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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
RENTAL SERVICE CORPORATION
(NAME OF SUBJECT COMPANY)
RENTAL SERVICE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
76009V102
(CUSIP NUMBER OF CLASS OF SECURITIES)
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ROBERT M. WILSON
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
RENTAL SERVICE CORPORATION
6929 EAST GREENWAY PARKWAY, SUITE 200
SCOTTSDALE, ARIZONA 85254
(480) 905-3300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPIES TO:
ELIZABETH A. BLENDELL, ESQ. MARK D. GERSTEIN, ESQ.
LATHAM & WATKINS LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000 233 SOUTH WACKER DRIVE
LOS ANGELES, CALIFORNIA 90071-2007 SEARS TOWER, SUITE 5800
(213) 485-1234 CHICAGO, ILLINOIS 60606-6401
(312) 876-7700
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Rental Service Corporation, a Delaware
corporation ("RSC"). The address of the principal executive offices of RSC is
6929 East Greenway Parkway, Suite 200, Scottsdale, Arizona 85254. This
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9")
relates to the common stock, par value $.01 per share, of RSC (the "Common
Stock"), together with the associated preferred share purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of April 16, 1999
(as amended, the "Rights Agreement"), between RSC and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent (the "Rights Agent"). References in this
Schedule 14D-9 to "Shares" shall mean shares of Common Stock and, unless the
context otherwise requires, shall include the Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer by Pandion Acquisition
Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of
Atlas Copco North America Inc., a Delaware corporation ("Parent"), to purchase
all outstanding Shares at a price of $29.00 per Share (the "Offer Price"), net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 29, 1999 and the
related Letter of Transmittal (which together constitute the "Atlas Offer"). The
Atlas Offer is disclosed in a Tender Offer Statement on Schedule 14D-1 dated
June 29, 1999 (the "Schedule 14D-1"), as filed by Parent and Purchaser with the
Securities and Exchange Commission (the "SEC") on such date.
The Atlas Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of June 28, 1999, among RSC, Parent and Purchaser (the "Merger
Agreement"). The Atlas Offer is subject to certain conditions, including the
condition that at least a majority of the total issued and outstanding Shares on
a fully diluted basis shall have been validly tendered and not withdrawn prior
to the expiration of the Atlas Offer. The Atlas Offer is not subject to a
financing condition. As described in the response to Item 3(b) below, the Merger
Agreement provides, among other things, that upon the terms and subject to the
conditions set forth in the Merger Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), as soon as practicable
following completion of the Atlas Offer, Purchaser will be merged with and into
RSC (the "Merger"), with RSC continuing as the surviving corporation (the
"Surviving Corporation"). At the effective time of the Merger (the "Effective
Time"), by virtue of the Merger and without any action on the part of RSC,
Parent, Purchaser or the holder of any Shares or any shares of capital stock of
Purchaser, each issued and outstanding Share (other than (1) Shares owned by RSC
or by any wholly owned subsidiary of RSC or by Parent, Purchaser or any other
wholly owned subsidiary of Parent, and (2) Shares held by stockholders of RSC
who have properly demanded appraisal of such holder's Shares in accordance with
the DGCL) will be converted into the right to receive the Offer Price, without
interest (the "Merger Consideration").
Based on information set forth in the Schedule 14D-1, the principal
executive offices of each of Parent and Purchaser are located at 1211 Hamburg
Turnpike, Suite 214, Wayne, New Jersey 07470.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of RSC, which is the entity filing this
Schedule 14D-9, are set forth in the response to Item 1 above.
(b) Except as set forth in this Schedule 14D-9 or in SCHEDULE I attached
hereto or as otherwise incorporated by reference herein, to the knowledge of
RSC, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between RSC or its affiliates and: (1) RSC, its executive officers, directors or
affiliates; or (2) Parent, Purchaser or the respective officers, directors or
affiliates of Parent or Purchaser.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement and
is qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which is filed as Exhibit 1 hereto and is incorporated by
reference herein.
THE ATLAS OFFER. The Merger Agreement provides that Purchaser will commence
the Atlas Offer and that, upon the terms and conditions of the Merger Agreement
and subject to the prior satisfaction or waiver of the conditions to the Atlas
Offer (as set forth in Annex A to the Merger Agreement), Purchaser will, and
Parent will cause Purchaser to, accept for payment and pay for all Shares
validly tendered and not withdrawn pursuant to the Atlas Offer as soon as
permitted under applicable law. The Merger Agreement provides that, without the
prior written consent of RSC, neither Parent nor Purchaser will (1) decrease the
Atlas Offer Price, (2) decrease the number of Shares sought pursuant to the
Atlas Offer or change the form of consideration payable in the Atlas Offer, (3)
change or amend the conditions to the Atlas Offer or impose additional
conditions to the Atlas Offer, (4) change the expiration date of the Atlas
Offer, or (5) otherwise amend, add or waive any term or condition of the Atlas
Offer in any manner adverse to the holders of Shares; PROVIDED, HOWEVER, that if
on any scheduled expiration date of the Atlas Offer any conditions to the Atlas
Offer have not been satisfied or waived, Purchaser may, and at the request of
RSC shall, from time to time, extend the expiration date of the Atlas Offer for
up to 5 additional business days (but in no event shall Purchaser be required to
extend the expiration date of the Atlas Offer beyond the 120th day following
commencement of the Atlas Offer unless the Atlas Offer is on or after such date
being extended due to the occurrence of certain events as described in Annex A
to the Merger Agreement, in which case the Atlas Offer may be required by RSC to
be extended to the 180th day following commencement of the Atlas Offer).
Notwithstanding the foregoing, Purchaser may, (1) without the consent of RSC,
extend the Atlas Offer for any period required by any applicable law, including
without limitation, any rule, regulation, interpretation or position of the SEC
applicable to the Atlas Offer and (2) make a one-time extension of the Atlas
Offer if the conditions to the Atlas Offer shall have been satisfied or waived
and the number of Shares that have been validly tendered and not withdrawn
represent more than 50% but less than 90% of the total issued and outstanding
Shares on a fully diluted basis; PROVIDED, HOWEVER, that in no event shall the
extension permitted under the foregoing clause (2) exceed, in the aggregate, 10
business days. Notwithstanding anything to the contrary in the Merger Agreement,
Parent may extend the Atlas Offer during (but only to the end of) the period in
which RSC is attempting to cure a breach pursuant to the terms of the Merger
Agreement. Parent and Purchaser agree, subject to the terms and conditions of
the Merger Agreement, to use their best efforts to consummate the Atlas Offer.
COMPOSITION OF THE RSC BOARD. The Merger Agreement provides that, promptly
upon the acceptance for payment of, and payment by Purchaser in accordance with
the Atlas Offer for, not less than a majority of the total issued and
outstanding Shares on a fully diluted basis pursuant to the Atlas Offer,
Purchaser shall be entitled to designate such number of members of the Board of
Directors of RSC (the "RSC Board") rounded up to the next whole number, equal to
that number of directors which equals the product of the total number of
directors on the RSC Board (giving effect, if applicable, to (1) the number of
newly created directorships if the size of the RSC Board is increased and (2)
the number of vacancies if the resignation of any directors is secured pursuant
to the Merger Agreement) multiplied by the percentage that such number of Shares
then owned beneficially or of record in the aggregate by Purchaser or Parent of
the total issued and outstanding Shares on a fully diluted basis; PROVIDED,
HOWEVER, that until the Effective Time there shall be at least two members of
the RSC Board who are directors of RSC as of the date of the Merger Agreement
("Continuing Directors") and Parent and Purchaser shall use their best efforts
to ensure that at least two Continuing Directors serve as directors of RSC until
the Effective Time. Upon the written request of Purchaser, RSC shall, on the
date of such request, either increase the size of the RSC Board or use its
reasonable efforts to secure the resignations of such number of its incumbent
directors as is necessary to enable Purchaser's designees to be so elected to
the RSC Board.
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Following the time that Purchaser's designees to the RSC Board as described
above constitute at least a majority of the RSC Board and until the Effective
Time, any (1) amendment or termination of the Merger Agreement, (2) amendment to
the certificate of incorporation or the bylaws of RSC, (3) extension of time for
the performance or waiver of the obligations or other acts of Parent or
Purchaser or waiver of RSC's rights hereunder, or (4) action by RSC with respect
to the Merger Agreement and the transactions contemplated thereby which
materially and adversely affects the interests of the stockholders of RSC, shall
require, in addition to any other affirmative vote required under DGCL, the
affirmative vote of not less than a majority of (1) the entire RSC Board, which
majority shall include the concurrence of a majority of the Continuing Directors
or (2) to the extent permitted under the DGCL, a committee of the RSC Board
consisting of only Continuing Directors; PROVIDED, HOWEVER, that if the
foregoing provisions relating to the concurrence of a majority of Continuing
Directors or approval by a committee consisting of Continuing Directors are
invalid or incapable of being enforced under applicable law, then neither Parent
nor Purchaser shall approve (either in its capacity as a stockholder or as a
party to the Merger Agreement, as applicable), and Parent and Purchaser shall
use their reasonable efforts to prevent the occurrence of, any of the actions
referred to above unless such actions shall have received the unanimous approval
of the entire RSC Board.
The provisions of the Merger Agreement relating to the election and
designation of directors to the RSC Board and RSC's obligations in connection
therewith are subject to Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and Rule 14f-1 promulgated thereunder. An
Information Statement (the "Information Statement") containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder is attached as SCHEDULE I to this Schedule 14D-9 and is incorporated
by reference herein.
THE MERGER. Pursuant to the Merger Agreement, upon the terms and subject to
the conditions set forth therein, and in accordance with the DGCL, as soon as
practicable following completion of the Atlas Offer, Purchaser will be merged
with and into RSC. Following the Merger, the separate corporate existence of
Purchaser shall cease and RSC shall continue as the Surviving Corporation and as
a wholly owned subsidiary of Parent. At the Effective Time, by virtue of the
Merger and without any action on the part of RSC, Parent, Purchaser or the
holder of any Shares or any shares of capital stock of Purchaser, each issued
and outstanding Share (other than (1) Shares owned by RSC or by a wholly owned
subsidiary of RSC or by Parent, Purchaser or any other wholly owned subsidiary
of Parent and (2) Shares held by stockholders of RSC who have properly demanded
appraisal of such holder's Shares in accordance with the DGCL) will be converted
into the right to receive the Atlas Offer Price, without interest (the "Merger
Consideration"). As of the Effective Time, all such Shares shall no longer be
outstanding and shall automatically be retired and shall cease to be
outstanding, and each holder of a certificate representing any such Shares shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such certificate, the Merger Consideration. At the Effective
Time, each issued and outstanding share of capital stock of Purchaser shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
The Merger Agreement provides that, at the Effective Time and without any
further action on the part of RSC or Purchaser, the certificate of incorporation
and bylaws of RSC shall be amended in its entirety to read as the certificate of
incorporation and bylaws, respectively, of Purchaser read as in effect
immediately prior to the Effective Time and, as so amended, shall be the
certificate of incorporation and bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law, provided
that the certificate of incorporation shall be amended to reflect "Rental
Service Corporation" as the name of the Surviving Corporation.
In addition, pursuant to the Merger Agreement, the directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be a director or until their respective successors are duly
elected and qualified, as the case may be. The officers of RSC immediately prior
to the Effective Time
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shall be the initial officers of the Surviving Corporation, until the earlier of
their resignation or removal or otherwise ceasing to be an officer or until
their respective successors are duly elected and qualified, as the case may be.
RSC has also agreed pursuant to the Merger Agreement that, if required by
the DGCL or RSC's certificate of incorporation or bylaws in order to consummate
the Merger, RSC shall, as soon as practicable following the acquisition by
Purchaser of Shares pursuant to the Atlas Offer, duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of voting on the
Merger Agreement and the Merger (the "Stockholders Meeting"). If required by
applicable law, as soon as practicable following Parent's request, RSC and
Parent shall prepare and file with the SEC a proxy statement with respect to the
Stockholders Meeting. Notwithstanding the foregoing, in the event Parent,
Purchaser and/or any other subsidiary of Parent beneficially owns, in the
aggregate, at least 90% of the outstanding Shares, RSC shall not be required to
call the Stockholders Meeting or to file or mail such proxy statement, and RSC,
Parent and Purchaser shall, at the request of Parent or RSC and subject to the
terms and conditions of the Merger Agreement, take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
acceptance for payment of and payment for Shares by Purchaser pursuant to the
Atlas Offer without a meeting of stockholders of RSC in accordance with Section
253 of the DGCL.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, RSC has
made various customary representations and warranties to Parent and Purchaser
with respect to, among other matters, corporate organization and good standing,
its subsidiaries, capital structure, authority and no conflicts, consents and
approvals, reports and financial statements, information supplied, compliance
with law, litigation, tax matters, absence of certain changes or events,
material contracts, employee benefit and labor matters, environmental matters,
intellectual property, no brokers or finders, opinions of financial advisors,
RSC Board recommendation, insurance, its rental fleet, certain business
practices, properties and compliance with Arizona statutes. Parent and Purchaser
have made various customary representations and warranties to RSC with respect
to, among other matters, corporate organization and good standing, capital
structure, authority and no conflicts, consents and approvals, reports and
financial statements, information supplied, no brokers or finders and financing.
