reason to believe that any of the nominees will be
unable to serve if elected.
Any proposals to nominate a director or directors, other than those
persons nominated by the Board, must be present in person at the meeting.
The Board is not aware of any other proposals or nominations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE NAMED NOMINEES.
PROPOSAL NO. 2 - APPROVING THE APPOINTMENT OF KPMG PEAT MARWICK AS
INDEPENDENT AUDITORS FOR FISCAL 1997
The Board of Directors appointed KPMG Peat Marwick as independent public
accountant to audit the financial statements for Fiscal 1997 and has
determined that it would be desirable to request that the shareholders
approve such appointment. Shareholder approval is not required for the
appointment of KPMG Peat Marwick since the Board of Directors has the
responsibility for selecting auditors. However, the appointment is being
submitted for the approval at the Annual Meeting. No determination has been
made as to what action the Board would take if shareholders do not approve
the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF KPMG PEAT
MARWICK AS INDEPENDENT AUDITORS.
<PAGE>
PROPOSAL NO. 3 - APPROVING AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
WITHOUT PAR VALUE FROM 20,000,000 SHARES TO 30,000,000 SHARES
As of the Record Date, in addition to the 13,415,697 Shares of Common
Stock issued and outstanding, an additional 5,194,573 Shares of Common Stock
were reserved for issuance under the Company's Statutory and Nonstatutory
Option Plans and an additional 98,679 Shares of Common Stock were reserved
for issuance upon exercise of outstanding warrants. Therefore, as of the
Record Date, there were a total of 18,708,948 Shares of Common Stock either
issued and outstanding or reserved for issuance out of a total of 20,000,000
authorized Shares of Common Stock, leaving a total of 1,291,051 Shares of
Common Stock remaining available for subsequent issuance or reservation.
The Board of Directors believes that the increased number of authorized
Shares of Common Stock contemplated by the proposed amendment is desirable to
make additional unreserved Shares of Common Stock available for issuance or
reservation without further shareholder action. Authorizing the Company to
issue more shares than currently authorized by the Certificate of
Incorporation will not affect any substantive rights, powers or privileges o
holders of Shares of Common Stock, except to the extent such holders are
diluted, pro rata, by the issuance of additional Shares of Common Stock. The
Company has no current commitment to issue any additional Shares of Common
Stock except pursuant to outstanding options and warrants as summarized
above.
As disclosed in the Company's Form 10-K for the fiscal year ended May
31, 1996, however, the Company continues to require additional capital to
fund its growth. In the immediate future, the Company expects to seek
additional equity financing to fund a portion of its planned capital needs
for calendar year 1997. There can be no assurance that the Company will
receive commitments for such financing on terms acceptable to it. Such
financing is not presently expected to require the issuance or reservation of
any of the additional Shares of Common Stock to be authorized by the
amendment, although the actual number of shares issued or reserved will
depend on, among other things, the structure of any such financing and future
market conditions, which cannot be predicted at this time. The Board of
Directors believes, however, that having additional shares authorized and
available for issuance or reservation will allow ETSI to have greater
flexibility in considering potential future actions involving the issuance of
stock which may be desirable or necessary to accommodate ETSI's growth plans,
including capital arising transactions and acquisitions. The Company does not
presently contemplate seeking stockholder approval for any future issuances
of capital stock unless required to do so by an obligation imposed by
applicable law or a regulatory authority, such as its obligation under the
terms of its listing of the Emerging Company Marketplace of the American
Stock Exchange to obtain shareholder approval for certain stock issuances.
Except as indicated above, the Board of Directors has no current plans to
effect any such potential actions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF AN AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK WITHOUT PAR VALUE FROM 20,000,000 SHARES TO
30,000,000 SHARES.
<PAGE>
PROPOSAL NO. 4 - APPROVING AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION AUTHORIZING 5,000,000 SHARES OF PREFERRED STOCK WITHOUT PAR
VALUE.
As discussed above under Proposal No. 3 and as disclosed in the
Company's Form 10-K for the fiscal year ended May 31, 1996, the Company
continues to require additional capital to fund its growth. In the immediate
future, the Company expects to seek additional equity financing to fund a
portion of its planned capital needs for calendar year 1997.
