UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
U.S. TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
- --------------------------------------------------------------------------------
(Title of Class of Securities)
91272D309
- --------------------------------------------------------------------------------
(CUSIP Number)
C. Gregory Earls
USV Partners, LLC
2001 Pennsylvania Avenue, NW
Suite 675
Washington, D.C. 20006
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 12, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box |_|
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.
Page 1 of 6 Pages
SEC 1746 (2-98)
<PAGE>
SCHEDULE 13D
CUSIP No. 91272D309 Page 2 of 6 Pages
--------- --- ---
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
USV Partners, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS (See instructions)
WC
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS OR ACTIONS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 11,009,009
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 3,000,000
PERSON
WITH 9 SOLE DISPOSITIVE POWER
11,009,009
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,009,009
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.3%
14 TYPE OF REPORTING PERSON (See instructions)
OO (limited liability company)
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D (Continued) Page 3 of 6 Pages
- --------------------------------------------------------------------------------
This amendment No. 1 on Schedule 13D is filed on behalf of the USV
Partners, LLC, to report the acquisition of additional shares by USV Partners,
LLC and the election of C. Gregory Earls, the sole member of the manager of USV
Partners, LLC, as President and Chief Executive Officer of the Issuer.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Stock Purchase Agreement between Kenneth H. Smith (the
"Seller") and USV Partners, LLC dated as of February 12, 1999 (the "Stock
Purchase Agreement"), USV Partners, LLC purchased an additional 3,366,152 shares
of Common Stock (the "Common Stock") from the Seller, for an aggregate purchase
price of $875,199.52. As provided by the Stock Purchase Agreement, USV Partners,
LLC paid the aggregate purchase price to the Issuer, which applied such funds to
cancel indebtedness of the Seller to the Issuer. The source of the funds was
personal contributions of the members of USV Partners, LLC.
Item 4. Purpose of Transaction.
C. Gregory Earls, the sole member of USV Management, LLC (which is the
manager of USV Partners, LLC), has been elected President and Chief Executive
Officer of the Issuer, filling the vacancies created by the resignation of
Kenneth H. Smith. In connection with Mr. Smith's resignation, USV Partners, LLC
agreed to purchase from Mr. Smith a portion of the shares of the Issuer's Common
Stock held by Mr. Smith. The proceeds of sale of these shares were used to repay
certain indebtedness of Mr. Smith to the Issuer. USV Partners, LLC seeks to
influence the affairs of the Issuer to the extent possible through Mr. Earls'
position as a director, President and Chief Executive Officer of the Issuer.
Except as described above and in the initial filing on Schedule 13D,
USV Partners, LLC does not have any current plans or proposals which relate to
or would result in any of the actions set forth in Parts (b) (c) and (e) through
(j) of Item 4.
Item 5. Interest in Securities of the Issuer.
(a), (b) According to the Form 10-Q filed by the Issuer with the SEC
for the quarter ending September 30, 1998, there were 28,922,778 shares of
Common Stock issued and outstanding. USV Partners, LLC has paid the Issuer
$4,100,000 of the $5,000,000 purchase price under the Investment Agreement.
The pro rata proportion of the shares of Preferred Stock and the Warrants,
based on the amount paid to date, is 410,000 shares of Preferred Stock and
410,000 Warrants. If the Earls Family Limited Partnership contributes the
balance of the purchase price to USV Partners, LLC, USV Partners, LLC will own
500,000 shares of Preferred Stock and 500,000 Warrants, after payment of such
amount to the Issuer.
Beginning January 12, 1999, USV Partners, LLC has the right to convert
its shares of Preferred Stock to Common Stock and exercise its Warrants to
purchase Common Stock. Based on the assumptions set forth in (c) below, if the
Preferred Stock and the Warrants were exercised in full, USV Partners, LLC would
directly own and would have sole power to vote or dispose of 11,009,009 shares
of Common Stock (7,642,857 upon conversion as described in (c) below plus the
3,366,152 purchased as described in Item 3 above), representing 30.1% of the
Issuer. In addition, pursuant to the Stock Purchase Agreement, the Seller
pledged 3,000,000 shares of Common Stock of the Issuer to secure payment of a
debt owed by the Seller to the Issuer and granted to C. Gregory Earls or to
such other proxy holder chosen by the Board of Directors an irrevocable proxy to
vote all of his shares, pledged or otherwise, of Common Stock of the Issuer
during the time the debt remains outstanding and unpaid.