COVENANTS AND OTHER AGREEMENTS. Except as permitted by the Merger Agreement
or to the extent consented to in writing by Parent, which consent shall not be
unreasonably withheld or delayed, the Merger Agreement obligates RSC (and its
subsidiaries under certain circumstances) during the period from the date of the
Merger Agreement to the Effective Time, among other things, (1) to carry on its
businesses in the usual, regular and ordinary course in all material respects,
and use all reasonable efforts to preserve intact its present business
organizations and preserve their relationships with customers, suppliers and
others having business dealings with RSC, (2) not to declare or pay any
dividends on or make other distributions in respect of any of its capital stock,
(3) not to split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its capital stock, (4) not to repurchase,
redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable or exchangeable for any shares of its capital
stock except as otherwise permitted under certain option agreements to effect
cashless option exercises, (5) not to issue, deliver, sell, pledge or otherwise
encumber (except as pledged on the date hereof and disclosed by RSC to Parent in
connection with the Merger Agreement or in its SEC reports), or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any voting debt or any securities convertible into or exercisable or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or voting debt, or enter into any agreement with respect to any of the foregoing
(other than the issuance of Shares upon the exercise of stock options or stock
appreciation rights outstanding on the date of the Merger Agreement), (6) not to
amend or propose to amend its certificate of incorporation or bylaws, (7) not to
incur any indebtedness for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities of RSC
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or guarantee any debt securities of other persons other than intercompany debt
or in the ordinary course of business, including, without limitation,
indebtedness for acquisitions made in the ordinary course of business,
consistent with past practices and involving an aggregate purchase price not
exceeding $10 million, (8) not to make any loans, advances or capital
contributions to, or investments in, any other person, other than intercompany
loans or in the ordinary course of business, (9) not to pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) other than in the ordinary course of
business, and (10) not to increase the compensation payable or to become payable
to any of its executive officers or employees or take any action with respect to
the grant of any severance or termination pay, or stay, bonus or other incentive
arrangement (other than pursuant to benefit plans and policies in effect on the
date of the Merger Agreement), except, among other things, any such increases or
grants made in the ordinary course of business.
In addition to the foregoing, RSC shall not (1) revalue any of its assets in
any material respect other than in the ordinary course of business or as
required by generally accepted accounting principles; (2) sell, lease or
otherwise encumber any of its properties or assets other than any such property
or assets the value of which does not exceed $250,000 individually or $2,000,000
in the aggregate, except sales or encumbrances in the ordinary course of
business; (3) make any capital expenditures except capital expenditures which,
individually or in the aggregate, do not exceed $100 million (of which $85
million is for capital expenditures committed for which the properties have not
yet been received) in the aggregate; (4) adopt a plan of complete or partial
liquidation or dissolution; (5) change any material accounting principle, except
as required by generally accepted accounting principles, the SEC or applicable
law; or (6) settle or compromise any litigation or contractual dispute other
than settlements or compromises where amounts paid by RSC do not exceed $250,000
or, in the aggregate, $1,000,000.
Each of RSC and Parent shall cooperate with each other and use (and shall
cause their respective subsidiaries to use) its reasonable efforts to take or
cause to be taken all actions, and do or cause to be done all things, necessary,
proper or advisable on their part under the Merger Agreement and applicable laws
to consummate the Atlas Offer and consummate and make effective the Merger and
the other transactions contemplated by the Merger Agreement as soon as
practicable.
TRANSACTION PROPOSALS. The Merger Agreement provides that, prior to the
termination of the Merger Agreement, RSC will not (whether directly or
indirectly through advisors, agents or other intermediaries), and will not
authorize or permit any of its officers, directors, agents, representatives or
advisors to:
(1) solicit, initiate or knowingly encourage or facilitate the submission of
inquiries, proposals or offers from any person (other than Purchaser or
Parent) relating to (A) any acquisition or purchase of over 20% of the
consolidated assets of RSC or of over 20% of any class of equity
securities of RSC, (B) any tender offer (including a self tender offer)
or exchange offer that if consummated would result in any third party
beneficially owning over 20% of any class of equity securities of RSC, or
(C) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving RSC other than the transactions
contemplated by the Merger Agreement (collectively, "Transaction
Proposals");
(2) agree to or recommend to its stockholders any Transaction Proposal; or
(3) enter into or participate in any discussions or negotiations regarding a
Transaction Proposal, or furnish to any person (other than Parent,
Purchaser or any of their representatives) any information with respect
to its business, properties or assets in connection with a Transaction
Proposal;
PROVIDED, HOWEVER, that nothing in the Merger Agreement prohibits RSC (either
directly or indirectly through advisors, agents or other intermediaries) from
(A) furnishing information pursuant to appropriate terms of confidentiality
concerning RSC and its business, properties or assets to a third party who has
indicated an interest in making a bona fide Transaction Proposal (provided, that
if such confidentiality terms are less favorable to RSC in any material respect
than the terms of the Confidentiality/Standstill
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Agreement (as defined below), that the Confidentiality/Standstill Agreement
shall be deemed amended to provide for such more favorable confidentiality
terms), (B) engaging in discussions or negotiations with such third party, (C)
following receipt of a bona fide Transaction Proposal, taking and disclosing to
its stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
or otherwise making disclosure to its stockholders, (D) following receipt of a
bona fide Transaction Proposal, failing to make or withdrawing or modifying its
recommendation and/or declaration of advisability of the Atlas Offer and/or
adoption of the Merger Agreement, and to the extent it does so, RSC may refrain
from calling, providing notice of and holding the RSC Stockholders Meeting to
adopt the Merger Agreement and from soliciting proxies or consents to secure the
vote or written consent of its stockholders to adopt the Merger Agreement, (E)
waiving the provisions of any confidentiality and/or standstill agreement to
which RSC is a party (provided, that RSC shall be deemed to simultaneously waive
any such provisions of the Confidentiality/Standstill Agreement), (F) taking any
non-appealable, final action ordered to be taken by RSC by any court of
competent jurisdiction and/or (G) making any disclosure or filing required by
law (including, without limitation, Delaware state law and the rules and
regulations promulgated under the federal securities laws), stock exchange rules
or the rules, regulations, order or request of any governmental entity
(including the SEC), but in each case referred to in the foregoing clauses (A)
through (E) only to the extent that the RSC Board shall have concluded in good
faith after consulting with its outside legal counsel and financial advisor that
such action is consistent with the discharge of its fiduciary duties to the
stockholders of RSC under applicable law; PROVIDED, FURTHER, that the RSC Board
shall not take any of the foregoing actions referred to in clauses (A) through
(D) above, until after 24 hours notice to Parent with respect to such action.
The RSC Board shall, to the extent that it has concluded in good faith after
consulting with its outside legal counsel and financial advisors that such
action is consistent with the discharge of its fiduciary duties to the
stockholders of RSC under applicable law, promptly inform Parent of the initial
material terms and conditions of such Transaction Proposal and the identity of
the person making it.
The Merger Agreement further provides that, upon execution of the Merger
Agreement, RSC shall immediately cease and cause its advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations conducted prior to the date of the Merger Agreement with respect to
any Transaction Proposal with any party other than Parent, Purchaser or their
representatives, and shall, upon consummation of the Atlas Offer, use its
reasonable best efforts to cause any such other party in possession of
confidential information about RSC that was furnished by or on behalf of RSC to
return or destroy all such information in the possession of any such party or in
the possession of any agent or advisor of such party. Notwithstanding anything
to the contrary contained in the Merger Agreement, prior to the Effective Time,
RSC may, in connection with a possible Transaction Proposal, refer any third
party to such sections of the Merger Agreement which discuss the foregoing and
to make a copy of such sections available to them.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the Merger
Agreement, Parent and the Surviving Corporation shall cause to be maintained in
effect (1) for a period of six years after the Effective Time, the current
provisions regarding indemnification of current or former officers and directors
(each an "Indemnified Party") contained in the certificate of incorporation or
the bylaws of RSC or its subsidiaries and in any agreements between an
Indemnified Party and RSC or its subsidiaries, provided that in the event any
claim or claims are asserted or made within such six year period, all rights to
indemnification in respect of any claim or claims shall continue until final
disposition of any and all such claims, and (2) for a period of six years,
policies of directors' and officers' liability insurance and fiduciary liability
insurance equivalent to the current policies maintained by RSC (the "D&O
Insurance") and which are, in the aggregate, no less advantageous to the insured
and (provided that any substitution of policies shall not result in any gaps or
lapses in coverage with respect to matters occurring prior to the Effective
Time) with respect to claims arising from facts or events that occurred on or
before the Effective Time, provided, that (A) RSC following the Merger shall not
be required to spend in excess of 200% of the amount spent on current annual
premiums for the D&O Insurance (the "Premium Limit") per year
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therefor; PROVIDED, FURTHER that if RSC following the Merger would be required
to spend in excess of the Premium Limit per year to obtain insurance having the
maximum available coverage under such D&O Insurance policies, RSC will be
required to spend up to such amount to maintain or procure insurance coverage
pursuant hereto, subject to availability of such (or similar) coverage and (B)
such policies may in the sole discretion of RSC be one or more "tail" policies
for all or any portion of the full six year period, provided that such "tail"
policies contain terms and conditions and provide coverage no less advantageous
to the insureds than the terms, conditions and coverage in the D&O Insurance.
RSC agrees that in the event it would be required to spend in excess of the
Premium Limit per year to obtain insurance having the maximum available coverage
under D&O Insurance policies, RSC will notify the officers and directors who are
the beneficiaries thereof and permit such officers and directors to pay any
excess amount over the Premium Limit which may be necessary to maintain such
policies.
In addition, for a period of six years after the Effective Time (provided
that in the event any claim or claims are asserted or made within such six year
period, all rights to indemnification in respect of any claim or claims shall
continue until final disposition of any and all such claims), Parent shall
indemnify the Indemnified Parties to the same extent as such Indemnified Parties
are entitled to indemnification under the instruments described and to the
extent set forth in clause (1) above. The Merger Agreement also provides that
Parent will pay as incurred the reasonable fees and expenses of counsel selected
by the Indemnified Party and reasonably acceptable to Parent (including the cost
of any investigation and preparation and the cost of any appeal) incurred in
connection therewith in the event any such Indemnified Party is or becomes
involved in any action, proceeding or investigation in connection with any
matter occurring prior to or on the Effective Time.
TREATMENT OF OPTIONS AND CERTAIN OTHER STOCK INTERESTS IN THE MERGER;
EMPLOYEE BENEFITS. At the Effective Time, each unexpired and unexercised
outstanding option, whether or not then vested or exercisable in accordance with
its terms, to purchase Shares (the "Options") previously granted by RSC or its
subsidiaries under any plan, agreement or arrangement (collectively, the "RSC
Equity Plans") shall be automatically converted into the right to receive from
Parent, at the Effective Time, cash in an amount equal to the product of (1) the
Merger Consideration minus the exercise price per share under such Option,
multiplied by (2) the number of Shares which may be purchased upon exercise of
such Option (whether or not then exercisable or vested), less any required
withholding, and thereupon each Option shall terminate and each holder thereof
shall have no further rights to any Shares. Prior to the Effective Time, RSC
will take all action necessary to (1) shorten the offering period under RSC's
Employee Qualified Stock Purchase Plan (as described in SCHEDULE I hereto) in
which the Effective Time occurs so that such offering period terminates on the
day prior to the Effective Time, and (2) terminate the Employee Qualified Stock
Purchase Plan effective as of the Effective Time. Immediately prior to the
Effective Time, the restrictions on all Shares of restricted Shares shall lapse
and each such Share of restricted stock shall be fully vested and, at the
Effective Time, shall be subject to conversion pursuant to the Merger Agreement
into the right to receive the Merger Consideration, less any applicable
withholding thereon. Similarly, at the Effective Time, each right of a person to
be issued Shares, whether or not then vested or otherwise matured previously
granted by RSC in connection with an acquisition (an "Issue Right"), shall be
automatically converted into the right to receive from Parent, at the Effective
Time, cash in an amount equal to the product of (1) the Merger Consideration,
multiplied by (2) the number of Shares issuable pursuant to such Issue Right.
In addition, Parent agrees that, and shall take all necessary action to
ensure that, during the period commencing at the Effective Time and ending on
the first anniversary thereof, the employees of RSC will continue to be provided
with (whether by Parent, the Surviving Corporation or otherwise) employee
benefit plans (other than stock option or other plans involving the potential
issuance of securities of RSC and other incentive or performance based programs
or arrangements) which in the aggregate are not materially less favorable to
those currently provided by RSC to such employees, to the extent permitted under
laws and regulations in force from time to time; PROVIDED, HOWEVER, that subject
to compliance with this paragraph, Parent reserves the right to review all
employee benefits after the Effective Time and to make such changes as it deems
appropriate. Parent intends to cause the Surviving Corporation to provide or
enter into incentive and performance based compensation plans or arrangements
with management
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employees of RSC, the purpose of which will be to provide such management
employees with incentive and performance based compensation at levels of
benefits and performance targets which are to replace the incentive and
performance based compensation that such management employees are eligible to
participate in and receive from RSC on the date hereof (excluding any equity
based incentive plans). For purposes of determining eligibility to participate,
waiting periods, vesting and accrual or entitlement to benefits where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Corporation or any of their respective subsidiaries, employees of
RSC and its subsidiaries as of the Effective Time shall receive service credit
for service with RSC and its subsidiaries to the same extent such service credit
was granted under RSC's employee benefit plans, programs, arrangements or
contracts, subject to offsets for previously accrued benefits and no duplication
of benefits. Parent shall cause the Surviving Corporation to assume and honor in
accordance with their terms all written employment, severance and termination
plans and agreements (including change in control provisions) of employees of
RSC and its subsidiaries as in effect on the closing date of the Merger, subject
to all rights to amend or terminate as set forth in the Merger Agreement and
certain other agreements, plans and policies disclosed by RSC to Parent in
connection with the Merger Agreement but excluding any obligations regarding
compensation plans linked to equity performance or earnings per Share.
