SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ETS International, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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>
ETS INTERNATIONAL, INC.
7400 Beaufont Springs Drive, Suite 415
Richmond, Virginia 23225
(804) 272-6600
Dear Shareholder:
The Annual Meeting of Shareholders of ETS International, Inc. (the
"Company") will be held at 10:00 a.m, local time, on Monday, August 17,
1998, at the Richmond Marriott, 500 East Broad Street, Richmond,
Virginia 23219. Enclosed you will find a 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 shareholders.
I hope you will be able to attend.
Please sign, date and return the enclosed Proxy without delay. If you
attend the Meeting, you may, if you desire, withdraw your Proxy and vote
in person.
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 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,
/s/ James B. Quarles
--------------------
JAMES B. QUARLES
Chairman and President
June 19, 1998
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ETS INTERNATIONAL, INC.:
NOTICE is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of ETS International, Inc. (the "Company") will be held at the
Richmond Marriott, 500 East Broad Street, Richmond, Virginia 23219 on Monday,
August 17, 1998, at 10:00 a.m., local time, for the following purposes:
1. Election of directors for fiscal 1999;
2. Approval of an Amendment and Restatement of the Company's Articles of
Incorporation changing the name of the Company to InfraCorps Inc.;
3. Approval of the appointment of independent auditors for fiscal year
1999; and
4. 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 June 12, 1998, 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
/s/ Warren E. Beam, Jr.
-----------------------
WARREN E. BEAM, JR.
Secretary
June 19, 1998
<PAGE>
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
ETS INTERNATIONAL, INC.
7400 Beaufont Springs Drive, Suite 415
Richmond, Virginia 23225
Solicitation of the enclosed proxy is made by and on behalf of the Board
of Directors (the "Board of Directors") of ETS International, Inc. (the
"Company") to be used at the Annual Meeting of Shareholders to be held at the
Richmond Marriott, 500 East Broad Street, Richmond, Virginia 23219 on Monday,
August 17, 1998, at 10:00 a.m., local time, and at any adjournments thereof.
The date on which this Proxy Statement and the accompanying Proxy are first
being mailed is June 24, 1998.
The cost of the solicitation of proxies will be borne by the Company.
Solicitations will be made by use of the mails, except that, if necessary,
officers, directors, employees and agents of the Company or its subsidiaries
may solicit proxies by telephone, telegram, facsimile or personal contact. It
is contemplated that brokerage houses and nominees will be requested to forward
proxy solicitation materials to the beneficial owners of the stock held of
record by such persons, and the Company will reimburse them for their
reasonable charges and expenses in this connection. The Company does not
anticipate that the cost of proxy solicitation will exceed $5,000.
All properly executed proxies delivered pursuant to this solicitation will
be voted at the Annual Meeting in accordance with the instructions thereupon,
or, in the absence of such instructions, in accordance with the Board of
Director's recommendations. 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 1998 Annual Report to Shareholders is being mailed
concurrently with this Proxy Statement, but should not be considered proxy
solicitation material.
The Company has only one class of stock outstanding. The Company has fixed
the close of business on June 12, 1998, as the record date for determination of
shareholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. As of June 12, 1998, there were outstanding 16,492,043
shares of Company common stock, no par value ("Common Stock"). Each share
entitled to one vote on each matter to be voted on at the Annual Meeting.
The holders of shares of Common Stock entitled to cast a majority of the
votes at the Annual Meeting constitute a quorum. If a share is represented for
any purpose at the Annual Meeting, it is deemed to be present for purposes of
establishing a quorum. Abstentions and shares held of record by a broker or its
nominee ("Broker Shares") which are voted on any matter are included in
determining the number of shares present or represented at the Annual Meeting.
Conversely, Broker Shares that are not voted on any matter will not be included
in determining whether a quorum is present. If a quorum is established,
directors will be elected by a plurality of votes cast in person or by proxy at
the Annual Meeting (Proposal No. 1). Approval of the amendment and restatement
of the Company's Articles of Incorporation to effect the corporate name change
(the "Corporate Name Change") (Proposal No. 2) requires the affirmative vote,
at a meeting at which a quorum is present, of more than two-thirds of the
outstanding shares of the Company's Common Stock entitled to be cast at the
Annual Meeting. Votes that are withheld and Broker Shares that are not voted in
the election of directors or in connection with the Corporate Name Change will
not be included in determining the number of votes cast for that matter.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of June 12, 1998, the beneficial
ownership of 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 named persons have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership Class
- -------------------------------------- ------------------------- --------
<S> <C>
Roberta Greiner 1,077,900 6.5%
5515 Village Drive
Roanoke, VA 24014
Dr. Allen Kahn 1,940,668 (1) 11.5%
2125 Evans Road
Flossmore, IL 60422
Coleman S. Lyttle 1,176,334 (2)(3) 7.1%
2210 Belt Boulevard
Richmond, VA 23224
Thomas W. Marmon 1,958,417 (4)(5) 11.8%
4390 Airwest Drive, SE
Grand Rapids, MI 49512
John W. Winfield, The InterGroup 1,215,300 (7) 7.4%
Corporation and Santa Fe Financial
Corporation (6)
2121 Avenue of the Stars, Suite 2020
Los Angeles, CA 90067
</TABLE>
- ---------
(1) Includes 343,667 shares issuable upon the exercise of warrants.
