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EXHIBIT 20
November 18, 1997
To Our Stockholders:
On October 31, 1997, your Board of Directors declared a dividend
distribution of Common Stock Purchase Rights. This letter describes the Stock
Purchase Rights Plan and the Board's reasons for adopting it.
These Rights contain provisions to protect stockholders in the event
of an unsolicited attempt to acquire the Company, including a gradual
accumulation of shares in the open market, a partial or two-tier tender offer
that does not treat all stockholders equally, a squeeze-out merger and other
abusive takeover tactics which the Board believes are not in the best interests
of stockholders. These tactics unfairly pressure stockholders, squeeze them out
of their investment without giving them any real choice and deprive them of the
full value of their shares.
Over 1,700 companies, including approximately half of the Business
Week 1000 companies and Fortune 500 companies and approximately two-thirds of
the Fortune 200 companies have issued rights to protect their stockholders
against these tactics. We consider the rights to be the best available means of
protecting both your right to retain your equity investment in U.S.
TECHNOLOGIES INC. and the full value of that investment, while not foreclosing
a fair acquisition bid for the Company.
The Rights are not intended to prevent a takeover of the Company and
will not do so. However, they should deter any attempt to acquire the Company
in a manner or on terms not approved by the Board. The Rights approved today
are designed to deal with the very serious problem of another person or company
using abusive tactics to deprive U.S. Technologies Inc.'s Board and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights may be redeemed by the Board of Directors for one-hundredth
of a cent per Right prior to the accumulation, through open-market purchases, a
tender offer or otherwise, of 15% or more of the Company's shares by a single
acquiror or group. Thus, the Rights should not interfere with any merger or
business combination approved by the Board of Directors prior to that time.
Issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The issuance of
the Rights has no dilutive effect, will not affect reported earnings per share,
is not taxable to the Company or to you, and will not change the way in which
you can presently trade the Company's shares. As explained in detail below, the
Rights will only be exercisable if and when the problem arises which they were
created to deal with. They will then operate to protect you against being
deprived of your right to share in the full measure of your Company's long-term
potential.
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Your Board was aware when it acted that some people have advanced
arguments that securities of the sort we are issuing deter legitimate
acquisition proposals. We carefully considered these views and concluded that
the arguments are speculative and do not justify leaving stockholders without
any protection against unfair treatment by an acquiror -- who, after all, is
seeking his own company's advantage, not yours. Your Board believes that these
Rights represent a sound and reasonable means of addressing the complex issues
of corporate policy created by the current takeover environment.
The Rights were issued as of November 14, 1997, to stockholders of
record on that date and will expire ten years from the date of adoption,
October 31, 2007. Initially, the Rights will not be exercisable, certificates
will not be sent to you, and the Rights will automatically trade with the
common shares. However, ten days after a person or group acquires 15% or more
of the Company's shares, or ten business days (or such later date as may be
determined by the Board prior to a person or group acquiring 15% or more of the
Company's shares) after a person or group announces an offer the consummation
of which would result in such person or group owning 15% or more of the shares
(even if no purchases actually occur), the Rights will become exercisable and
separate certificates representing the Rights will be distributed. We expect
that the Rights will begin to trade independently from the Company's shares at
that time. At no time will the Rights have any voting power.
When the Rights first become exercisable, unless a person or group has
acquired 50% or more of the Company's shares, a holder will be entitled to buy
from the Company one-hundredth (1/100th) of a share of common stock at a
purchase price of $20.00 per share. If the Company is involved in a merger or
other business combination at any time after a person or group has acquired 15%
or more of the Company's shares, the Rights will entitle a holder to buy a
number of shares of common stock of the acquiring company having a market value
of twice the exercise price of each Right. For example, if at the time of the
business combination the acquiring company's stock has a per share value of
$10.00, the holder of each Right would be entitled to receive 4 shares of the
acquiring company's common stock for $20.00, i.e., at a 50% discount.
If any person or group acquires 15% or more of the Company's
outstanding common stock, the "flip-in" provision of the Rights will be
triggered and the Rights will entitle a holder (other than such person or any
member of such group) to buy a number of additional shares of common stock of
the Company having a market value of twice the exercise price of each Right.
Thus, if at the time of the 15% acquisition the Company's stock were to have a
market value per share equal to $10.00, the holder of each Right (other than
such person or any member of such group) would be entitled to receive 4 shares
of the Company's common stock for $20.00.
Following the acquisition by any person or group of 15% or more of the
Company's common stock, but only prior to the acquisition by a person or group
of a 50% stake, the Board of Directors will also have the ability to exchange
the Rights (other than Rights held by such person or group), in whole or in
part, for one share of common stock per Right. This provision will have an
economically dilutive effect on the acquiror, and provide a corresponding
benefit to the remaining
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Rights holders, that is comparable to the flip-in without requiring Rights
holders to go through the process and expense of exercising their Rights.
While, as noted above, the distribution of the Rights will not be
taxable to you or the Company, stockholders may recognize taxable income upon
the occurrence of certain subsequent events.
In declaring the Rights dividend, we have expressed our confidence in
the future and our determination that you, our stockholders, be given every
opportunity to participate fully in that future. A more detailed summary of the
Shareholders Rights Plan accompanies this letter.
On behalf of the Board of Directors.
/s/ Kenneth H. Smith
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Kenneth H. Smith
President and Chief Executive Officer
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