CONDITIONS TO THE CONSUMMATION OF THE MERGER. Pursuant to the Merger
Agreement, the respective obligations of Parent, Purchaser and RSC to consummate
the Merger are subject to the satisfaction, at or before the Effective Time, of
each of the following conditions: (1) RSC shall have obtained all approvals of
holders of shares of capital stock of RSC necessary to approve the Merger
Agreement and all the transactions contemplated thereby (including the Merger)
to the extent required by law, (2) the waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired, (3) no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other governmental
entity of competent jurisdiction shall be in effect and have the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger,
(4) all required consents and all other authorizations, consents, orders and
approvals of, and declarations and filings with, and all expirations of waiting
periods imposed by, any governmental entity which, if not obtained in connection
with the consummation of the transactions contemplated thereby, could reasonably
be expected to have a material adverse effect on RSC or materially impair or
delay the ability of RSC, Parent or Purchaser to consummate the transactions
contemplated hereby shall have been obtained, waived, declared or filed or have
occurred, as the case may be, and all such approvals shall be in full force and
effect, and (5) Purchaser shall have commenced the Atlas Offer and shall have
purchased, pursuant to the terms and conditions of the Atlas Offer, all Shares
duly tendered and not withdrawn.
TERMINATION. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time, by action taken by the board of directors of
the terminating party, whether before or after approval of the Merger Agreement
and the transactions contemplated thereby by RSC's stockholders:
(a) by mutual written consent of Parent and RSC;
(b) by either RSC or Parent if the Merger shall not have been consummated by
the date which is six months from the date of the Merger Agreement, provided
that such date shall be extended to the date which is nine months from the date
of the Merger Agreement in the event the conditions to the Merger have been or
are capable of being satisfied at the time of such extension other than certain
conditions which have been or are reasonably capable of being satisfied on or
prior to the date which is nine months from the date of the Merger Agreement
(such date, as it may be so extended, shall be referred to herein as the
"Outside Date"); PROVIDED FURTHER that the right to terminate the Merger
Agreement under this paragraph shall not be available to any party whose failure
to fulfill any obligation or condition under the Merger Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or before such
date and shall not be available to Parent if it has purchased Shares pursuant to
the Atlas Offer;
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(c) By RSC or Parent if the Atlas Offer is terminated or withdrawn pursuant
to its terms without any Shares being purchased thereunder; provided that Parent
may terminate the Merger Agreement pursuant to this paragraph only if Parent's
or Purchaser's termination or withdrawal of the Atlas Offer is not in violation
of the terms of the Merger Agreement or the Atlas Offer;
(d) By either RSC or Parent if any governmental entity shall have issued an
order, decree or ruling or taken any other action (which order, decree, ruling
or other action the parties shall have used their reasonable efforts to resist,
resolve or lift, as applicable, subject to the provisions of the Merger
Agreement) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable;
(e) By either Parent or RSC if any approval by RSC's stockholders required
for the consummation of the Merger or the other transactions contemplated by the
Merger Agreement shall not have been obtained at the Stockholders Meeting or any
adjournment thereof by reason of the failure to obtain the required vote at a
duly held meeting of RSC's stockholders or at any adjournment thereof;
(f) By Parent, prior to the payment by Purchaser for Shares pursuant to the
Atlas Offer, if (1) the RSC Board shall have withdrawn or materially and
adversely modified its recommendation of the Atlas Offer or the adoption of the
Merger Agreement (it being understood, however, that for all purposes of the
Merger Agreement, the fact that RSC has supplied any person with information
regarding RSC or has entered into discussions or negotiations with such person
as permitted by the Merger Agreement, or the disclosure of such facts, shall not
be deemed a withdrawal or modification of the RSC Board's recommendation of the
Atlas Offer or the adoption of the Merger Agreement); (2) the RSC Board shall
have recommended to the stockholders of RSC that they approve a Transaction
Proposal other than transactions contemplated by the Merger Agreement and at
least two business days have elapsed since the recommendation; or (3) a tender
offer or exchange offer that, if successful, would result in any person or
"group" becoming a "beneficial owner" (such terms having the meaning ascribed
under Regulation 13D under the Exchange Act) of 50% or more of the outstanding
Shares is commenced (other than by Parent or an affiliate of Parent) and the RSC
Board recommends that the stockholders of RSC tender their shares in such tender
or exchange offer;
(g) By RSC, prior to the payment by Purchaser for Shares pursuant to the
Atlas Offer, if RSC, following receipt of a bona fide Transaction Proposal,
fails to make or withdraw or modify its recommendation and/or declaration of
advisability of the Atlas Offer and/or adoption of the Merger Agreement;
(h) By Parent, prior to the payment by Purchaser for Shares pursuant to the
Atlas Offer, upon a material breach of any covenant or agreement on the part of
RSC set forth in the Merger Agreement, or if (1) any representation or warranty
of RSC that is qualified as to materiality shall have become untrue, or (2) any
representation or warranty of RSC that is not so qualified shall have become
untrue in any material respect; PROVIDED, HOWEVER, that if such breach is
capable of being cured by RSC prior to the 21st day following written notice of
such breach by Parent to RSC through the exercise of its best efforts, so long
as RSC continues to exercise such best efforts, Parent may not terminate the
Merger Agreement pursuant to this paragraph prior to such 21st day; or
(i) By RSC, upon a material breach of any covenant or agreement on the part
of Parent or Purchaser set forth in the Merger Agreement, or if (1) any
representation or warranty of Parent or Purchaser that is qualified as to
materiality shall have become untrue or (2) any representation or warranty of
Parent or Purchaser that is not so qualified shall have become untrue in any
material respect; PROVIDED, HOWEVER, that, if such breach is capable of being
cured by Parent prior to the 21st day following written notice of such breach by
Parent to RSC through the exercise of best efforts, so long as Parent continues
to exercise such best efforts, RSC may not terminate the Merger Agreement
pursuant to this paragraph prior to such 21st day;
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(j) By RSC, if Purchaser shall have failed to commence the Atlas Offer
within the five business day period specified in the Merger Agreement or
Purchaser fails to pay for validly tendered Shares in violation of the terms of
the Atlas Offer or the Merger Agreement; or
(k) By Parent or RSC, if the Atlas Offer terminates or expires on account of
the failure of any condition specified in the Merger Agreement without Purchaser
having purchased any Shares thereunder (provided that the right to terminate the
Merger Agreement pursuant to this paragraph shall not be available to any party
whose failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of any such condition).
TERMINATION FEES AND EXPENSES. The Merger Agreement provides that in the
event that the Merger Agreement is terminated pursuant to paragraph (f) or (g)
described under the heading "Termination" in the response to this Item 3(b)
above, RSC shall pay Parent a cash fee of $20,000,000, which amount shall be
payable by wire transfer of immediately available funds no later than two
business days after such termination.
AMENDMENTS; WAIVER. The Merger Agreement may be amended by the parties
thereto, by action taken or authorized by their respective boards of directors,
at any time before or after approval of the matters presented in connection with
the Merger by RSC's stockholders, but, after any such approval, no amendment
shall be made which by law or in accordance with the rules of the New York Stock
Exchange, Inc. (the "NYSE") requires further approval by such stockholders
without such further approval. The Merger Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto. At any
time prior to the Effective Time, the parties to the Merger Agreement, by action
taken or authorized by their respective boards of directors, may, to the extent
legally allowed, (1) extend the time for the performance of any of the
obligations or other acts of the other parties thereto, (2) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto, and (3) waive compliance with any of the
agreements or conditions contained therein. Any agreement on the part of a party
to the Merger Agreement to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. No delay on
the part of any party to the Merger Agreement in exercising any right, power or
privilege thereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party thereto of any right, power or privilege thereunder
operate as a waiver of any other right, power or privilege thereunder, nor shall
any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege thereunder. The failure of any party to the Merger
Agreement to assert any of its rights thereunder or otherwise shall not
constitute a waiver of those rights.
GUARANTY
In connection with the execution of the Merger Agreement, Atlas Copco AB, a
corporation formed and organized under the laws of the Kingdom of Sweden ("Atlas
Copco"), executed a guaranty, dated as of June 28, 1999 (the "Guaranty"),
pursuant to which Atlas Copco unconditionally guarantees to RSC the prompt
payment and performance of the obligations and agreements of Parent and
Purchaser under the Merger Agreement. The guaranty obligation terminates
immediately following the earlier of (1) the Effective Time, and (2) the
termination of the Merger Agreement. The foregoing summary of the Guaranty is
qualified in its entirety by reference to the complete text of the Guaranty, a
copy of which is filed as Exhibit 2 hereto and is incorporated by reference
herein.
CONFIDENTIALITY/STANDSTILL AGREEMENT
On June 14, 1999, RSC and Atlas Copco AB entered into a
confidentiality/standstill letter agreement (the "Confidentiality/Standstill
Agreement"). Pursuant to the terms of the Confidentiality/Standstill Agreement,
Atlas Copco agreed, on its behalf and on behalf of its affiliates, including
Parent and
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Purchaser, and representatives, to, among other things, (1) keep confidential
certain business and financial information concerning RSC and its subsidiaries
and (2) for a period of one year not to, without the prior written consent of
RSC or the RSC Board, among other things; (A) acquire directly or indirectly, by
purchase or otherwise, of any securities (or beneficial ownership thereof), or
rights to acquire any securities, of RSC or any subsidiary thereof; (B) effect,
cause or participate in, directly or indirectly, any tender or exchange offer,
merger, consolidation or other business combination involving RSC; (C) solicit
proxies or written consents as to any voting securities of RSC (or seek to
advise or influence any person with respect to the voting of any voting
securities of RSC); (D) act, alone or in concurrent with others, to seek to
control or influence RSC's management, the RSC Board or RSC's policies or
propose any matter for submission to a vote of RSC's stockholders; or (E) enter
into any discussions or arrangements with any third party with respect to any of
the foregoing or advise, assist, encourage, finance or seek to persuade others
to take any action with respect to the foregoing. In addition, Atlas Copco
agreed, on its behalf and on behalf of its affiliates, including Parent and
Purchaser, that for a period of one year it would not, directly or indirectly,
solicit for employment or employ certain employees of RSC and its subsidiaries
without obtaining the prior written consent of RSC, subject to certain
exceptions as described in the Confidentiality/Standstill Agreement.
The foregoing summary of the Confidentiality/Standstill Agreement is
qualified in its entirety by reference to the complete text of the
Confidentiality/Standstill Agreement, a copy of which is filed as Exhibit 3
hereto and is incorporated herein by reference.
AGREEMENTS WITH MR. REID
EMPLOYMENT AGREEMENT. RSC and Martin R. Reid are parties to an employment
agreement, dated as of January 14, 1998 (as amended, the "Reid Employment
Agreement"), pursuant to which Mr. Reid is employed as Chairman of the Board and
Chief Executive Officer. The term of the Reid Employment Agreement expires on
December 31, 2001, but will be automatically extended for one additional year at
the end of each calendar year, unless earlier terminated. The Reid Employment
Agreement provides for a base salary of no less than $500,000. Mr. Reid is also
eligible to receive a yearly bonus of up to $500,000, if specified performance
criteria are met. In addition, Mr. Reid is entitled to four weeks vacation and
all benefits generally available to other RSC executives.
The Reid Employment Agreement may be terminated by Mr. Reid or RSC at any
time, with or without cause. In addition, if requested by the RSC Board, Mr.
Reid will resign as Chief Executive Officer, but will remain as Chairman of the
Board and devote at least 50% of his time to RSC. Beginning with the first full
year after his resignation, Mr. Reid's base salary and corresponding bonus
opportunity would each be reduced to $250,000. The RSC Board may also request
that Mr. Reid step down as Chairman of the Board, and, in such circumstance, Mr.
Reid would remain an RSC employee at a base salary not less than $125,000,
depending on the time he devotes.
Except where there has been a "change of control," if Mr. Reid's active
employment in all capacities is terminated by RSC without "cause" (as defined in
the Reid Employment Agreement), Mr. Reid will be entitled to receive severance
pay equal to his then-current base salary through the remaining term of the Reid
Employment Agreement, plus the maximum bonus opportunity available if he had
continued in the position from which he was terminated. Mr. Reid will also be
entitled to immediate vesting of all his unvested options and restricted stock.
In addition, for the remainder of the term of the Reid Employment Agreement, Mr.
Reid will be treated as an active employee for purposes of all benefits and will
be entitled to health insurance coverage until age 65. No severance pay or
benefit continuation will be available if Mr. Reid is terminated for cause or if
he resigns (other than due to a breach of the Reid Employment Agreement by RSC)
or is asked by the RSC Board to resign as Chief Executive Officer or step-down
as Chairman of the Board. Under the Reid Employment Agreement, a "change of
control" includes (1) the acquisition by any person (other than any employee
benefit plan maintained by RSC) of beneficial ownership of 50% or more of the
Shares; (2) the disposition of all or substantially all of the business of
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RSC pursuant to a merger, consolidation or other transaction in which either RSC
is not the surviving company or the stockholders of RSC immediately prior to the
transaction do not continue to own at least 60% of the surviving corporation
immediately after the transaction; or (3) individuals who constituted the RSC
Board as of January 14, 1998 cease for any reason to constitute at least a
majority of the RSC Board (provided that any individual whose election or
nomination to the RSC Board was approved by at least two-thirds of the directors
comprising the RSC Board as of the date of the Reid Employment Agreement shall
be considered as though such individual were a member of the RSC Board as of
January 14, 1998, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an election contest with
respect to the election or removal of directors or other actual or overtly and
publicly threatened solicitation of proxies or consents by or on behalf of a
person or entity other than the RSC Board).