(2) Includes 120,000 shares issuable upon the exercise of options as follows:
20,000 shares pursuant to the 1994 Nonstatutory Option Plan and 100,000
shares pursuant to the 1995 Nonstatutory Option Plan.
(3) Does not include shares in the name of the Estate of Stamie E. Lyttle, of
which Coleman Lyttle is executor, and certain trust 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.
(4) Includes 153,350 shares issuable upon the exercise of options and warrants
as follows: 20,000 shares pursuant to the 1994 Nonstatutory Option Plan,
100,000 shares pursuant to the 1995 Nonstatutory Option Plan and 33,350
shares pursuant to warrants.
(5) Includes shares registered in the name of Thomas W. Marmon Trust.
(6) Mr. Winfield is the Chairman, President and Chief Executive Officer of The
InterGroup Corporation ("InterGroup") and Santa Fe Financial Corporation
("Santa Fe"), and is the controlling shareholder of InterGroup. InterGroup
owns approximately 41% of Santa Fe, and Mr. Winfield, as an individual,
owns 3.7% of Santa Fe. In his capacity as Chairman, President and Chief
Executive Officer of InterGroup and Santa Fe, Mr. Winfield may be deemed
to have voting and dispositive power of shares of Company Common Stock
held by InterGroup and Santa Fe.
(7) Based on information contained in the Schedule 13D of Mr. Winfield,
InterGroup and Santa Fe dated January 5, 1998, the Company believes that:
(i) Mr. Winfield has sole voting and dispositive power with respect to
415,300 shares of Company Common Stock; (ii) Mr. Winfield may be deemed to
have shared voting and dispositive power with respect to 600,000 shares of
Company Common Stock, which include 500,000 shares held by InterGroup and
100,000 shares held by Santa Fe; and (iii) Mr. Winfield has no voting
power but may be deemed to have shared dispositive power with respect to
200,000 shares of Company Common Stock held by members of Mr. Winfield's
family.
2
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth, as of June 12, 1998, certain information
regarding the beneficial ownership of Company Common Stock by each director and
director nominee of the Company, by each executive officer of the Company, and
by all directors and executive officers as a group. Unless otherwise indicated,
the Company believes that the named persons have sole voting and investment
power with respect to all outstanding shares of Common Stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership Class
- --------------------------------- ------------------------- --------
<S> <C>
Terence R. Dellecker (1) 0 0%
75 Rue De Courcelles
75008 Paris, France
Coleman S. Lyttle (2)(3) 1,176,334(4)(5) 7.1%
2210 Belt Boulevard
Richmond, VA 23224
John R. Potter (1) 0 0%
2408 E. Roy Street
Seattle, WA 98112
James B. Quarles (2)(3) 810,000(6) 4.7%
7400 Beaufont Springs Drive,
Suite 415
Richmond, VA 23225
Lee A. Raver (2) 773,800(7) 4.6%
1788 Hungary Road
Richmond, VA 23228
Navin D. Sheth (2)(3) 652,208(8) 3.9%
2210 Belt Boulevard
Richmond, VA 23224
Warren E. Beam, Jr. (3) 0 0%
7400 Beaufont Springs Drive,
Suite 415
Richmond, VA 23225
Directors and Executives 3,412,342(9) 18.9%
Officers as a group (5 persons)
</TABLE>
- ---------
(1) A director nominee.
(2) Currently serves as a director of the Company.
(3) An executive officer of the Company.
(4) Includes 120,000 shares issuable upon the exercise of options as follows:
20,000 shares pursuant to the 1994 Nonstatutory Option Plan and 100,000
shares pursuant to the 1995 Nonstatutory Option Plan.
(5) Does not include shares in the name of the Estate of Stamie E. Lyttle, of
which Coleman Lyttle is executor, and certain trust 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.
(6) Comprised of 810,000 shares issuable upon the exercise of options as
follows: 750,000 shares pursuant to options issued in February 1998
pursuant to the 1995 Nonstatutory Option Plan and 60,000 shares pursuant
to options issued in November 1997 pursuant to the 1995 Nonstatutory
Option Plan.
3
<PAGE>
(7) Includes 470,000 shares issuable upon the exercise of options as follows:
350,000 shares pursuant to options issued in July 1993, 20,000 shares
pursuant to the 1994 Nonstatutory Option Plan and 100,000 shares pursuant
to the 1995 Nonstatutory Option Plan. Mr. Raver is not standing for
reelection to the Board of Directors at the Annual Meeting.
(8) Includes 120,000 shares issuable upon the exercise of options as follows:
20,000 shares pursuant to the 1994 Nonstatutory Option Plan and 100,000
shares pursuant to the 1995 Nonstatutory Option Plan.
(9) Includes 1,520,000 shares issuable upon the exercise of options and
warrants.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information as to annual and other
compensation paid by the Company to all individuals who served as the Company's
Chief Executive Officer during fiscal 1998 and to each of the other executive
officers of the Company whose total annual salary exceeded $100,000 in fiscal
1998.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual -----------------------
Compensation Awards
------------- -----------------------
Name and
Principal Position Year(2) Salary ($) Options/SARs
- -------------------------------- -------- ------------- -----------------------
<S> <C>
James B. Quarles 1998 44,585 830,000
Chairman, President and Chief 1997 - -
Executive Officer of the 1996 - -
Company(1) 1995 - -
John D. McKenna 1998 81,873 0
Former President and Chief 1997 79,333 140,000
Executive Officer of the 1996 93,783 0
Company (1) 1995 100,301 20,000
Coleman S. Lyttle 1998 119,785 0
President of InfraCorps 1997 115,337 100,000
of Virginia, Inc. 1996 150,943 0
and a Director of the Company 1995 127,603 20,000
</TABLE>
- ---------
(1) Mr. Quarles was appointed President and Chief Executive Officer of the
Company on January 20, 1998, and Mr. McKenna resigned as President and
Chief Executive Officer of the Company on that date. Mr. McKenna resigned
as a director of the Company on February 2, 1998. Mr. Quarles became
Chairman of the Board on that date. The amounts shown for Mr. Quarles and
Mr. McKenna, respectively, reflect all compensation received from the
Company for services rendered in all capacities in fiscal 1998.