The Articles of Incorporation of ETS International are he hereby
amended by deleting Article III in its entirety and substituting in place
thereof the following:
2. (a) The aggregate number of shares which the Corporation is authorized to
issue is as follows:
Class Number of Shares Par Value
Common 20,000,000 No Par Value
Preferred 5,000,000 No Par Value
(b) The Board of Directors of the Corporation (the "Board of Directors")
may, by amending these Articles of Incorporation (the "Articles") by filing
Articles of Amendment with the Virginia State Corporation Commission, fix in
whole or in part the preferences, limitations and rights, within the limits
set by law, of (i) any class of shares, before the issuance of any shares of
that class, or (ii) one or more series within a class, before the issuance of
any shares within that series.
(c) The preferred stock (including any shares of preferred stock restored
to the status of authorized but unissued preferred stock undesignated as to
series pursuant to this Article 2(c)) may be divided into one or more series
and issued from time to time with such preferences, privileges, limitations,
and relative rights as shall be fixed and determined by the Board of
Directors. Without limiting the generality of the foregoing, the Board of
Directors is expressly authorized to the fullest extent permitted form time
to time by law to fix:
<PAGE>
(i) the distinctive serial designations and the division of
shares of preferred stock into one or more series and the number of shares of
a particular series, which may be increased or decreased (but not below the
number of shares thereof then outstanding);
(ii) the rate or amount (or the method of determining the rate or
amount) and times at which the form in which, and the preferences and
conditions under which dividends shall be payable on shares of a particular
series, the status of such dividends as cumulative, partially cumulative, or
noncumulative, the date or dates from which dividends, if cumulative, shall
accumulate, and the status of such series as participating or
nonparticipating with shares of other classes or series;
(iii) the price or prices at which, the consideration for which,
the period or periods within which and the terms and conditions, if any, upon
which the shares of a particular series may be redeemed, in whole or in part,
at the option of the Corporation or otherwise;
(iv) the amount or amounts and rights and preferences, if any, to
which the Holders (as defined in Article 3 below) of shares of a particular
series are entitled or shall have upon any involuntary or voluntary
liquidation, dissolution or winding up of the Corporation;
(v) the rights and preferences over or otherwise in relation to
any other class or series (including other series of preferred stock), as to
the right to receive dividends and/or the right to receive payments out of
the net assets of the Corporation upon any involuntary or voluntary
liquidation, dissolution or winding up of the Corporation
(vi) the right, if any, of the Holders of a particular series,
the Corporation or another person to convert, or cause conversion of shares
of such series into shares of other classes or series or into other
securities, cash, indebtedness or other property, or to exchange or cause
exchange of such shares for shares, classes or series or other securities,
cash, indebtedness or other property, and the terms and conditions, if any,
including the price or prices or the rate or rates of conversion and
exchange, and the terms and conditions or adjustments, if any, at which such
conversion or exchange amy be made or caused;
<PAGE>
(vii) the obligation, if any, of the Corporation to redeem,
purchase or otherwise acquire, in whole or in part, shares of a particular
series for a sinking fund or otherwise, the terms and conditions thereof, if
any, including the price or prices and the nature of the consideration
payable for such shares so redeemed, purchase or otherwise acquired;
(viii) the voting rights, if any, including special, conditional
or limited voting rights, of the shares of a particular series in addition to
those required by law, including the number of votes per shares and any
requirement for the approval by the Holders of shares of all series of
preferred stock, or of the shares of one or more series thereof., or of both,
in any amount greater than a majority up to such amount as in accordance with
applicable law or these Articles, as a condition to specified corporation
action or amendments to the Articles;
(d) shares of preferred stock shall rank prior or superior to the common
stock in respect of the right to receive dividends and/or the right to
receive payments out of the net assets of the Corporation upon any
involuntary or voluntary liquidation, dissolution or winding up of the
Corporation. All shares of preferred stock redeemed, purchased or otherwise
acquired by the Corporation (including shares surrendered for conversion or
exchange) shall e canceled and thereupon restored to the status of authorized
but unissued shares of preferred stock undesignated as to series.
(e) The Holders of common stock, to the exclusion of any other class of
stock of the Corporation, have sole power to vote for the election of
directors except as (i) otherwise expressly provided in the serial
designation of any series of preferred stock, (ii) otherwise expressly
provided in these Articles and (iii) otherwise expressly provided by the ten
existing laws of the Commonwealth of Virginia. The Holders of common stock
will have one vote for each share of common stock held by them.
(f) No Holder of shares of stock of any class of the Corporation will have
any preemptive or preferential rights of subscription to any shares of any
class of stock of the Corporation, whether now or hereafter authorized, or to
any obligations of the Corporation convertible into stock of the Corporation,
issued or sold, nor any right of subscription to any thereof.