Upon a change of control, all of Mr. Reid's unvested stock options and
restricted stock will vest. In addition, if within 24 months after a change of
control, Mr. Reid is terminated without cause or voluntarily terminates his
employment for "good reason" (as defined in the Reid Employment Agreement),
then, in place of other severance payments, he will receive a payment equal to
two and one-half times his highest base salary and annual bonus opportunity
during the term of the Reid Employment Agreement prior to the change of control.
RSC must also continue to provide Mr. Reid with health and life insurance
comparable to that in effect on the date of the change of control for 30 months
or until he is re-employed and eligible for health and life insurance benefits
from a new employer that are at least as favorable as those provided by RSC. In
addition, Mr. Reid will either be fully vested in his account under RSC's 401(k)
plan (as described in SCHEDULE I attached hereto) upon the change of control or
receive payments equal to the unvested portion of that account. RSC must also
transfer to Mr. Reid the company-owned car he was using at the time of the
change of control or pay him two and one-half times his annual car allowance.
During the term of the Reid Employment Agreement, and for four years after
any termination of employment for any reason, Mr. Reid cannot directly or
indirectly engage in any business that competes with RSC, whether as an owner,
director, officer, employee, consultant or otherwise, subject to limited
investments in public companies and a pre-existing loan to a family member.
If Mr. Reid's employment is terminated as a result of his death or
disability, all of his unvested options and restricted stock will vest, and he
or his estate will receive his unpaid base salary through the date of such death
or disability plus a pro rata portion of his maximum bonus opportunity for that
year.
In connection with the execution of the Reid Employment Agreement, RSC
accelerated the vesting of Mr. Reid's 200,000 then-outstanding options to
purchase Shares and those options became immediately exercisable.
RESTRICTED STOCK AND OPTION GRANTS. On January 14, 1998, Mr. Reid was
granted options to purchase 190,000 Shares, vesting in equal installments over
four years (or earlier if certain performance criteria are met), and 10,000
shares of restricted stock, vesting in equal installments over four years.
However, the options will vest immediately if Mr. Reid presents a chief
executive officer succession plan that is approved by the RSC Board, but in no
event earlier than one year from the grant of such options. In addition, the
vesting of the restricted stock may be accelerated under certain circumstances,
including a "change of control" (as defined in the Reid Employment Agreement).
On February 25, 1998, Mr. Reid surrendered to RSC options to purchase 57,000
Shares in order to ensure the number of Shares available for issuance pursuant
to the 1996 Equity Participation Plan (as described in SCHEDULE I attached
hereto) was sufficient to allow certain grants of stock options to other
officers. On April 29, 1998, Mr. Reid was granted options to purchase 40,411
Shares and 16,589 shares of restricted stock. These options and restricted stock
are subject to the same vesting as those granted in January 1998.
On October 9, 1998, RSC issued Mr. Reid an additional 235,000 shares of
restricted stock. The restricted stock is subject to vesting in equal
installments over four years; however, the vesting may be
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accelerated under certain circumstances, including a "change of control" (as
defined in the Reid Employment Agreement). RSC also entered into an agreement to
loan Mr. Reid the amount of any tax liability resulting from this grant of
restricted stock (up to $1.4 million). The loan accrues interest at a rate equal
to the current rate on RSC's revolving credit facility (which, as of June 25,
1999 was equal to 7.3%), with principal and interest due upon 100% vesting of
the restricted stock and in certain other circumstances. The loan is secured by
the restricted stock and will be forgiven based on the market price of the
Shares reaching certain levels, and in certain other circumstances if the
vesting of the restricted stock is accelerated. At June 25, 1999, Mr. Reid owed
RSC $1.4 million, including accrued interest, under this loan agreement.
On January 4, 1999, Mr. Reid was granted options to purchase 200,000 Shares
at an exercise price of approximately $15.13 per Share and vesting in equal
installments over four years.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
RSC has entered into severance agreements (collectively, the "Severance
Agreements") with Douglas A. Waugaman, Robert M. Wilson, Ronald Halchishak and
David G. Ledlow providing for certain benefits upon termination of employment
either by RSC without cause or by the executive officer due to a reduction in
base salary and benefits (other than across the board salary cuts for employees
at the executive officer's level or changes in benefits). These benefits include
a lump sum severance payment equal to 100% of the executive officer's base
salary, plus a pro rata portion of the current-year bonus opportunity, plus
life, disability, accident and group health insurance benefits substantially
similar to those received by the executive officer immediately prior to
termination for a 12 month period. In addition, all stock options granted prior
to 1996, all stock options scheduled to vest in the year of termination and
one-third of all other stock options held by such executive officer, if any,
shall become vested and exercisable effective as of the day immediately prior to
the date of termination of the executive officer. As consideration for these
benefits, each of Messrs. Wilson, Halchishak and Ledlow agreed that during the
term of their Severance Agreement and for 12 months after termination of
employment for any reason, they would not solicit any customers of RSC or hire
or offer employment to any of RSC's employees. Mr. Waugaman agreed that during
the term of his Severance Agreement and for 3 months after termination of
employment for any reason he would not solicit any customers of RSC or hire or
offer employment to any of RSC's employees. The Severance Agreements: (1) with
Messrs. Halchishak and Ledlow will continue in effect through December 31, 2001,
(2) with Mr. Wilson will continue in effect through April 14, 2000, and (3) with
Mr. Waugaman will continue in effect through June 30, 2001.
RSC has also entered into executive severance agreements (collectively, the
"Executive Severance Agreements") with Messrs. Waugaman, Wilson, Halchishak and
Ledlow providing that upon a "change of control," they will be entitled to
certain benefits upon the subsequent termination of their employment within two
years following the change of control, unless the termination is due to death or
disability or if the termination is by RSC for "cause" or by the officer other
than for "good reason" (each as defined in the Executive Severance Agreements).
The benefits under the Executive Severance Agreements include, in lieu of any
other severance obligation of RSC, severance payments equal to 200% of the
executive officer's base salary, plus an additional lump sum payment equal to
the maximum bonus for the current year plus the following two years, plus
certain "gross-up" payments if any of the other payments would be subject to
"golden parachute" excise taxes. The benefits also include continuation of
health and life insurance for 18 months following termination (unless earlier
provided by another employer) and vesting of all 401(k) plan accounts. In
addition, all stock options accelerate and become immediately vested and
exercisable, and all restricted stock immediately vests following atermination
that gives rise to the benefits under the Executive Severance Agreements. The
Executive Severance Agreements also provide that, for 12 months following a
termination that gives rise to the benefits thereunder, the executive officers
will not compete with RSC. Under the Executive Severance Agreements, the term
"change of control" has the same meaning given to such term in the Reid
Employment Agreement. The Executive Severance Agreements are, except as
specifically provided therein, in addition to the Severance Agreements.
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INDEMNIFICATION AGREEMENTS
Each of the directors on the RSC Board has entered into an indemnification
agreement with RSC which supplements the indemnification provisions set forth in
RSC's bylaws (collectively, the "Indemnification Agreements"). The
Indemnification Agreements generally provide that RSC will indemnify each
director, subject to certain limitations and exclusions, for any damages,
judgments, fines, penalties, settlements and costs, attorneys' fees and other
amounts, including any expenses of establishing a right to indemnification under
the Indemnification Agreements, incurred by such director in connection with any
threatened, pending or completed claim, action, suit or other proceeding brought
against or involving such director by reason of the fact that the director is or
was an officer or director of RSC or arising out of any action or inaction taken
while serving as a director. The Indemnification Agreements authorize the
director to bring suit to enforce a claim or request for indemnification
thereunder and to recover the expenses of prosecuting such suit if successful in
whole or in part. RSC also agrees, at the request of the director, to advance
the expenses of any proceeding (other than the amount of any settlement) giving
rise to a claim for indemnification under the Indemnification Agreements,
subject to repayment to the extent the director ultimately is not entitled to
indemnification.
CERTAIN STOCK OWNERSHIP INFORMATION; COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS
Certain information regarding securities of RSC owned beneficially or of
record by RSC's directors, executive officers and affiliates and certain
information with respect to the compensation of RSC's directors and executive
officers is set forth in SCHEDULE I attached hereto and is incorporated by
reference herein.
OTHER EMPLOYEE BENEFIT AND COMPENSATION PLANS
RSC maintains various other employee benefit and compensation plans,
including RSC's Supplemental Severance Pay Plan, Supplemental Severance Pay Plan
for Key Corporate Employees, Supplemental Severance Pay Plan for Key Field
Employees, 401(k) Retirement Savings Plan, Stock Option Plan for Key Employees,
1996 Equity Participation Plan, Management Incentive Compensation Plan and
executive incentive bonus plan, Executive Savings Plan, Survivor Protection
Program and Employee Qualified Stock Purchase Plan. Each of the foregoing
employee benefit and compensation plans are described in SCHEDULE I attached
hereto and are incorporated by reference herein.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Brentwood Buyout Partners, L.P. ("BBP") has received
investment banking fees from RSC in connection with certain acquisitions.
Investment banking fees paid to BBP totaled $388,000 in 1996, $1.1 million in
1997, $0 in 1998 and $0 to date in 1999. RSC's obligation to pay these
investment banking fees to BBP terminated upon the completion of RSC's initial
public offering in 1996. However, RSC, in its discretion, may utilize BBP's
investment banking services under the same fee arrangement. William M. Barnum,
Jr., a general partner of BBP, also serves as a director of RSC. Mr. Barnum does
not receive additional compensation from BBP for service as a director of RSC.
In connection with the acquisition of Center Rentals & Sales in December
1997 ("Center Rentals"), RSC entered into leases for certain of Center Rentals'
facilities with David P. Lanoha, a director of RSC, and certain partnerships
affiliated with Mr. Lanoha. The leases initially expire in 2002, with options to
extend for three periods of five years each. The aggregate annual rent under
such leases is $720,000. RSC believes the terms of these leases are no less
favorable than those that could be obtained from unaffiliated third parties.
Prior to the acquisition of Center Rentals, these locations had been leased by
Center Rentals from Mr. Lanoha and his affiliates and, in connection with the
acquisition, these leases were terminated.
The foregoing descriptions and those in SCHEDULE I attached hereto are
qualified in their respective entireties by reference to the texts of the
applicable contracts, agreements, plans, policies, arrangements
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and other documents, copies of which are filed as Exhibits 8 through 31 hereto
and are incorporated by reference herein.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION AND BACKGROUND
THE RSC BOARD HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE ATLAS OFFER AND THE MERGER, HAS DETERMINED
THAT EACH OF THE ATLAS OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF RSC'S STOCKHOLDERS, HAS DECLARED THAT THE MERGER AGREEMENT IS
ADVISABLE AND RECOMMENDS THAT RSC'S STOCKHOLDERS ACCEPT THE ATLAS OFFER AND
TENDER THEIR SHARES INTO THE ATLAS OFFER.
On January 20, 1999, RSC and NationsRent, Inc. ("NationsRent") entered into
an Agreement and Plan of Merger, dated as of January 20, 1999 (the "NationsRent
Merger Agreement"), pursuant to which RSC and NationsRent would merge in a
stock-for-stock transaction (the "NationsRent Merger").
While the NationsRent Merger was pending, UR Acquisition Corporation ("UR
Acquisition"), a wholly owned subsidiary of United Rentals, Inc. ("United
Rentals"), and United Rentals commenced a tender offer (the "United Rentals
Offer") on April 5, 1999 to purchase all outstanding Shares at a purchase price
of $22.75 per Share, net to the seller in cash, without interest, subject to the
terms and conditions described in the Tender Offer Statement on Schedule 14D-1
filed by United Rentals and UR Acquisition with the SEC on April 5, 1999, as
amended. On April 13, 1999, United Rentals filed preliminary consent
solicitation materials with the SEC to solicit the consent of RSC's stockholders
to, among other things, remove the members of the RSC Board and replace them
with United Rentals' nominees. United Rentals later withdrew six nominees who
were executive officers and/or directors of United Rentals from its proposed
slate and substituted six new nominees.
On April 6, 1999, Lennart Johansson, Senior Vice President of Atlas Copco,
contacted a representative of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, financial advisor to RSC ("Merrill Lynch"), to discuss recent
developments in the equipment rental industry. During the conversation, Mr.
Johansson made an unsolicited comment to the effect that Atlas Copco had no
interest in RSC at that time.
From April 8 through April 15, 1999, the RSC Board held four meetings to
discuss the United Rentals Offer and related matters, including the status of
the NationsRent Merger and the adoption of the Rights Agreement. On April 16,
1999, RSC filed a Solicitation/Recommendation Statement on Schedule 14D-9 with
the SEC announcing the RSC Board's determination that the United Rentals Offer
was inadequate and not in the best interests of RSC or its stockholders, and
recommending that RSC's stockholders reject the United Rentals Offer and not
tender their Shares pursuant to the United Rentals Offer. Also on April 16,
1999, Merrill Lynch delivered to the RSC Board its written opinion dated such
date as to the inadequacy of the consideration being offered in the United
Rentals Offer to RSC's stockholders (other than United Rentals and its
affiliates), from a financial point of view. On April 19, 1999, RSC filed
preliminary consent revocation materials with the SEC to solicit against the
consent solicitation of United Rentals.
On May 20, 1999, RSC and NationsRent mutually terminated the NationsRent
Merger Agreement. In light of the termination of the NationsRent Merger
Agreement, the RSC Board directed Merrill Lynch and Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), co-financial advisors to RSC, to review the
strategic alternatives available to RSC, including remaining an independent
public company, and to promptly report the results of their review to the RSC
Board. The RSC Board also determined that, until the completion of the review
and evaluation process, the RSC Board was maintaining its recommendation against
the United Rentals Offer.