(2) On April 6, 1998, the Board of Directors approved a resolution changing the
fiscal year-end of the Company from May 31 to March 31. Compensation
reported for 1995, 1996 and 1997 is based on a May 31 fiscal year-end.
Compensation shown with respect to 1998 is based on the twelve months
ended March 31, 1998. Accordingly, there is a two-month overlap between the
reported compensation for 1998 (covering the twelve months ended March 31,
1998) and 1997 (covering the twelve months ended May 31, 1997).
4
<PAGE>
Option Grants in Last Fiscal Year
The following table provides information as to options granted in the
fiscal year ended March 31, 1998 to the individuals named in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
Potential Realized
Value(1) at Assumed
Individual Grants Annual Rates of
---------------------------------------------------------------- Stock Price
Appreciation for
% of Total Market Option Term
Number of Securities Options Exercise Price on --------------------
Underlying Granted to Employees or Base Date of
Options in Fiscal Price Grant Expiration
Name Granted(#) Year ($/Share)(2) ($/Share)(2) Date 5%($) 10%($)
- ------------------- --------------------- ---------------------- -------------- -------------- ----------- --------- ---------
<S> <C>
James B. Quarles 20,000 .50 .44 6/15/02 11,231 14,172
60,000 .50 .50 11/03/02 38,288 48,315
400,000 .27 .38 2/11/03 193,995 244,798
350,000 100% .50 .50 2/01/03 223,349 281,839
John D. McKenna 0 0 0 0 - 0 0
Coleman S. Lyttle 0 0 0 0 - 0 0
</TABLE>
- ---------
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future appreciation, if
any, of the Company's stock price. Additionally, these values do not take
into consideration the provisions of the options providing for
nontransferability or termination of the options following termination of
employment. The Company did not use an alternative formula for a grant
date valuation, as it is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or
volatile factors.
(2) The market price of the options is calculated based on the closing sales
price of the Company's Common Stock on the American Stock Exchange
Emerging Company Marketplace ("AMEX-ECM") on the date of grant. The
Company's Common Stock was removed from trading on the AMEX-ECM on March
6, 1998. No options have been issued since that date. Options generally
expire five years from the date of grant.
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table shows the number and value of stock options exercised
by each of the named executive officers during fiscal 1998. It also shows the
number and value of unexercised options held by each named executive on March
31, 1998. The value of unexercised options is calculated as the difference
between the exercise price and the average of the high and low bid prices on
the OTC Bulletin Board on March 31, 1998 ($0.1675).
<TABLE>
<CAPTION>
Number of Unexercied Value of Unexercised
Shares Options/SARs at In-the-Money Options/SARs at
Acquired March 31, 1998 (#) March 31, 1998 (#)(1)
on Exercise Value -------------------------------- -------------------------------
Name (# shares) Realized ($) Exercisable Unexerciseable Exercisable Unexerciseable
- ------------------- ------------- ------------- ------------- ---------------- ------------- ---------------
<S><C>
James B. Quarles 20,000 10,000 810,000 0 0 0
John D. McKenna 0 0 100,000 0 0 0
Coleman S. Lyttle 0 0 120,000 0 0 0
</TABLE>
- ---------
(1) Options are in-the-money if the fair market value of the underlying common
stock exceeds the exercise price of the option. The exercise price of all
outstanding options held by the named executive officers currently exceeds
the fair market value of the underlying Common Stock of the Company.
Likewise, the named executive officers held no in-the-money options at
March 31, 1998.
5
<PAGE>
Board of Directors Report on Executive Compensation
The compensation of the Company's executive officers 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.
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 its 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.
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 the increases in an average
of local and national cost of living indexes. The Board may award year-end
bonuses to executives, but only in the event the Company is profitable. The
total of all bonuses generally is based on the Company's overall economic
performance. Bonuses may be awarded pursuant to the Board's subjective analysis
of each executive's performance. No bonuses were awarded or paid in fiscal
1998.
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. Except
for the stock options granted to Mr. Quarles in connection with his appointment
as President and Chief Executive Officer of the Company as described below, no
executive options were granted in fiscal 1998.
Compensation of Chief Executive Officer. Mr. McKenna resigned as Chief
Executive Officer of the Company on January 20, 1998. In reviewing and
approving Mr. McKenna's fiscal 1998 compensation the Board of Directors
considered the same criteria detailed above with respect to executives in
general. Mr. McKenna's base salary for fiscal 1998 was established at $91,500,
which is below the midpoint of the base compensation for chief executive
officers of comparable companies. This amount represented a 3.5% increase over
the base salary that was awarded to Mr. McKenna in fiscal 1997.