<PAGE>
SCHEDULE 13D (Continued) Page 4 of 6 Pages
- --------------------------------------------------------------------------------
(c) Pursuant to the Investment Agreement, USV Partners, LLC has the
right and obligation to purchase 500,000 Warrants and 500,000 shares of
Preferred Stock. USV Partners, LLC may convert the Preferred Stock into Common
Stock and exercise the Warrants beginning on January 12, 1999. The number of
shares of Common Stock of the Issuer into which each share of Preferred Stock is
convertible shall be equal to the result obtained by (x) dividing (I) the stated
value of the Preferred Stock ($10.00) plus any accrued but unpaid dividends on
such share of Preferred Stock, by (II) the Conversion Price as defined below;
and (y) multiplying by the Conversion Factor, which adjusts the price for
intervening Common Stock dividends or distributions or issuances of shares of
Common Stock at less than market value. The "Conversion Price" shall be, if the
Issuer achieves a certain earnings target, the average of the daily closing
price for the Common Stock for the 15 trading days preceding December 31, 1998;
provided that (A) if the average daily closing price is less than $0.70 per
share of the Common Stock, the Conversion Price shall be $0.70 per share and (B)
if the average of the daily closing price is more than $1.00 per share of Common
Stock, the Conversion Price shall be $1.00 per share. If the Issuer does not
meet the earnings target, the Conversion Price shall be $0.65.
If the Earls Family Limited Partnership contributes the balance of the
purchase price to USV Partners, LLC, USV Partners, LLC will own 500,000 shares
of Preferred Stock and 500,000 Warrants, after payment of such amount to the
Issuer, and, based on such range of Conversion Prices, USV Partners, LLC would
have the right to purchase between 5,500,000 and 8,192,308 shares of Common
Stock, which would represent between 16.0% and 22.1% of the outstanding Common
Stock at such time (assuming no other issuances other than the issuance of
Common Stock and a full conversion of the Preferred Stock and a full exercise of
the Warrants).
<PAGE>
SCHEDULE 13D (Continued) Page 5 of 6 Pages
- --------------------------------------------------------------------------------
The estimated ownership of 7,642,857 shares of Common Stock included in
the 11,009,009 estimate in (b) above is based on the current price of the
Issuer's Common Stock. At the current price of the Issuer's Common Stock, the
500,000 shares of Preferred Stock would be converted at a $0.70 Conversion Price
for 7,142,857 shares of Common Stock. Assuming full exercise of the 500,000
Warrants, USV Partners, LLC would own a total of 11,009,009 shares of Common
Stock, representing 20.9% of the Issuer.
(d), (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
As of July 16, 1998, the Issuer and USV Partners, LLC entered into a
Registration Rights Agreement ("Registration Rights Agreement"), which
Registration Rights Agreement was previously filed with the initial filing of
the Schedule 13D. Pursuant to the Registration Rights Agreement, the Issuer has
agreed to provide USV Partners, LLC certain demand and piggyback registration
rights with respect to the Common Stock that USV Partners, LLC may receive upon
conversion of the Preferred Stock, exercise of the Warrants or pursuant to any
stock dividends or splits ("Registrable Securities"). The demand registration
rights are exercisable from time to time but may only be validly exercised
pursuant to a request by holders of Registrable Securities that constitute a
majority of all of the Registrable Securities. With respect to the piggyback
registration rights, if the Issuer at any time proposes to register the Issuer's
securities for its own account or on behalf of other shareholders of the Issuer,
the holders of the Registrable Securities have the right to have their
Registrable Securities included in such registration. Such registration rights
are subject to certain underwriter cutbacks.
USV Partners, LLC has an option to provide an additional $5,000,000 of
financing to the Issuer, which financing may be either debt or equity financing.
Such option is set forth in the Investment Agreement, which was previously filed
with the initial filing of the Schedule 13D.
In addition to the Registration Rights Agreement and the option to
provide additional financing described in the initial filing, the Seller has
given his irrevocable proxy to C. Gregory Earls or to such other proxy holder
chosen by the Board of Directors with respect to all of his shares, pledged or
otherwise, of Common Stock of the Issuer.
Item 7. Material to Be Filed as Exhibits
Exhibit A Proxy
<PAGE>
SCHEDULE 13D (Continued) Page 6 of 6 Pages
- --------------------------------------------------------------------------------
SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this amendment is
true, complete and correct.
Dated: February 22, 1999
USV PARTNERS, LLC
By: USV Management, LLC, its Manager
/s/ C. Gregory Earls
-----------------------------------
By: C. Gregory Earls
Title: Sole Member
<PAGE>
EXHIBIT A
U.S. TECHNOLOGIES INC.