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On May 24, 1999, a representative of Goldman, Sachs & Co. ("Goldman,
Sachs"), financial advisor to United Rentals, attempted to contact Morgan
Stanley by telephone on behalf of United Rentals. On May 25, 1999, a
representative of Morgan Stanley responded to such contact and was informed by
the representative of Goldman, Sachs that United Rentals would be interested in
participating in any process that RSC may conduct as a result of the review and
evaluation of RSC's strategic alternatives.
On June 2, 1999, Mr. Johansson of Atlas Copco contacted Merrill Lynch.
During this conversation, Mr. Johansson indicated to Merrill Lynch that, in
light of the termination of the NationsRent Merger Agreement and the process
being conducted by the RSC Board, Atlas Copco was reevaluating its position with
respect to RSC.
At a meeting of the RSC Board on June 8, 1999 in Scottsdale, Arizona (the
"June 8 Meeting"), Merrill Lynch and Morgan Stanley made a joint presentation to
the RSC Board with respect to their ongoing review and analysis of strategic
alternatives available to RSC. During the presentation, Merrill Lynch informed
the RSC Board that it had not changed its written opinion, dated April 16, 1999,
as to the inadequacy, from a financial point of view, of the consideration being
offered by United Rentals to RSC's stockholders (other than United Rentals and
its affiliates) in the United Rentals Offer. Based on the joint presentation of
Merrill Lynch and Morgan Stanley, the RSC Board confirmed its previous
determination that the United Rentals Offer was inadequate and not in the best
interests of RSC or its stockholders. The RSC Board also determined to continue
to recommend that RSC's stockholders reject the United Rentals Offer and not
tender their Shares pursuant to the United Rentals Offer and to continue to urge
RSC's stockholders not to deliver consents to United Rentals to remove and
replace the members of the RSC Board.
At the June 8 Meeting, Merrill Lynch and Morgan Stanley informed the RSC
Board of a contact received from a third party inquiring about the possibility
of RSC acquiring such third party in a stock-for-stock transaction that would be
accounted for as a purchase. After considering the matter, the RSC Board
determined, with the advice of Merrill Lynch and Morgan Stanley, not to pursue
discussions at that time.
Following the joint presentation of Merrill Lynch and Morgan Stanley at the
June 8 Meeting, the RSC Board discussed the matters presented and determined to
further explore the strategic alternatives available to RSC. As part of the RSC
Board's determination, the RSC Board authorized its financial and legal advisors
to provide forms of confidentiality/standstill agreements to third parties,
including United Rentals, interested in obtaining access to RSC's senior
management and reviewing confidential business and financial information of RSC.
At the June 8 Meeting, the RSC Board determined that the process of
exploring RSC's strategic alternatives could result in RSC requesting and
receiving formal proposals from one or more third parties to engage in a
strategic transaction with RSC; could result in an agreement for a strategic
transaction between RSC and a third party; could result in an auction of RSC
involving multiple parties that have communicated expressions of interest in
RSC; could result in a recapitalization or an investment in RSC by a third
party; or could result in RSC remaining an independent public company.
Merrill Lynch and Morgan Stanley contacted 36 potential strategic acquirors
and financial investors regarding a potential acquisition of RSC, a leveraged
buyout of RSC or a minority investment in RSC. A form of
confidentiality/standstill agreement was distributed to third parties expressing
an interest in participating in RSC's process, including United Rentals and
Atlas Copco. Merrill Lynch and Morgan Stanley also continued to consider other
strategic alternatives, including RSC remaining an independent public company
and certain recapitalization transactions involving RSC. From June 9 through
June 24, 1999, nine third parties executed confidentiality/standstill agreements
with RSC. Subsequent to June 11, 1999, counsel to RSC negotiated the terms of a
confidentiality/standstill agreement with counsel to United Rentals. RSC
attempted to negotiate a confidentiality/standstill agreement with United
Rentals which took into account RSC's process, United Rentals' participation in
the process and United Rentals' pending tender offer and consent solicitation.
These negotiations did not result in any agreement.
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On June 9, 1999, a representative of Merrill Lynch discussed the Atlas Copco
confidentiality/standstill agreement with Mr. Johansson. Mr. Johansson indicated
to Merrill Lynch that representatives of Atlas Copco would be traveling to the
United States from Sweden during the week of June 14, 1999 and were available to
conduct due diligence and meet with RSC's senior management during that week.
Mr. Johansson further indicated that Atlas Copco desired to move quickly and was
unwilling to participate in an auction involving RSC.
On June 10, 11, 14 and 16, 1999, RSC's senior management and representatives
of Merrill Lynch and Morgan Stanley met with financial investors which had
expressed an interest in making a minority investment in RSC and which had
executed a confidentiality/standstill agreement. One of these financial
investors indicated an interest in reviewing due diligence materials and, on
June 21 and 22, 1999, conducted a due diligence review and engaged in further
discussions with RSC's senior management in Scottsdale, Arizona.
From June 11 through June 13, 1999, counsel to Atlas Copco and counsel to
RSC negotiated the terms of a confidentiality/standstill agreement. On June 14,
1999, Atlas Copco executed the Confidentiality/
Standstill Agreement. From June 14 through June 16, 1999, Atlas Copco, its legal
counsel and its financial advisor, Credit Suisse First Boston, conducted a due
diligence review of RSC in Scottsdale, Arizona and met with RSC's senior
management.
In connection with the process of reviewing and evaluating strategic
alternatives, RSC received preliminary communications during the week of June
14, 1999 from third parties expressing an interest in making an investment in or
acquiring RSC at a price per Share in excess of the $22.75 per Share being
offered by United Rentals.
During the week of June 21, 1999, three third parties, each of which was a
party to a confidentiality/ standstill agreement with RSC, were furnished access
to due diligence materials and RSC's senior management in Scottsdale, Arizona.
On June 18, 1999, Merrill Lynch and Mr. Johansson engaged in a conversation
regarding follow-up due diligence and related matters. Following a meeting of
the Atlas Copco board of directors on June 22, 1999, Mr. Johansson contacted
Merrill Lynch. During the conversation, Mr. Johansson emphasized that it was the
view of the Atlas Copco board of directors that Atlas Copco would not
participate in an auction, that it would not make a proposal without assurances
that RSC would not shop such proposal and that it would withdraw any proposal
that it made if RSC sought to shop such proposal. The possibility of Atlas Copco
submitting a proposal to RSC was the subject of further discussions on June 23
and June 24, 1999 between Mr. Johansson and Merrill Lynch and between counsel
for RSC and counsel for Atlas Copco.
On June 24, 1999, the RSC Board held a telephonic meeting at which outside
legal counsel to RSC advised the RSC Board of its fiduciary duties and updated
the RSC Board on the status of negotiations with United Rentals concerning the
confidentiality/standstill agreement. Merrill Lynch, Morgan Stanley and RSC's
senior management updated the RSC Board on the status of the review of strategic
alternatives, including the status of third parties participating in the
process. Merrill Lynch related to the RSC Board its conversations with Mr.
Johansson.
On June 25, 1999, at the invitation of RSC, Parent submitted a written
proposal (as supplemented on June 26, 1999, the "Atlas Proposal"). Under the
Atlas Proposal, Parent offered to acquire RSC at a price of $29.00 per Share in
a transaction structured as a cash tender offer followed by a second-step
merger. The Atlas Proposal was not conditioned upon additional due diligence or
the receipt of financing for the transaction.
From June 26 through June 27, 1999, RSC and Atlas Copco and their respective
advisors negotiated the terms of the Merger Agreement and related documents. On
June 27, 1999, the RSC Board held a meeting in Los Angeles, California (the
"June 27 Meeting") with all members except Martin R. Reid attending to discuss
the Atlas Proposal. At the June 27 Meeting, outside legal counsel to RSC
reviewed
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with the RSC Board its fiduciary duties. Merrill Lynch and Morgan Stanley
reviewed the results of the process of exploring RSC's strategic alternatives.
Merrill Lynch and Morgan Stanley made a joint presentation to the RSC Board with
respect to the Atlas Proposal, including the Atlas Offer and the Merger, and
Merrill Lynch and Morgan Stanley delivered their respective oral opinions to the
effect that the consideration to be received by RSC's stockholders pursuant to
the Merger Agreement was fair to such stockholders from a financial point of
view.
During the joint presentation, Merrill Lynch and Morgan Stanley advised the
RSC Board that, United Rentals was not likely to increase its $22.75 per Share
offer price to a price in excess of $29.00 per Share in the absence of the Atlas
Offer and the Merger. Merrill Lynch and Morgan Stanley also advised the RSC
Board that there could be no assurance that United Rentals would offer a price
in excess of $29.00 per Share in light of the financial implications of such a
price per Share to United Rentals. Merrill Lynch further advised the RSC Board
of its conversations with Mr. Johansson to the effect that Atlas Copco was
unwilling to participate in an auction and would withdraw the Atlas Proposal if
RSC sought to shop such proposal to any third party. Merrill Lynch and Morgan
Stanley advised the RSC Board that, in their view, the provisions of the Merger
Agreement concerning the amounts payable to Parent in the event of a termination
would not preclude United Rentals or other third parties from submitting a
proposal to acquire RSC.
Following the joint presentation of Merrill Lynch and Morgan Stanley and the
discussions of the RSC Board with respect thereto, outside legal counsel to RSC
reviewed with the RSC Board the terms of the Merger Agreement, including the
provisions of the Merger Agreement (1) permitting RSC to furnish non-public
information concerning RSC and its business, properties or assets to, and to
engage in discussions or negotiations with, any third party which has indicated
an interest in making a bona fide acquisition proposal, if the RSC Board
concludes in good faith after consulting with its outside legal counsel and
financial advisors that such action is consistent with the discharge of its
fiduciary duties to RSC's stockholders under applicable law and (2) the
termination provisions and the circumstances in which a termination fee would be
payable to Parent.
After discussing these matters, the RSC Board, by the unanimous vote of all
members attending, determined to approve the Merger Agreement and the
transactions contemplated thereby, including the Atlas Offer and the Merger, and
to authorize RSC to execute and deliver the Merger Agreement. The RSC Board
further determined that the Atlas Offer and the Merger were fair to and in the
best interests of RSC's stockholders and that the Merger Agreement was advisable
and to recommend that RSC's stockholders accept the Atlas Offer and tender their
Shares pursuant to the Atlas Offer.
On June 28, 1999, Merrill Lynch and Morgan Stanley delivered to the RSC
Board their respective written opinions dated such date to the effect that the
consideration to be received by RSC's stockholders pursuant to the Merger
Agreement was fair to such stockholders from a financial point of view.
On June 28, 1999, RSC, Parent and Purchaser entered into the Merger
Agreement. After RSC announced that it had entered into the Merger Agreement,
United Rentals issued a press release on June 28, 1999 stating that it was
terminating the United Rentals Offer and its consent solicitation.
A copy of a letter to RSC's stockholders communicating the recommendation of
the RSC Board and the text of a press release related thereto are filed as
Exhibits 4 and 5, respectively, hereto and are incorporated by reference herein.
The full texts of the opinions of each of Merrill Lynch and Morgan Stanley, each
dated June 28, 1999, setting forth the assumptions made, matters considered and
limitations on the review undertaken by Merrill Lynch and Morgan Stanley,
respectively, are filed as Exhibits 6 and 7, respectively, hereto and are
incorporated by reference herein.
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(b) REASONS FOR THE RECOMMENDATION
In approving the Merger Agreement and the transactions contemplated thereby
and in making the recommendation described in the response to Item 4(a) above,
the RSC Board considered a number of factors, including the following:
(1) The determination of the RSC Board that, as a result of the RSC Board's
exploration, with the participation of RSC's senior management, Merrill Lynch
and Morgan Stanley, of strategic alternatives available to RSC and its review
and evaluation of the results of that process, the Atlas Offer and the Merger
represent the most attractive alternative available to RSC's stockholders;
(2) The joint presentation of Merrill Lynch and Morgan Stanley concerning
RSC and the financial aspects of the Atlas Offer and the Merger and the written
opinions of each of Merrill Lynch and Morgan Stanley, each dated June 28, 1999,
to the effect that, as of the date thereof, the consideration to be received by
RSC's stockholders pursuant to the Merger Agreement was fair to such
stockholders from a financial point of view;
(3) The $29.00 price per Share being offered in the Atlas Offer, as
contemplated by the Merger Agreement, represents a 27% premium to the $22.75
price per Share then being offered in the United Rentals Offer;
(4) The terms and conditions of the Merger Agreement, including (1) the
proposed structure of the Atlas Offer and the Merger involving an immediate cash
tender offer followed by a merger for the same consideration, (2) the fact that
the Atlas Offer and the Merger are not conditioned upon the receipt of
financing, thereby enabling RSC's stockholders to promptly obtain cash for their
Shares, and (3) the ability of RSC pursuant to the Merger Agreement to furnish
non-public information concerning RSC and its business, properties or assets to,
and to engage in discussions or negotiations with, any third party which has
indicated an interest in making a bona fide acquisition proposal, if the RSC
Board concludes in good faith after consulting with its outside legal counsel
and financial advisors that such action is consistent with the discharge of its
fiduciary duties to RSC's stockholders under applicable law;
(5) The determination of the RSC Board, based on the advice of its financial
and legal advisors and their experience in negotiating a proposed
confidentiality/standstill agreement with United Rentals, that the negotiations
with United Rentals were unlikely to result in an executed
confidentiality/standstill agreement that would take into account RSC's process,
United Rentals' participation in the process and United Rentals' then pending
tender offer and consent solicitation;
(6) The determination of the RSC Board, based on the advice of Merrill Lynch
and Morgan Stanley, that, while United Rentals was not likely to increase its
$22.75 per Share offer price to a price in excess of $29.00 per Share in the
absence of the Atlas Offer and the Merger, there could be no assurance that
United Rentals would offer a price in excess of $29.00 per Share in light of the
financial implications of such a price per Share to United Rentals;
(7) The determination of the RSC Board, based on the view expressed by its
financial advisors, that the provisions of the Merger Agreement concerning the
amounts payable to Parent in the event of a termination would not preclude any
third party from submitting a proposal to acquire RSC;
(8) The determination of the RSC Board, based on the terms of the Atlas
Proposal and the discussions between Merrill Lynch and Mr. Johansson of Atlas
Copco, that Parent would not participate in an auction and that it would
withdraw the Atlas Proposal if RSC sought to shop the Atlas Proposal to any
third party, including United Rentals;
(9) The availability of appraisal rights under Section 262 of the DGCL in
connection with the Merger to stockholders of RSC who perfect and preserve such
rights; and
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(10) The RSC Board's familiarity with RSC's business, financial condition,
results of operations, current business strategy and future prospects, the
nature of the markets in which RSC operates, RSC's position in such markets, the
historical and current market prices for the Shares.