Mr. Quarles became Chief Executive Officer of the Company on January 20,
1998. At that time, the Board of Directors determined that Mr. Quarles would
receive a base salary of $11,000 per month for a minimum of six months, a five-
year option to purchase 400,000 shares of Company common stock at $.27 per
share and a five-year option to purchase 350,000 shares of Company common stock
at $.50 per share. Mr. Quarles' compensation was established through
negotiation with Mr. Quarles and was subjectively determined. The Board deemed
it in the best interests of the Company to offer a competitive compensation
package, which through stock options, would be tied to the performance of the
Company. The Board felt that this was especially important to attract
qualified, aggressive leadership to refocus the Company's business on the
infrastructure markets at a time when the Company's financial situation was
declining.
Submitted by the Board of Directors of the Company:
Coleman S. Lyttle, Navin D. Sheth,
James B. Quarles and Lee A. Raver
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Board of Directors makes decisions regarding compensation of executive
officers. Messrs. John D. McKenna, John C. Mycock and David F. Tompkins, each
of whom resigned as a director and officer of the Company during fiscal 1998,
as well as Coleman S. Lyttle and Navin D. Sheth, who currently continue as
directors and executive officers of the Company, participated during fiscal
1998 in deliberations of the Company's Board of Directors concerning executive
officer compensation. During fiscal 1998, the Company had notes payable to each
of directors Sheth and Lyttle and to Thomas W. Marmon, who resigned as a
director effective April 13, 1998. Each of these individuals also participated
in deliberations of the Board concerning compensation of executive officers in
fiscal 1998. See discussion under "Transactions with Management" below.
Board of Directors and Committees
The Audit 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 Messrs. Quarles, Sheth and Raver.
The Board of Directors does not have a standing compensation committee.
The Board of Directors is responsible for 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.
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 required by law. Four meetings of the Board of
Directors were held during fiscal 1998. The Audit Committee met two times in
fiscal 1998. Each incumbent director had an attendance record of 75% or greater
at meetings, including meetings of the Audit Committee.
Remuneration of Directors
Outside directors do not received any fees for attending meetings of the
Board, but are reimbursed for their out-of-pocket expenses in connection
therewith. Directors are entitled to receive the base level of stock options
awarded to executives.
7
<PAGE>
Performance Graph
The following graph compares the yearly percentage change and the
cumulative total of shareholder return on the Company's Common Stock with the
cumulative return on the AMEX Market Value Index, the Russell 2000 Index and
the Dow Jones Heavy Construction Index for the five-year period commencing
March 31, 1994 and ending on March 31, 1998. These comparisons assume the
investment of $100 in the Company's Common Stock and in each of the indices on
March 31, 1993 and the reinvestment of dividends.
[GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------------
3/93 3/94 3/95 3/96 3/97 3/98
------ ------ ------ ------ ------ -----
<S> <C>
ETS International, Inc. ETSI $100 83 117 83 50 8
EX Market Value ISAS $100 105 110 135 137 182
Russell 2000 IR20 $100 111 117 151 159 226
D J Heavy Construction ICON $100 125 108 145 122 127
</TABLE>
8
<PAGE>
TRANSACTIONS WITH MANAGEMENT
During a portion of fiscal 1998, the Company occupied approximately 45,000
square feet of office and laboratory space in a modern commercial building in
Roanoke, Virginia, under lease agreements with its subsidiaries, IC Subsidiary,
Inc. (formerly ETS, Inc.) ("ETS") and ETS Analytical Services, Inc. ("ETSAS"),
effective as of February 1, 1991, which expire on December 31, 2000, from PDJ
Associates, a partnership in which John D. McKenna, former President and
Chairman of the Board of the Company, and Roberta Greiner, widow of Gary P.
Greiner, a former officer and director of the Company, are partners. In
connection with the Company's sale of ETS, as described below, the ETS lease
was assigned, effective February 1, 1998, to ETS Acquisition, Inc, a Virginia
corporation owned by John D. McKenna, Arthur B. Nunn III and John C. Mycock,
former executive officers and directors of the Company. The Company believes
that the leases with PDJ Associates were on terms as favorable as those which
would have been available from a non-affiliated parties. In connection with the
sale of ETSAS described below, the ETSAS lease was assigned, effective October
31, 1997, to Q Enterprises, Inc., a Virginia corporation which was owned by
James B. Quarles. Mr. Quarles, who subsequently became President and a director
of the Company in January 1998, sold his interest in Q Enterprises, Inc. on
February 16, 1998. Lease payments made by the Company to PDJ Associates in
fiscal 1998 totaled $164,000.
Effective in 1994, InfraCorps of Virginia, Inc. (formerly ETS Water and
Waste Management, Inc.) ("ETSW") entered into a lease of its premises which are
owned by the Estate of Stamie E. Lyttle, of which Coleman S. Lyttle, a director
of the Company is executor, at $10,500 per month for two years. On June 1,
1997, the lease was renewed for a one-year term with three one-year renewal
options. Rent expense under this lease was approximately $105,000 for fiscal
1998. The Company believes that the lease is on terms as favorable as those
which would be available from non-affiliated third parties.
The Company had notes receivable from officers of $193,112 as of March 31,
1998, which include notes receivable from Coleman S. Lyttle, President of ETSW
and a director of the Company, in the principal aggregate amount of $180,000,
and from Navin D. Sheth, Chief Financial Officer of the Company, Executive Vice
President of ETSW and a director of the Company, in the principal aggregate
amount of $90,000. At March 31, 1998, the outstanding balances on the Lyttle
and Sheth notes were $86,912 and $106,200, respectively. The notes, which are
unsecured, bear annual interest at six percent and are due July, 1998.