February 11, 1999
Mr. Kenneth H. Smith
President and Chief Executive Officer
U.S. Technologies Inc.
3901 Roswell Road, Suite 300
Marietta, GA 30062
Re: Offer of U.S. Technologies Inc. (the "Company") of Severance
Terms and Conditions
Dear Ken:
In reviewing your proposal of the compensation and other benefits to be
paid to you by the Company as consideration for your resignation as President
and Chief Executive Officer of the Company and as a controlling director of the
Company, I have considered what I believe to be the best interests of the
Company and its shareholders, including the significant benefits to be derived
by the Company from the avoidance of shareholder and creditor lawsuits and from
the potential avoidance of the imminent bankruptcy of the Company. Based upon
these considerations and based upon my consultations with the outside
accountants for the Company and the outside legal counsel for the Company, I
hereby, on behalf of the Company, as I have been specifically empowered by the
Board of Directors of the Company to do, offer the following terms and
conditions for your severance from employment with the Company:
1) The Company will retain you as an independent contractor for
consulting services, as needed by the Company, for six months and will
pay to you for such consulting services the aggregate amount of
$125,000, in six equal installments, commencing on the later date of
(i) 30 days after the date of your resignation as an officer and
director of the Company, and (ii) the date of the repayment of your
indebtedness to the Company, as provided below, with each additional
installment to be paid 30 days following the payment of the most
recent installment; provided that the payments contemplated hereby
will be reduced by any amounts owed by you to the Company over and
above the repayment contemplated by Section 4 and Section 5 below.
Further, you will assist with the transition of management and with
other Company matters, as may be requested by the Board of Directors
of the Company. The payments for your consulting services will be
reported on IRS Form 1099.
<PAGE>
Mr. Kenneth H. Smith
February 11, 1999
Page 2
2) The Company will pay to you the aggregate amount of $4,800, in twelve
equal installments, as payment of a portion of your lease payments due
on a certain Mercedes Benz automobile, such installments to commence
on the later date of (i) 30 days after the date of your resignation as
both an officer and director of the Company and (ii) the date of the
repayment of your indebtedness to the Company, as provided below, with
each additional installment to be paid 30 days following the payment
of the most recent installment. The lease will be reassigned to you by
the Company and you will be responsible for all insurance coverages
required for the automobile and for the lease.
3) The Company will sell to you the laptop computer currently used by you
and owned by the Company, for a purchase price equal to the book value
of said laptop computer;
4) You agree to sell 3,366,152 shares of the common stock, $.02 par
value, of the Company, and to apply all of the proceeds thereof as
repayment of all or a portion of the outstanding balance of loans due
from you to the Company;
5) The Company, upon 30 days following the effective date of your
resignation as an officer and director, and upon repayment of the
amount contemplated in Section 4 above, will reimburse you in the
amount any and all of your unpaid out-of-pocket expenses attributable
to the business of the Company, less any amounts owed to the Company
over and above the repayment amount paid pursuant to Section 4 above,
including any accrued interest on your loans to the Company or other
amounts due and owing to the Company;
6) Upon and as of the effective date of your resignation as an officer
and director of the Company, you will purchase, and the Company will
sell to you, GWP, Inc., the Company's wholly-owned subsidiary which
currently owns 51% of the voting shares of Technology Manufacturing &
Design, Inc. ("TMD"), in a transaction to be concluded as soon as
possible following the effective date of your resignation as an
officer and director of the Company and the repayment of your
indebtedness to the Company, and upon such terms and conditions as are
acceptable to legal counsel to the Company and are not inconsistent
with the terms and conditions of this offer, such terms and conditions
to include:
a) You agree to execute a personal, non-exculpated promissory note,
in the amount of $1,234,832, representing the total existing
investment, plus expenses, of the Company in GWP, Inc. (the
"Note"), such Note to bear interest at the prime rate plus 200
<PAGE>
Mr. Kenneth H. Smith
February 11, 1999
Page 3
basis points (as such prime rate is published from time to time
in the Wall Street Journal), with interest to be payable
quarterly, the first payment thereof being six months from the
date of the Note (in the amount of the accrued interest thereon
to date), with the principal thereof to be repaid in equal
installments of $411,610.67, payable at the end of each 12-month
period, beginning on the date of the Note, with no prepayment
penalty thereon;