The foregoing discussion of the information and factors considered by the
RSC Board is not intended to be exhaustive. In view of the variety of factors
considered, the RSC Board did not find it practicable to, and did not, provide
specific assessments of, quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination and recommendation.
The determination of the RSC Board to recommend that RSC's stockholders accept
the Atlas Offer and tender their Shares into the Atlas Offer was made after
consideration of all of the factors taken as a whole. In addition, individual
members of the RSC Board may have given different weight to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
RSC initially retained Merrill Lynch as its financial advisor in connection
with the NationsRent Merger. In connection with the commencement of the United
Rentals Offer, RSC supplemented and modified the engagement of Merrill Lynch to
act as RSC's co-financial advisor with respect to the United Rentals Offer.
Merrill Lynch, in its capacity as co-financial advisor to RSC, also assisted the
RSC Board in its exploration of the strategic alternatives available to RSC.
Merrill Lynch also serves as RSC's co-financial advisor in connection with the
Atlas Offer and the Merger. The terms and conditions of Merrill Lynch's
engagement as RSC's co-financial advisor in all circumstances are as follows:
(1) Merrill Lynch has received a retention fee in an amount equal to $2
million;
(2) a fee equal to $8 million (against which the fee paid under clause
(1) above will be credited) will be payable if, during the period of Merrill
Lynch's engagement or within 2 years thereafter, any merger, consolidation
or other business combination or alternative restructuring or acquisition
transaction involving RSC is consummated or any person acquires more than
40% of RSC's voting capital stock or a substantial portion of RSC's assets
or RSC enters into a definitive agreement which subsequently results in such
an acquisition transaction, which fee will be payable in cash upon the
closing of such acquisition transaction (or, in the case of the United
Rentals Offer, upon the first purchase of Shares pursuant to the United
Rentals Offer); and
(3) a fee equal to $8 million (against which the fee paid under clause
(1) above will be credited) will be payable in the event, among other
things, RSC has not consummated any acquisition transaction described in
clause (2) above by April 5, 2000, which fee will be payable in cash on
April 5, 2000.
Merrill Lynch is currently providing financial advisory services (but not in
connection with the Atlas Offer and the Merger), and has in the past provided
financing and financial advisory services to Atlas Copco and its affiliates,
including acting as lead manager in connection with a debt offering for an
affiliate of Atlas Copco in 1998 and as dealer manager in connection with a
tender offer for Prime Service, Inc. by Parent in 1997, and expects to continue
to do so and has received, and may receive, fees for the rendering of such
services.
RSC also engaged Morgan Stanley as its co-financial advisor in connection
with the United Rentals Offer. Morgan Stanley, in its capacity as co-financial
advisor to RSC, also assisted the RSC Board in its exploration of the strategic
alternatives available to RSC. Morgan Stanley also serves as RSC's co-financial
advisor in connection with the Atlas Offer and the Merger. Pursuant to the terms
of Morgan Stanley's engagement, RSC has agreed to pay Morgan Stanley an
aggregate fee equal to $5 million, comprised of (1) a retention fee equal to $1
million, which has been paid, and (2) an additional fee equal to $4 million
payable upon the earlier of April 5, 2000, or the consummation of, among other
things, any merger, consolidation or other business combination involving RSC or
any acquisition of a majority of the voting stock of RSC or all or substantially
all of its assets.
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Pursuant to the engagements of Merrill Lynch and Morgan Stanley, RSC has
also agreed to reimburse each of Merrill Lynch and Morgan Stanley, respectively,
for certain reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of legal counsel) and to indemnify each of Merrill Lynch and
Morgan Stanley and certain respective related parties from and against certain
liabilities, including liabilities under the federal securities laws, arising
out of their respective engagements.
RSC initially retained MacKenzie Partners, Inc. ("MacKenzie Partners") to,
among other things, assist RSC in connection with its communications with and to
its stockholders with respect to, and to provide other services to RSC in
connection with, the United Rentals Offer. Mackenzie Partners is also serving in
such capacity in connection with the Atlas Offer and related matters. RSC will
pay MacKenzie Partners reasonable and customary compensation for their services
and will reimburse MacKenzie Partners for their reasonable out-of-pocket
expenses incurred in connection therewith. RSC has also agreed to indemnify
MacKenzie Partners against certain liabilities and expenses arising from or in
connection with its engagement.
RSC initially retained Kekst & Co. ("Kekst") as its public relations advisor
in connection with the United Rentals Offer. Kekst is also serving in such
capacity in connection with the Atlas Offer and related matters. RSC will pay
Kekst reasonable and customary compensation for its services plus reimbursement
for reasonable out-of-pocket expenses. RSC has also agreed to indemnify Kekst
against certain liabilities and expenses arising from or in connection with its
engagement.
Other than as set forth in the response to this Item 5, neither RSC nor any
person acting on its behalf currently intends to employ, retain or compensate
any other person to make solicitations or recommendations to stockholders of RSC
on its behalf concerning the Atlas Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as described in the response to this Item 6(a) or in SCHEDULE I
attached hereto or as incorporated by reference herein, during the past 60 days
there have been no transactions in the Shares which were effected by RSC or any
subsidiary of RSC or, to the best knowledge of RSC, by any executive officer,
director or affiliate of RSC.
(b) To the best knowledge of RSC, its executive officers, directors,
affiliates and subsidiaries presently intend to tender, pursuant to the Atlas
Offer, all Shares which are held of record or beneficially owned by such
persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by RSC in response to the Atlas Offer which relates to
or would result in: (1) an extraordinary transaction such as a merger or
reorganization, involving RSC or any subsidiary of RSC; (2) a purchase, sale or
transfer of a material amount of assets by RSC or any subsidiary of RSC; (3) a
tender offer for or other acquisition of securities by or of RSC; or (4) any
material change in the present capitalization or dividend policy of RSC.
(b) Except as set forth in this Schedule 14D-9, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Atlas Offer which relate to or would result in one or more of the matters
referred to in Item 7(a) above, except to the extent such action could subject
such persons to liability pursuant to the federal securities laws or to the
extent restricted by the terms of the plan, if any, under which such Shares were
issued.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
RIGHTS AGREEMENT
On April 15, 1999, the RSC Board approved and adopted the Rights Agreement
and declared a dividend of one Right for each Share outstanding at the close of
business on April 30, 1999. On April 16, 1999, RSC and the Rights Agent entered
into the Rights Agreement.
Each Right will entitle the registered holder thereof, after the Rights
become exercisable and until December 9, 1999 (or the earlier redemption,
exchange or termination of the Rights), to purchase from RSC one one-thousandth
( 1/1000th) of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Preferred Shares"), at a price of $150.00 per one
one-thousandth ( 1/1000th) of a Preferred Share, subject to certain
anti-dilution adjustments (the "Purchase Price"). Until the earlier to occur of
(1) 10 days following a public announcement that a person or group of affiliated
or associated persons has acquired, or obtained the right to acquire, beneficial
ownership of 10% or more of the Shares (an "Acquiring Person"), or (2) the
occurrence of the tenth business day (or such later date as may be determined by
action of the RSC Board prior to such time as any person or group of affiliated
persons becomes an Acquiring Person) following the commencement or announcement
of an intention to make a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group of 10% or
more of the Shares (the earlier of (1) and (2) being called the "Distribution
Date"), the Rights will be evidenced, with respect to any certificate
representing Shares outstanding as of the Record Date, by such certificate.
No person would become an Acquiring Person solely as the result of an
acquisition of Shares by RSC which, by reducing the number of Shares
outstanding, increases the proportionate number of Shares beneficially owned by
such person to 10% or more of the Shares then outstanding. The Rights will be
transferred with and only with the Shares until the Distribution Date or earlier
redemption or expiration of the Rights. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights (the "Right
Certificates") will be mailed to holders of record of Shares as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights. The Rights will at no time have any voting rights. The
RSC Board has determined to delay the distribution of the Rights until the
earlier of the date on which an Acquiring Person becomes such and such date as
may be determined by action of the RSC Board prior to the time any person or
group becomes an Acquiring Person.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of
1,000 times the dividend, if any, declared per Share. In the event of
liquidation, dissolution or winding up of RSC, the holders of the Preferred
Shares will be entitled to a preferential liquidation payment of $1,000 per
share plus any accrued but unpaid dividends but will be entitled to an aggregate
payment of 1,000 times the payment made per Share. Each Preferred Share will
have 1,000 votes and will vote together with the Shares. Finally, in the event
of any merger, consolidation or other transaction in which Shares are exchanged,
each Preferred Share will be entitled to receive 1,000 times the amount received
per Share. Preferred Shares will not be redeemable. The Rights are protected by
customary anti-dilution provisions. Because of the nature of a Preferred Share's
dividend, liquidation and voting rights, the value of one one-thousandth of a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Share.
In the event that a person becomes an Acquiring Person or if RSC were the
surviving corporation in a merger with an Acquiring Person or any affiliate or
associate of an Acquiring Person and the Shares were not changed or exchanged,
each holder of a Right, other than Rights that are or were acquired or
beneficially owned by the Acquiring Person (which Rights will thereafter be
void), will thereafter have the right to receive upon exercise that number of
Shares having a market value of two times the then current Purchase Price of one
Right. In the event that, after a person has become an Acquiring Person, RSC
were
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acquired in a merger or other business combination transaction or more than 50%
of its assets or earning power were sold, proper provision shall be made so that
each holder of a Right shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times the then current Purchase
Price of one Right.
At any time after a person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence in the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of the then
outstanding Shares, the RSC Board may cause RSC to exchange the Rights (other
than Rights owned by an Acquiring Person which have become void), in whole or in
part, for Shares at an exchange rate of that number of Shares having an
aggregate value equal to the Spread (as defined in the Rights Agreement) (with
such value being based on the current per Share market price (as determined
pursuant to the Rights Agreement)) on the date of the occurrence of a Trigger
Event (as defined in the Rights Agreement) per Right (subject to adjustment).
The Rights may be redeemed in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price") by the RSC Board at any time prior to the time
that an Acquiring Person has become such. The redemption of the Rights may be
made effective at such time, on such basis and with such conditions as the RSC
Board in its sole discretion may establish. Immediately upon any redemption of
the Rights, the right to exercise the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price.
The Purchase Price payable, and the number of one one-thousandths of a
Preferred Share or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (1) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (2) upon the grant to holders of the
Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares or convertible securities at less than the current market price
of the Preferred Shares, or (3) upon the distribution to holders of the
Preferred Shares of evidences of indebtedness, cash, securities or assets
(excluding regular periodic cash dividends at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid or, in case
regular periodic cash dividends have not theretofore been paid, at a rate not in
excess of 50% of the average net income per Share for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (1) above)) or of subscription rights or warrants (other than those
referred to above).
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of RSC beyond those as an existing stockholder, including,
without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement may be amended by the RSC
Board for so long as the Rights are then redeemable, and after the Rights are no
longer redeemable, RSC may amend or supplement the Rights Agreement in any
manner that does not adversely affect the interests of the holder of the Rights.
One Right will be distributed to stockholders of RSC for each Share owned of
record by them on April 30, 1999. As long as the Rights are attached to the
Shares, RSC will issue one Right with each new Share so that all such Shares
will have attached Rights. RSC has agreed that, from and after the Distribution
Date, RSC will reserve 40,000 Preferred Shares initially for issuance upon
exercise of the Rights.
The rights are designed to assure that all of RSC's stockholders receive
fair and equal treatment in the event of any proposed takeover of RSC and to
guard against partial tender offers, open market accumulations and other abusive
tactics to gain control of RSC without paying all stockholders a control
premium. The Rights will cause substantial dilution to a person or group that
acquires 10% or more of the
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<PAGE>
Shares on terms not approved by the RSC Board. The Rights should not interfere
with any merger or other business combination approved by the RSC Board at any
time prior to the first date that a person or group has become an Acquiring
Person.