The Company has notes payable to affiliates of $966,159 as of March 31,
1998. These affiliates include Mr. Sheth, Mr. Lyttle, family members of Mr.
Sheth and Mr. Lyttle and the Estate of Stamie S. Lyttle. The balance is
classified as current and due in 1998. The notes, which are unsecured, bear
interest at annual rates between eleven and twenty percent. Interest is payable
monthly. The aggregate amount of the notes payable to Mr. Sheth and his family
members and affiliates was approximately $551,000 at March 31, 1998. The
aggregate amount of the notes payable to Mr. Lyttle and his family members and
associated entities, including the Estate of Stamie Lyttle, was approximately
$280,000 at March 31, 1998.
In addition, the Company had $500,000 of unsecured notes payable to Dr.
Allen Kahn, a large shareholder of the Company, with due dates in fiscal 1999.
Interest is payable monthly at rates ranging from ten to twelve percent per
annum.
During fiscal 1998, the Company was indebted to Thomas W. Marmon, a former
director and a large shareholder of the Company, under a secured credit
facility established March 1997 to provide capital to the Company. The original
note creating the credit facility called for fixed monthly interest of $25,000
over a two-year term, subject to call by the holder at any time upon sixty days
notice, and was secured by the assets of the Company and its subsidiaries. The
Company's total indebtedness under the original note was $2.5 million at
February 28, 1998. The $25,000 fixed monthly interest payment was equivalent to
a 15% annual interest rate. As of March 31, 1998, the Company had failed to
make eight interest payments ($200,000 total) under the note. On May 1, 1998,
the Company and Mr. Marmon restructured the note to increase the amount of the
secured credit facility and to cure the default. The new note, which in part is
a renewal of the previous note, permits total aggregate borrowing by the
Company of up to $3.5 million. The new note provides for monthly interest
payments at a rate of 10% until the credit facility's maturity at May 1, 1999
and 12% thereafter and is subject to call by the holder upon sixty days written
notice. At March 31, 1998, the principal amount outstanding on the secured
credit facility was approximately $3.1 million (which included unpaid interest
of $210,000 as part of principal). The new note is secured by the assets of the
Company and its subsidiaries. Mr. Marmon resigned as a director of the Company
effective April 13, 1998. Mr. Marmon's son, Thomas R. Marmon, was named Vice
President of InfraCorps of Florida, Inc. (formerly ETS Liner, Inc.), a
subsidiary of ETSW located in Florida, on March 19, 1998.
9
<PAGE>
On October 31, 1997, ETSAS, a wholly owned subsidiary of the Company, sold
to Q Enterprises, Inc. substantially all of its assets in return for a ten-year
8.5% promissory note in the amount of $1,380,000, which exceeded the net book
vale of the assets and liabilities sold. The purchase price was subject to
final post-closing adjustments relative to the net book value of certain
assets. In January 1998, in accordance with the final post-closure adjustments
relative to net book value of the assets sold, the purchase price was adjusted
from $1,380,000 to $1,000,000. James B. Quarles was the sole shareholder of Q
Enterprises, Inc. at the time of its purchase of ETSAS assets. Mr. Quarles, who
was subsequently elected President and a director of the Company on January 20,
1998, sold his interest in Q Enterprises, Inc. on February 16, 1998.
On March 12, 1998, substantially all of the assets and certain liabilities
of ETS, a wholly owned subsidiary of the Company, were sold to ETS Acquisition,
Inc., a newly formed firm based in Roanoke, Virginia. In connection with the
sale, the Company sold a portion of its assets and business relating to the
Limestone Emission Control ("LEC") technology, including patents and licenses,
to Christel Clear Technologies, Inc. ("CCTI"), a newly formed firm based in
Roanoke, Virginia. The total purchase price was $1,896,124 for all of the
aforementioned. The purchase price was paid in cash, stock of the Company and
by assumption of certain liabilities of ETS, delivery of a $200,000 thirty-day
note bearing 8 1/2% interest and delivery of a ten-year $100,000 note bearing
8 1/2% interest. Also, the Company will receive 50% of all royalties received
by CCTI in connection with the license of the LEC technology. While there is no
indication that the LEC technology will be resold by CCTI, the agreement of
sale further provides that the Company will receive 50% of the net sales price
from a resale of the LEC technology on or before March 12, 1999, and 25% of the
net sales price from a resale after March 12, 1999 but on or before March 12,
2000.
In connection with the foregoing transaction, the Company entered into a
management agreement with Air Technologies, Inc. ("ATI"), a newly formed firm
based in Roanoke, Virginia, to provide management services with respect to the
Company's contract with China Steel Corporation ("China Steel"). ATI and CCTI
have agreed to accept responsibility for any potential liabilities associated
with the China Steel contract and to provide its best efforts to have the
contract transferred from the Company to ATI. ETS Acquisition, Inc., CCTI and
ATI are owned by John D. McKenna, Arthur B. Nunn, III and John C. Mycock, three
former executive officers of the Company and former members of the Company's
Board of Directors. Messrs. McKenna, Nunn and Mycock resigned as executive
officers and directors of the Company during the third quarter of fiscal 1998.