b) You hereby pledge, pursuant to this agreement, 3,000,000 shares
of the common stock of the Company to the performance of your
obligations hereunder this Section 6 and, further, to the
repayment of the Note under the terms of a stock pledge and
guaranty agreement which are acceptable to the legal counsel to
the Company and which are not inconsistent with the terms and
conditions hereof; such pledge to also secure your personal
guaranty of the satisfaction of certain existing obligations of
TMD (the "Obligations") which are presently guaranteed by the
Company, including, but not limited to, the payment of the
Fidelity Funding, Inc. loan, pursuant to the Loan and Security
Agreement between TMD and Fidelity Funding, Inc., dated as of
November 30, 1998, and the performance of the purchase price
payment to the minority shareholders of TMD pursuant to Section
8.2 of the Amended and Restated Stock Purchase Agreement between
TMD and GWP, Inc. dated as of October 5, 1998. You agree that any
subsequent defaults of TMD with respect to the Obligations will
constitute a default under the Note;
c) GWP, Inc. will pledge its shares of TMD to secure the Note and
the performance by TMD of the Obligations and such pledge shall
contain such anti-dilution covenants as are acceptable to legal
counsel to the Company and which shall assure that the collateral
pledged by GWP, Inc. will always equal 51% of the voting stock of
TMD;
d) You and GWP, Inc. will each guarantee the performance by TMD of
the Obligations, and GWP, Inc. and TMD will each guarantee the
repayment of your Note;
e) As additional collateral for the repayment of the Note and the
performance by TMD of the Obligations, you will give to C.
<PAGE>
Mr. Kenneth H. Smith
February 11, 1999
Page 4
Gregory Earls, or to such other proxy holder chosen by the Board
of Directors of the Company, your irrevocable proxy, which shall
be deemed to be coupled with an interest, with respect to all of
your shares, pledged or otherwise, of common stock of the
Company. Such proxy shall terminate immediately upon the later to
occur of (i) the repayment of the Note with all interest thereon;
and (ii) the satisfaction by TMD of the Obligations;
f) The amount of the Note shall be adjusted, if necessary, to
reflect the total amount of investment and expenses of the
Company in GWP, Inc. and TMD, Inc., as determined by BDO Siedman,
LLP, CPAs, independent auditors of the Company, and such
determination of said amount shall be deemed conclusive as
between the parties; and
g) You, GWP, Inc. and TMD will agree to provide such additional
assurances as may be deemed necessary by legal counsel to the
Company in the event that the Company shall deem itself insecure
with respect to the repayment of the Note and the performance by
TMD of the Obligations. Further, you agree that BDO Seidman, LLP,
CPA's will conduct the annual audit for TMD, at the expense of
TMD, for 1998 and for each fiscal year in which the Note and the
Obligations are outstanding and unsatisfied.
7) You agree that, for a period of three years, commencing on the
effective date of your resignation as an officer and director of the
Company, you will not directly or indirectly engage in or carry on,
either individually or as a stockholder, director, officer,
consultant, independent contractor, employee, agent, member or
otherwise of or through any corporation, partnership, association,
joint venture, firm, individual or otherwise, or in any other
capacity, the business of prison-based manufacturing and/or services
anywhere in the United States; provided, that there shall be no
restriction upon your engaging in the business of the prison-based
manufacturing of electronics anywhere outside the State of Texas.
8) You agree that you will not, for a period of three years, commencing
on the effective date of your resignation as an officer and director
of the Company, call upon, recruit, solicit, or assist others in
calling upon, recruiting or soliciting any person who is or was an
employee of the Company and its subsidiaries, for the purpose of
having such person work in any other corporation, association, or
<PAGE>
Mr. Kenneth H. Smith
February 11, 1999
Page 5
business engaged in providing products or services of the same or
similar kind as those offered by the Company.
This letter constitutes the offer of the Company with respect to your
severance compensation and benefits. This offer will be deemed to have been
accepted upon (i) receipt of your effective, unconditional resignation, in
writing, (ii) your repayment of the amount contemplated by Section 4 above, and
(iii) your delivery, pursuant to the pledge requirements of Section 6(b) hereof,
of 3,000,000 shares of your common stock of the Company, along with a stock
power of attorney endorsed in blank relating to said shares, on or before 5:00
p.m. Eastern Standard Time on February 12, 1999.
Very truly yours,
U.S. TECHNOLOGIES INC.
/s/ John P. Brocard
-------------------------------
John P. Brocard, Executive Vice President
and General Counsel
Accepted this 15th day of February, 1999
/s/ Kenneth H. Smith
- ---------------------------
Kenneth H. Smith
cc: James C. Melton
C. Gregory Earls