On June 9, 1999, RSC and the Rights Agent executed an amendment, pursuant to
authority granted by the RSC Board, to the Rights Agreement (the "Rights
Agreement Amendment") to (1) provide for the expiration of the Rights Agreement
on the earlier of (A) the close of business on December 9, 1999, (B) the time at
which the Rights are redeemed pursuant to the Rights Agreement, (C) the closing
of any merger or other acquisition transaction involving RSC pursuant to a
merger or other acquisition agreement between RSC and any person which has been
approved by the RSC Board prior to such person becoming an Acquiring Person, at
which time the Rights are deemed terminated, and (D) the time at which the
Rights are exchanged pursuant to the Rights Agreement, and (2) in light of the
May 20, 1999 termination of the NationsRent Merger Agreement, delete references
in the Rights Agreement to NationsRent, the NationsRent Merger Agreement and
certain other documents executed by RSC and NationsRent in connection therewith.
On June 28, 1999, in connection with the execution and delivery of the
Merger Agreement, RSC and the Rights Agent executed an amendment to the Rights
Agreement ("Amendment No. 2 to Rights Agreement") pursuant to which Parent and
its affiliates, including Purchaser, are excluded from the definition of
Acquiring Person for purposes of the Rights Agreement in connection with the
acquisition of beneficial ownership of Shares pursuant to the Atlas Offer or the
Merger, in each case in accordance with the terms of the Merger Agreement. In
addition, Amendment No. 2 to Rights Agreement provides that a Distribution Date
will not be deemed to have occurred solely as a result of the approval,
execution or delivery of the Merger Agreement or the making or acceptance for
payment of Shares pursuant to the Atlas Offer or the consummation of the Merger,
in each case in accordance with the terms of the Merger Agreement.
The foregoing summary of the Rights Agreement, the Rights Agreement
Amendment and Amendment No. 2 to Rights Agreement is qualified in its entirety
by reference to the complete texts of the Rights Agreement, the Rights Agreement
Amendment and Amendment No. 2 to Rights Agreement, copies of which are filed as
Exhibits 32, 33 and 34, respectively, hereto and are incorporated by reference
herein.
EXECUTIVE COMMITTEE AND CONSULTANT
Mr. Reid, RSC's Chairman of the Board and Chief Executive Officer, upon the
advice of his physicians, was granted a medical leave of absence to pursue
treatment of a heart condition. RSC has established an Executive Committee of
the RSC Board consisting of John M. Sullivan, as chairman, Britton H. Murdoch
and Eric L. Mattson. The Executive Committee has and will continue to work with
and supervise the executive management of RSC on a daily basis, including Mr.
Wilson and Mr. Waugaman, during Mr. Reid's medical leave of absence. Mr. Reid is
currently undergoing treatment consistent with his doctor's recommendations.
Until the medical treatment is concluded, the likelihood and timing of Mr.
Reid's return to his duties as Chairman of the Board and Chief Executive Officer
of RSC is uncertain.
RSC has also entered into a consulting agreement, dated May 19, 1999, with
Frederick Warren, a former director of RSC, pursuant to which Mr. Warren will
provide advisory services to the RSC Board and the Executive Committee during
Mr. Reid's medical leave of absence.
DELAWARE TAKEOVER STATUTE; SHORT FORM MERGER
DELAWARE TAKEOVER STATUTE. As a Delaware corporation, RSC is subject to the
provisions of Section 203 of the DGCL ("Section 203"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person who owns or
has the right to acquire 15% or more of a corporation's
24
<PAGE>
outstanding voting stock) from engaging in a "business combination" (defined
generally to include mergers and certain other transactions) with a Delaware
corporation for a period of three years following the time such person became an
interested stockholder unless, among other things, the corporation's board of
directors approves such business combination or the transaction in which the
interested stockholder becomes an interested stockholder prior to the time the
interested stockholder becomes such. As described in the response to Item 3(b)
above, the Merger Agreement provides that RSC and the RSC Board, subject to its
fiduciary duties, will have granted such approvals, if any, and will have taken
such actions, if any, as are necessary so that the transactions contemplated by
the Merger Agreement may be consummated as promptly as practicable on the terms
contemplated thereby and otherwise will have acted to render inapplicable,
eliminate or minimize the effects of Section 203 or any other takeover statute
as may be applicable to the transactions to be undertaken pursuant to the Merger
Agreement.
SHORT FORM MERGER. Under Section 253 of the DGCL, if Purchaser acquires,
pursuant to the Atlas Offer or otherwise, at least 90% of the outstanding
Shares, Purchaser will be able to effect the Merger after consummation of the
Atlas Offer without a vote of RSC's stockholders. However, if Purchaser does not
acquire at least 90% of the outstanding Shares pursuant to the Atlas Offer or
otherwise, a vote of RSC's stockholders is required under the DGCL.
CERTAIN LITIGATION
THE DELAWARE LITIGATION. On April 5, 1999, United Rentals and UR
Acquisition filed a complaint against RSC, NationsRent and RSC's directors in
the Court of Chancery of the State of Delaware (the "Delaware Chancery Court")
styled UR ACQUISITION CORPORATION AND UNITED RENTALS, INC. V. MARTIN R. REID, ET
AL., C.A. No. 17090 (the "Delaware Litigation"). In the Delaware Litigation, the
plaintiffs allege, among other things, that the defendants breached their
fiduciary duties to RSC's stockholders in entering into the NationsRent Merger
Agreement. The plaintiffs seek, among other things, an order requiring RSC to
provide them with a fair and equal opportunity to acquire RSC. The plaintiffs
also seek to enjoin the defendants from adopting any defensive measures.
On April 8, 1999, the Delaware Chancery Court granted plaintiffs'
application for expedited discovery in the Delaware Litigation and scheduled a
hearing on plaintiffs' application for a preliminary injunction for May 17,
1999. On April 16, 1999, RSC answered the complaint in the Delaware Litigation.
On May 10, 1999, United Rentals and UR Acquisition amended and supplemented
their complaint in the Delaware Litigation, alleging additional breaches of
fiduciary duty relating, among other things, to the adoption of the Rights
Agreement and to the alleged failure to disclose certain information concerning
Mr. Reid's medical condition and NationsRent's financial statements.
On May 17, 1999, the Delaware Chancery Court held a hearing on plaintiffs'
application for a preliminary injunction. On May 21, 1999, NationsRent filed a
motion to dismiss plaintiffs' claims in the Delaware Litigation. On May 24,
1999, RSC also filed a motion to dismiss plaintiffs' claims in the Delaware
Litigation. These motions are pending in the Delaware Chancery Court.
In light of United Rentals' termination of the United Rentals Offer and its
consent solicitation, RSC believes the Delaware Litigation is moot and intends
to move to dismiss the Delaware Litigation if United Rentals does not do so
voluntarily.
Copies of the complaint and the amended and supplemented complaint in the
Delaware Litigation are filed as Exhibits 35 and 36, respectively, hereto and
are incorporated by reference herein.
THE CONNECTICUT LITIGATION. On April 7, 1999, United Rentals and UR
Acquisition filed a verified complaint against James L. Kirk, RSC and
NationsRent in the United States District Court for the District of Connecticut
(the "District Court") styled as UR ACQUISITION CORPORATION AND UNITED RENTALS,
INC. V. JAMES L. KIRK, ET AL., C. A. No. 399CV00625 (DJS) (the "Connecticut
Litigation"). In the Connecticut Litigation, the plaintiffs allege, among other
things, certain violations by the defendants of the federal
25
<PAGE>
securities laws, specifically Section 14(a) of the Exchange Act and Rule
14a-3(a) and Rule 14a-9 promulgated thereunder, Section 14(d) of the Exchange
Act and Rule 14d-9 promulgated thereunder and Section 14(e) of the Exchange Act.
The plaintiffs seek declaratory relief that the defendants violated Sections
14(a), 14(d) and 14(e) of the Exchange Act and requests an order requiring the
defendants to make all appropriate disclosures. In addition, the plaintiffs seek
injunctive relief enjoining the defendants and certain other persons from, among
other things, soliciting any stockholder of RSC with respect to whether or not
to tender Shares in the United Rentals Offer unless and until the defendants
comply in full with all applicable provisions of the federal securities laws.
On April 8, 1999, United Rentals and UR Acquisition filed applications for
expedited discovery and a preliminary injunction with the District Court in the
Connecticut Litigation.
On April 16, 1999, RSC answered the complaint in the Connecticut Litigation
and filed counterclaims against United Rentals and UR Acquisition seeking
declaratory and injunctive relief. RSC's counterclaims alleged violations of the
prohibitions of Section 8 of the Clayton Act against interlocking directorates
among competitors by United Rentals in connection with its consent solicitation.
RSC sought, among other things, additional declaratory and injunctive relief
with respect to its amended counterclaims. On April 27, 1999, in response to
RSC's Clayton Act counterclaims, United Rentals withdrew the nominations of six
of its current officers and directors from its proposed slate and substituted
six new nominees. RSC's counterclaims further alleged, among other things, that
United Rentals violated Sections 14(d) and 14(e) of the Exchange Act by
misstating, concealing and failing to adequately disclose certain material terms
of the United Rentals Offer relating to the financing condition to the United
Rentals Offer. On April 29, 1999, United Rentals moved to dismiss RSC's
counterclaims.
On May 19, 1999, the District Court ordered United Rentals to provide
statements under oath concerning the nature of the relationships, if any,
between United Rentals or its affiliates and the nominees which replaced the
persons who were originally subject to RSC's Clayton Act counterclaims. United
Rentals filed these statements on May 28, 1999 and, on June 2, 1999, RSC filed
an objection to such statements.
On June 11, 1999, the District Court dismissed RSC's Clayton Act
counterclaims on the ground that they were moot based upon (1) United Rentals'
withdrawal of its original slate of nominees for the RSC Board, and (2) United
Rentals' assurance that it would not nominate any director, officer or employee
of United Rentals to serve on the RSC Board. The Court made no finding on the
merits of RSC's Clayton Act counterclaims. On June 17, 1999, the District Court
dismissed the remaining counterclaims of RSC in the Connecticut Litigation.
In light of United Rentals' termination of the United Rentals Offer and its
consent solicitation, RSC believes the Connecticut Litigation is moot and
intends to move to dismiss the Connecticut Litigation if United Rentals does not
do so voluntarily.
Copies of the complaint, the answer and counterclaim and the amended
counterclaims filed in the Connecticut Litigation are filed as Exhibits 37, 38
and 39, respectively, hereto and are incorporated by reference herein.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
1 Agreement and Plan of Merger, dated as of June 28, 1999, between Rental
Service Corporation, Atlas Copco North America Inc. and Pandion
Acquisition Corp.*
2 Guaranty executed by Atlas Copco AB dated June 28, 1999.*
3 Letter agreement, dated as of June 14, 1999, between Rental Service
Corporation and Atlas Copco AB.*
26
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4 Letter to stockholders from John M. Sullivan on behalf of the Board of
Directors of Rental Service Corporation dated June 28, 1999.*/**
5 Press release issued by Rental Service Corporation dated June 28, 1999.*
6 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated June
28, 1999.*/**
7 Opinion of Morgan Stanley & Co. Incorporated dated June 28, 1999.*/**
8 Employment Agreement dated January 14, 1998 between Rental Service
Corporation and Martin R. Reid. (1)
9 Restricted Stock Agreement dated January 14, 1998 between Rental Service
Corporation and Martin R. Reid. (2)
10 Restricted Stock Agreement dated April 29, 1998 between Rental Service
Corporation and Martin R. Reid. (3)
11 Restricted Stock Agreement dated October 9, 1998 between Rental Service
Corporation and Martin R. Reid, including the related Promissory Note and
Pledge Agreement. (4)
12 Form of 1997 Executive Severance Agreement. (5)
13 Form of 1998 Executive Severance Agreement. (3)
14 Rental Service Corporation Supplemental Severance Pay Plan. (6)
15 Rental Service Corporation Supplemental Severance Pay Plan for Key
Corporate Employees. (6)
16 Rental Service Corporation Supplemental Severance Pay Plan for Key Field
Employees. (6)
17 Form of Indemnification Agreement. (7)
18 Stock Option Plan for Key Employees. (7)
19 Form of Incentive Stock Option Agreement for Directors. (7)
20 Form of Amended Incentive Stock Option Agreement for Corporate Office
Personnel. (7)
21 Form of Amendment to Amended Incentive Stock Option Agreement for
Corporate Office Personnel. (7)
22 1996 Equity Participation Plan of Rental Service Corporation. (8)
23 Amendment to the 1996 Equity Participation Plan of Rental Service
Corporation, dated as of April 29, 1998. (9)
24 Form of Incentive Stock Option Agreement for Employees. (10)
25 Form of Non-Qualified Stock Option Agreement for Directors. (10)
26 First Amended and Restated Employee Qualified Stock Purchase Plan of
Rental Service Corporation. (11)
27 Amendment to the First Amended and Restated Employee Qualified Stock
Purchase Plan of Rental Service Corporation, dated as of April 29, 1998.
(4)
28 Second Amendment to the First Amended and Restated Employee Qualified
Stock Purchase Plan of Rental Service Corporation, dated September 14,
1998. (4)
29 Management Incentive Compensation Plan. (12)
30 Executive Savings Plan. (5)
27
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31 Form of Survivor Protection Program Agreement between Rental Service
Corporation and certain executive officers. (5)
32 Rights Agreement, dated as of April 16, 1999 between Rental Service
Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
(13)
33 Amendment to Rights Agreement, dated as of June 9, 1999 between Rental
Service Corporation and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent. (14)
34 Amendment No. 2 to Rights Agreement, dated as of June 28, 1999, between
Rental Service Corporation and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent.*
35 Complaint filed on April 5, 1999 with the Court of Chancery of the State
of Delaware in UR ACQUISITION CORPORATION AND UNITED RENTALS, INC. V.