On April 27, 1998, the Company completed the sale of the Service Division
of ETSW (e.g., septic system installation and repair, irrigation, plumbing,
jacuzzi service contracts and incidental concrete manufacturing/concrete
products) to a new corporation formed by Coleman S. Lyttle, a director of the
Company and President of ETSW, for a total purchase price of $700,000, payable
as follows: $350,000 cash at closing, assumption of $100,000 of indebtedness of
ETSW and notes payable to ETSW in the aggregate amount of $250,000.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Directors elected at the Annual Meeting will serve until the next
Annual Meeting of Shareholders or until their successors are elected and
qualified. The Board of Directors of the Company has nominated Terence R.
Dellecker, Coleman S. Lyttle, Navin D. Sheth, John R. Potter and James B.
Quarles to serve as directors of the Company for fiscal 1999. All nominees,
except Mr. Potter and Mr. Dellecker, currently are members of the Board of
Directors. Lee A. Raver is not standing for reelection to the Board.
TERENCE R. DELLECKER (age 51) is a lawyer based in Paris, France. He is a
member of the New York and Massachusetts bars and is licensed to practice in
France as an Avocat a la Cour. He has practiced law since 1970 and specializes
in corporate matters, in particular acquisitions, licensing, mergers and
capital restructurings. Mr. Dellecker served as Associate Regional Counsel with
the Department of Housing and Urban Development in Boston, Massachusetts from
1972 through 1975. He received his B.S. in Electrical Engineering from
Princeton University in 1967 and his J.D. from Harvard Law School in 1970.
COLEMAN S. LYTTLE (age 44) has served as President of ETSW 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 Institute and State
University in 1975.
10
<PAGE>
JOHN R. POTTER (age 52) founded Stratagem Inc., a business consulting firm
based in Seattle, Washington, in 1993 and is a principal in that company. He
was a Director of Enviros Inc., a biotechnology firm, from 1993 through 1996
and from 1983 until 1993 was President and Chief Executive Officer of Utilx
Corporation, a NASDAQ-listed utility construction technology company. Mr.
Potter received his B.A. from Harvard University and his B.S. and M.S. in
Mechanical Engineering from Massachusetts Institute of Technology.
JAMES B. QUARLES (age 45) has served as President and Chief Executive
Officer of the Company since January 20, 1998. He became Chairman of the
Company's Board of Directors on February 2, 1998. From October 1997 to February
1998, Mr. Quarles was the sole officer, director and shareholder of Q
Enterprises, Inc., a Virginia corporation, which purchased substantially all of
the assets of ETSAS, a wholly-owned subsidiary of the Company, and provided
consulting services to the Company. Prior thereto, he was employed as the
Senior Vice President for mergers and acquisitions with the Company from May
1997 through October 1997, and from January 1987 to December 1996 was Chairman
and President of Enviros Inc., a biotechnology company based in Seattle,
Washington. Mr. Quarles began his career in the U.S. Navy, where he served
under Admiral Elmo R. Zumwalt, Jr., former Chief of Naval Operations and the
current Chairman of the Company's Management Advisory Committee.
NAVIN D. SHETH (age 51) has served as Executive Vice-President of ETSW
since June 1994 and, since May 1996, also served as Chief Operating Officer. He
was appointed Chief Financial Officer of the Company on January 20, 1998. 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.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ABOVE-NAMED NOMINEES.
---
PROPOSAL NO. 2 - AMENDMENT AND RESTATEMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION TO CHANGE THE COMPANY'S NAME TO INFRACORPS INC.
General
The Board of Directors of the Company has adopted resolutions proposing an
amendment and restatement of the Company's Articles of Incorporation
("Articles") to change the name of the Company from ETS International, Inc. to
InfraCorps Inc.
The Board of Directors believes that the amendment and restatement is in
the best interests of the Company and its shareholders. If approved, the
amendment and restatement will be effective upon the filing of Articles of
Amendment with the State Corporation Commission of Virginia, which filing will
be made promptly after the Annual Meeting.
The full text of the proposed amendment and restatement is set out in
Exhibit A attached to this Proxy Statement.
Background
On January 20, 1998, the Board initiated changes in the Company's
executive management. On that date, James B. Quarles was elected President and
Chief Executive Officer of the Company and was appointed to its Board of
Directors. Navin D. Sheth, Chief Operating Officer of ETSW, a wholly owned
subsidiary of the Company, was appointed Chief Financial Officer of the
Company. Further, in connection with ongoing negotiations to purchase
substantially all of the assets of the Company's wholly owned environmental
subsidiary, ETS, John D. McKenna, Arthur B. Nunn, III and John C. Mycock
resigned from the Company's Board of Directors on February 2, 1998. Mr. Quarles
was elected Chairman of the Board on that date.
11
<PAGE>
The management restructuring is part of an overall plan to refocus the
Company's business on the infrastructure markets, particularly with respect to
expanding utilization of trenchless technologies for the rehabilitation of
underground utilities. The Company intends to focus on its infrastructure lines
of business and de-emphasize its environmental products and services. New
management believes that the environmental services aspect of the Company
historically has been a break-even business, providing little value to
shareholders, while attempts to commercialize the environmental technologies
aspect of the Company have been a drain on the Company's limited capital
resources. New management believes that the Company should focus on one line of
business -- the installation and rehabilitation of subsurface pipelines for the
transmission of water, waste and gas -- and seeks to position the Company to
take advantage of perceived growth opportunities within that industry. However,
there can be no assurance that the Company's refocusing efforts will be
successful.
The Board of Directors feels that the name InfraCorps Inc. reflects the
Company's new emphasis on the infrastructure trenchless technologies. The Board
anticipates that the name change also will help the Company avoid being
confused with the environmental services operations that were sold as part of
the Company's refocusing effort.
Consistent with the foregoing, effective May 22, 1998, the Company changed
the names of its wholly owned subsidiaries, ETS Water and Waste Management,
Inc. and ETS, Inc., to InfraCorps of Virginia, Inc. and IC Subsidiary, Inc.,
respectively. The name of ETS Liner, Inc. was changed to InfraCorps of Florida,
Inc. effective May 21, 1998.
The adoption of the amendment and restatement requires the affirmative
vote of more than two-thirds of the outstanding shares of the Company's Common
Stock entitled to vote at the Annual Meeting. A failure to vote, either by not
returning the enclosed proxy or checking the "abstain" box, will have the same
effect as a vote against Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
---
PROPOSAL NO. 3 - APPROVING THE APPOINTMENT OF KPMG PEAT MARWICK LLP INDEPENDENT
AUDITORS FOR FISCAL 1999
The Board of Directors appointed KPMG Peat Marwick LLP as independent
certified public accountants to audit the financial statements for fiscal 1999
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 LLP 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.
A representative of KPMG Peat Marwick LLP is expected to attend the Annual
Meeting with the opportunity to make a statement and/or respond to appropriate
questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF KPMG PEAT MARWICK
---
LLP AS INDEPENDENT AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Company
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that during fiscal 1998, each of Mr. Quarles and
Mr. Beam was late in filing his initial statement of beneficial ownership on
Form 3. In addition, for fiscal 1998, Mr. McKenna filed late two reports
relating to an aggregate of three transactions, Mr. Mycock filed late two
reports relating to an aggregate of two transactions, and Mr. Nunn filed late
one report relating to one transaction.
12
<PAGE>
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the Company's fiscal
1999 Annual Meeting must be received by the President of the Company, at the
Company's headquarters, 7400 Beaufont Springs Drive, Suite 415, Richmond,
Virginia 23225, no later than February 24, 1999, in order to be considered for
inclusion in the Company's Proxy Statement relating to that meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxies in the enclosed
form confer upon the person or persons entitled to vote the shares represented
by such proxies discretionary authority to vote the same in accordance with
their best judgement in the interest of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Warren E. Beam, Jr.
-----------------------
WARREN E. BEAM, JR.
Secretary
June 19, 1998
The Company's Annual Report on Form 10-K for the transition period from
June 1, 1997 to March 31, 1998 is available without charge to any shareholder
requesting the same. Written requests should be addressed to the attention of
Mr. Warren E. Beam, Jr., Secretary, ETS International, Inc., 7400 Beaufont
Springs Drive, Suite 415, Richmond, Virginia 23225.
13
<PAGE>
Exhibit A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ETS INTERNATIONAL, INC.
ARTICLE I - NAME
The name of the Corporation is InfraCorps Inc.
ARTICLE II - PURPOSE
The purpose of this Corporation is to transact any or all lawful business
not required to be specifically stated in these Articles of Incorporation for
which corporations may be incorporated under the Virginia Stock Corporation
Act.
ARTICLE III - AUTHORIZED STOCK
(a) The aggregate number of shares which the Corporation is authorized to
issue is as follows:
<TABLE>
<CAPTION>
Class Number of Shares Par Value
- ------------- ------------------ -------------
<S> <C> <C>
Common 30,000,000 No Par Value
Preferred 5,000,000 No Par Value
</TABLE>
(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 III(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 from time to time by law
to fix:
(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 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
A-1
<PAGE>
other property, or to exchange or cause exchange of such shares for shares
of other 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 may
be made or caused;
(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, purchased 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 share 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 an amount greater than a majority up to such amount as is in
accordance with applicable law or these Articles, as a condition to
specified corporate action or amendments to the Articles; and
(ix) any other preferences, limitations and relative rights which may be
so determined by resolution or resolutions of the Board of Directors.
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
be canceled and thereupon restored to the status of authorized but unissued
shares of preferred stock undesignated as to series.
(d) 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 then 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.
(e) No holder of shares of stock of any class of the Corporation will have
any preemptive or preferential right 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.
ARTICLE IV - INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. Each Director and Officer who is or was a party to any proceeding
(including a proceeding by or in the right of the Corporation) shall be
indemnified by the Corporation against any liability imposed upon or asserted
against him (including amounts paid in settlement) arising out of conduct in
his official capacity with the Corporation or otherwise by reason of the fact
that he is or was such a Director or Officer or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, except there shall be no indemnification in relation to matters as
to which he shall have been finally adjudged to be liable by reason of having
been guilty of (i) willful misconduct or (ii) a knowing violation of criminal
law in the performance of his duty as such Director or Officer.
B. In addition to the indemnification provided under Section A, to the
full extent permitted by the Virginia Stock Corporation Act and any other
applicable law, as they exist on the date hereof or may hereafter be amended,
the Corporation shall indemnify a Director or Officer of the Corporation who is
or was a party to any proceeding (including a proceeding by or in the right of
the Corporation) by reason of the fact that he is or was such a Director or
Officer or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise.
C. The Corporation is empowered to contract in advance to indemnify any
Director or Officer to the extent indemnification is granted under Sections A
and B. The Board of Directors is also empowered to cause the Corporation to
indemnify or contract in advance to indemnify any other person not covered by
Sections A and B who was or is a party to any proceeding, by reason of the fact
that he is or was an employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise to the same extent as if such person were specified as one
to whom indemnification is granted under Sections A and B.
A-2
<PAGE>
D. The Corporation may advance, pay for and/or reimburse the reasonable
expenses incurred by an Officer or Director who is a party to any proceeding in
advance of the final disposition thereof if (i) the Officer or Director
furnishes the Corporation a written statement of his good faith belief that he
has met the standard of conduct described in Sections A and/or B above, (ii)
the Officer or Director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay the advance if it is ultimately
determined that he did not meet the standard of conduct, and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification under this Article. The
undertaking required by clause (ii) above shall be an unlimited general
obligation of the Officer or Director but need not be secured and may be
accepted without reference to financial ability to make repayment.
E. All determinations as to indemnification and advances of expenses
(including contracts with respect thereto) shall be made by a majority vote of
a quorum of disinterested Directors. In the event a quorum of disinterested
Directors cannot be obtained to make any determination as to indemnification
and advancement of expenses with respect to any claim for indemnification made
pursuant to this Article, such determinations shall be made by special legal
counsel agreed upon by the Board of Directors and the proposed indemnitee. If
the Board of Directors and the proposed indemnitee are unable to agree upon
such special legal counsel, the Board of Directors and the proposed indemnitee
each shall select a nominee, and the nominees shall select such special legal
counsel.
F. The foregoing provisions are intended to provide indemnification with
respect to those monetary damages for which the Virginia Stock Corporation Act
permits the limitation or elimination of liability. In addition, to the full
extent that the Virginia Stock Corporation Act, as it exists on the date hereof
or may hereafter be amended, permits the limitation or elimination of the
liability of directors, a Director of the Corporation shall not be liable to
the Corporation or its stockholders for monetary damages arising out of a
single transaction, occurrence or course of conduct in excess of the amount of
cash consideration received by the Directors from the Corporation for services
as a Director during the twelve months immediately preceding the act or
omission for which liability was imposed.
G. The Corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance, in such amounts as the Board
of Directors may determine, on behalf of any person who is or was a Director,
Officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by such person
in any such capacity or arising from his status as such, whether or not the
Corporation would have power to indemnify him against such liability under the
provision of this Article.
H. The provisions of this Article shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof, whether
arising from any action taken or failure to act before or after such adoption.
No amendment, modification or repeal of this Article shall diminish the rights
provided hereby or diminish the right to indemnification with respect to any
claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
I. Except to the extent inconsistent with this Article, terms used herein
shall have the same meanings assigned them in the Indemnification Article of
the Virginia Stock Corporation Act as now in effect or hereafter amended.
Without limitation, it is expressly understood that reference herein to
Directors, Officers, employees or agents shall include former Directors,
Officers, employees and agents and their respective heirs, executors and
administrators.
A-3
<PAGE>
PROXY
ANNUAL MEETING OF SHAREHOLDERS
ETS INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY BOARD OF DIRECTORS OF THE CORPORATION
The undersigned Shareholder of ETS International, Inc., Richmond,
Virginia, having received the Notice dated June 19, 1998, of the Annual
Meeting of Shareholders, hereby nominates, constitutes, appoints and
authorizes James B. Quarles and Warren E. Beam, Jr., and each of them
with full power to act alone, as proxies with full power of substitution,
for me and in my name, place and stead, to vote all the common stock of
said corporation standing in my name on its books on June 12, 1998, at the
Annual Meeting of Shareholders to be held at the Richmond Marriott, 500
East Broad Street, Richmond, Virginia 23219, at 10:00 a.m., Monday, August
17, 1998, or at any adjournments thereof, with all the power the undersigned
would possess if personally present, as follows:
(Continued, and to be signed on the other side.)
<PAGE>
Please mark [X]
your votes as
indicated in
this example
1. The election of the five nominees for director listed in the
Proxy Statement dated June 19, 1998, for terms of one year
each and until their successors are elected and qualify.
FOR WITHHOLD
all nominees AUTHORITY
except as marked to vote for all
to the contrary below. nominees listed below.
[ ] [ ]
(Instructions: To withhold authority to vote for any individual,
strike a line through the nominee's name below.)
NOMINEES:
Terence R. Dellecker Coleman S. Lyttle Navin D. Sheth
John R. Potter James B. Quarles
2. Approval of amendment and restatement of the Company's Articles
of Incorporation to change the name of the Company to InfraCorps
Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the appointment of KPMG Peat Marwick LLP as independent
auditors for fiscal year 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such
other business as may be brought before the Annual Meeting or any
adjournments thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE FOR ALL OF THE PERSONS LISTED
EVEN THOUGH THE BLOCK IN ITEM 1 IS NOT MARKED UNLESS THE NAMES OF
ONE OR MORE CANDIDATES ARE LINED OUT. THIS PROXY WILL BE VOTED
"FOR" ITEMS 2 AND 3 ABOVE UNLESS "AGAINST" OR "ABSTAIN" IS
INDICATED. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS
PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
MANAGEMENT.
The undersigned hereby acknowledges receipt of the Proxy Statement
dated June 19, 1998.
Dated 1998
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Signature of Shareholder(s)
Please sign your name(s) exactly as shown imprinted hereon.
(This Proxy is revocable at any time prior to the exercise hereof.)