MARTIN R. REID, ET AL., C.A. No. 17090. (15)
36 First Amended and Supplemental Complaint filed on May 10, 1999 with the
Court of Chancery of the State of Delaware in UR ACQUISITION CORPORATION
AND UNITED RENTALS, INC. V. MARTIN R. REID, ET AL., C.A. No. 17090. (16)
37 Verified Complaint filed on April 7, 1999 with the United States District
Court for the District of Connecticut in UR ACQUISITION CORPORATION AND
UNITED RENTALS, INC. V. JAMES L. KIRK, ET AL., C.A. No. 399CV00625 (DJS).
(15)
38 Answer, Counterclaim and Jury Demand filed on April 16, 1999 with the
United States District Court for the District of Connecticut in UR
ACQUISITION CORPORATION AND UNITED RENTALS, INC. V. JAMES L. KIRK, ET AL.,
C.A. No. 399CV00625 (DJS). (15)
39 Amended Counterclaims and Jury Demand filed on April 22, 1999 with the
United States District Court for the District of Connecticut in UR
ACQUISITION CORPORATION AND UNITED RENTALS, INC. V. JAMES L. KIRK, ET AL.,
C.A. No. 399CV00625 (DJS). (17)
40 Text of remarks of Giulio Mazzalupi to Rental Service Corporation
employees on June 28, 1999.*
41 Letter to Rental Service Corporation employees dated June 28, 1999.*
42 Letter to Rental Service Corporation customers dated June 29, 1999.*
43 Letter to Rental Service Corporation business partners dated June 29,
1999.*
- ------------------------
* Filed herewith.
** Included in material being distributed to stockholders of RSC.
(1) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the three
months ended March 31, 1998 and incorporated by reference herein.
(2) Filed as an Exhibit to the Registration Statement on Form S-4
(Registration No. 333-56653, effective August 20, 1998) and incorporated
by reference herein.
(3) Filed as an Exhibit to the Registration Statement on Form S-1
(Registration No. 333-59519, effective August 13, 1998) and incorporated
by reference herein.
(4) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the three
months ended September 30, 1998 and incorporated by reference herein.
(5) Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 and incorporated by reference herein.
(6) Filed as an Exhibit to Amendment No. 10 to the Solicitation/Recommendation
Statement on Schedule 14D-9 dated May 21, 1999 and incorporated by
reference herein.
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(7) Filed as an Exhibit to the Registration Statement on Form S-1
(Registration No. 333-05949, effective September 18, 1996) and
incorporated by reference herein.
(8) Filed as an Exhibit to the Registration Statement on Form S-8
(Registration No. 333-22403, dated February 26, 1997) and incorporated by
reference herein.
(9) Filed as an Exhibit to the Registration Statement on Form S-8
(Registration No. 333-59679, dated July 23, 1998) and incorporated by
reference herein.
(10) Filed as an Exhibit to the Registration Statement on Form S-1
(Registration No. 333-26753, effective May 29, 1997) and incorporated by
reference herein.
(11) Filed as an Exhibit to the Registration Statement on Form S-8
(Registration No. 333-29579, dated June 19, 1997) and incorporated by
reference herein.
(12) Filed with the Proxy Statement on Schedule 14A filed March 30, 1998 and
incorporated by reference herein.
(13) Filed as an Exhibit to the Current Report on Form 8-K dated April 16,
1999 and incorporated by reference herein.
(14) Filed as an Exhibit to Amendment No. 14 to the
Solicitation/Recommendation Statement on Schedule 14D-9 dated June 9,
1999 and incorporated by reference herein.
(15) Filed as an Exhibit to the Solicitation/Recommendation Statement on
Schedule 14D-9 dated April 16, 1999 and incorporated by reference herein.
(16) Filed as an Exhibit to Amendment No. 9 to the Solicitation/Recommendation
Statement on Schedule 14D-9 dated May 12, 1999 and incorporated by
reference herein.
(17) Filed as an Exhibit to Amendment No. 3 to the Solicitation/Recommendation
on Schedule 14D-9 dated April 23, 1999 and incorporated by reference
herein.
29
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 29, 1999 RENTAL SERVICE CORPORATION
By: /s/ Robert M. Wilson
------------------------------------------
Name: Robert M. Wilson
Title: EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
<PAGE>
SCHEDULE I
RENTAL SERVICE CORPORATION
6929 EAST GREENWAY PARKWAY, SUITE 200
SCOTTSDALE, ARIZONA 85254
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 29, 1999, as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (as amended
from time to time, the "Schedule 14D-9") of Rental Service Corporation, a
Delaware corporation ("RSC"), to the holders of record of shares of common
stock, par value $.01 per share, of RSC (the "Common Stock") at the close of
business on or about June 25, 1999. You are receiving this Information Statement
in connection with the possible election of persons designated by Atlas Copco
North America Inc., a Delaware corporation ("Parent"), through its wholly owned
subsidiary, Pandion Acquisition Corp., a Delaware corporation ("Purchaser"), to
a majority of the seats on the Board of Directors of RSC (the "RSC Board").
On June 28, 1999, RSC, Parent and Purchaser entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which (1) Parent will cause
Purchaser to commence a tender offer to purchase all outstanding shares of
Common Stock, together with the associated preferred share purchase rights (the
"Rights" and, together with the Common Stock, the "Shares") issued pursuant to
the Rights Agreement, dated as of April 16, 1999, between RSC and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, at a price of $29.00 per Share,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 29, 1999 (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Atlas Offer"), and (2) following consummation of the Atlas Offer and upon the
terms and subject to the conditions set forth in the Merger Agreement, and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Purchaser will be merged with and into RSC (the "Merger"), with RSC
continuing as the surviving corporation (the "Surviving Corporation"). At the
effective time of the Merger (the "Effective Time"), RSC will become a wholly
owned subsidiary of Parent and the separate corporate existence of Purchaser
will cease.
Purchaser has the right pursuant to the Merger Agreement to designate
certain individuals to the RSC Board under the circumstances described therein.
See "Board of Directors and Executive Officers-- Right to Designate Directors;
The Parent Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9
to which this Information Statement is attached.
Pursuant to the Merger Agreement, Purchaser commenced the Atlas Offer on
June 29, 1999. The Atlas Offer is scheduled to expire at 12:00 Midnight, New
York City time, on Tuesday, July 27, 1999, unless the Atlas Offer is extended.
The information contained in or incorporated by reference into this
Information Statement concerning Parent, Purchaser and the Parent Designees (as
hereinafter defined) has been furnished to RSC by Parent, and RSC assumes no
responsibility for the accuracy or completeness of such information.
1
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BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of RSC outstanding. Each
Share has one vote. As of June 28, 1999, there were 24,271,458 Shares issued and
outstanding. The number of directors comprising the RSC Board is fixed by the
bylaws, which provide that the RSC Board shall consist of no fewer than four and
no more than sixteen directors, with the exact number to be fixed by resolution
of the RSC Board. Pursuant to a resolution adopted by the RSC Board, the RSC
Board currently consists of eight members. Each director holds office until such
director's successor is elected and qualified. Subject to RSC's certificate of
incorporation and applicable law, any director of the entire RSC Board may be
removed, with or without cause, at any meeting of RSC's stockholders by a
majority of the Shares represented and entitled to vote.
RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the acceptance for payment
of, and payment by Purchaser in accordance with the Atlas Offer for, not less
than a majority of the total issued and outstanding Shares on a fully diluted
basis, Purchaser shall be entitled to designate such number of members of the
RSC Board (the "Parent Designees"), rounded up to the next whole number, equal
to that number of directors which equals the product of the total number of
directors on the RSC Board (including vacancies, if any, and subject to
adjustment for newly created directorships) multiplied by the percentage that
such number of Shares owned, beneficially or of record, in the aggregate by
Parent and Purchaser bears to the total number of Shares issued and outstanding
on a fully diluted basis. Parent intends to cause Purchaser to designate the
Parent Designees. Notwithstanding the foregoing, the Merger Agreement further
provides that, until the Effective Time, there shall be at least two directors
on the RSC Board who were directors as of the date of the Merger Agreement (the
"Continuing Directors") and that certain actions to be taken by the RSC Board
following such time as the Parent Designees constitute at least a majority of
the RSC Board and until the Effective Time shall require the vote of not less
than a majority of (1) the entire RSC Board, which majority shall include the
concurrence of a majority of the Continuing Directors, or (2) to the extent
permitted under the DGCL, a committee of the RSC Board consisting only of
Continuing Directors.
It is expected that the Parent Designees may assume office at any time
following the purchase by Purchaser of Shares pursuant to the Atlas Offer, which
purchase cannot be earlier than July 27, 1999, and that, upon assuming office,
the Parent Designees will thereafter constitute at least a majority of the RSC
Board.
Parent has informed RSC that it will choose the Parent Designees from the
following persons:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Lennart Johansson.................... Senior Vice President of Atlas Copco AB and President of Atlas Copco North
America Inc. Employed since January 1, 1987.
Bengt Kvarnback...................... Senior Executive Vice President of Atlas Copco AB. Employed since October
15, 1992.
Giulio Mazzalupi..................... President and CEO of Atlas Copco AB since April 22, 1997. Previously
Senior Executive Vice President of Atlas Copco Airpower n.v. Belgium.
Employed since 1972.
Mark Cohen........................... Executive Vice President of Atlas Copco North America Inc. Employed since
January 28, 1974.
</TABLE>
Each of the foregoing persons has held the position indicated for the past
five years. The business
address of each such person is c/o Atlas Copco AB, S-10523 Stockholm Sweden,
except Mr. Cohen, whose
2
<PAGE>
business address is c/o Atlas Copco North America Inc., 1211 Hamburg Turnpike,
Suite 214, Wayne, New Jersey 07470. Messrs. Kvarnback and Johansson are citizens
of Sweden; Mr. Mazzalupi is a citizen of Italy; and Mr. Cohen is a citizen of
the United States.
None of the Parent Designees (1) is currently a director of, or holds any
position with, RSC, (2) has a family relationship with any of the directors or
executive officers of RSC, or (3) to the best knowledge of Parent, beneficially
owns any securities (or rights to acquire any securities) of RSC. RSC has been
advised by Parent that, to the best of Parent's knowledge, none of the Parent
Designees has been involved in any transactions with RSC or any of its
directors, executive officers or affiliates which are required to be disclosed
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"), except as may be disclosed herein or in the Schedule 14D-9.
BOARD OF DIRECTORS OF RSC
The names of the current members of the RSC Board, their ages and certain
information about them are set forth below. Each person is a citizen of the
United States, and the business address of each person is c/o Rental Service
Corporation, 6929 East Greenway Parkway, Suite 200, Scottsdale, Arizona 85254
(other than Mr. Barnum and Mr. Laurence whose business address is 11150 Santa
Monica Boulevard, Suite 1200, Los Angeles, California 90025; Mr. Lanoha whose
business address is c/o Rental Service Corporation, 11250 East 40th Avenue,
Denver, Colorado 60239; and Mr. Murdoch whose business address is c/o V-Span,
1100 First Avenue, Suite 400, King of Prussia, Pennsylvania 19406).
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE POSITIONS AND OFFICES WITH RSC
- --------------------------------------------- --- --------------- ---------------------------------------------
<S> <C> <C> <C>
Martin R. Reid............................... 56 1994 Chairman of the Board and Chief Executive
Officer
William M. Barnum, Jr........................ 45 1992 Director
James R. Buch................................ 45 1995 Director
David P. Lanoha.............................. 49 1998 Director
Christopher A. Laurence...................... 32 1995 Director
Eric L. Mattson.............................. 47 1996 Director
Britton H. Murdoch........................... 41 1997 Director
John M. Sullivan............................. 64 1997 Director
</TABLE>
The principal occupations and positions for the past five years and, in
certain cases prior years, of the directors and executive officers named above
are as set forth below.
MARTIN R. REID was elected as a director and Chief Executive Officer of RSC
in June 1994 and became Chairman of the Board in October 1995. Mr. Reid was a
director of Tuboscope Vetco International Corporation ("Tuboscope"), a provider
of oilfield-related inspection and coating services, from October 1993 until
February 1998. Mr. Reid served as Chief Executive Officer of Tuboscope from May
1991 to October 1993 and as Chairman of the Board of Directors from October 1990
to April 1996. From September 1986 to June 1990, Mr. Reid was Chief Executive
Officer of Eastman Christensen Co., a provider of oil and gas drilling systems.
Mr. Reid was also Vice Chairman of Eastman Christensen Co. from August 1989 to
June 1990. Mr. Reid is also director of HDA Parts System, Inc.
WILLIAM M. BARNUM, JR. has served as a director of RSC since our formation
in 1992. He served as Chairman of the Board from June 1993 through October 1995.
He is a general partner of Brentwood Buyout Partners, L.P. ("BBP"), the general
partner of Brentwood RSC Partners, L.P., a stockholder of RSC. He was an
associate at Morgan Stanley & Co. Incorporated from October 1981 until joining
3
<PAGE>
Brentwood Associates, an affiliate of Brentwood RSC Partners, in July 1984. He
is also a director of Quiksilver, Inc. and several privately held companies.
JAMES R. BUCH has served as a director of RSC since October 1995. From
October 1990 through April 1996, he served as President and Chief Executive
Officer of Evans Rents, Inc. From April 1997 through December 1998, he served as
the Chief Executive Officer of Classroom Connect, Inc. Previously, he served as
Director of U.S. Operations for Brittania Security Group.
DAVID P. LANOHA has served as a director of RSC since January 1998. He
initially joined RSC as a Senior Vice President of Operations in conjunction
with the acquisition of Center Rentals & Sales ("Center Rentals") in December
1997. He served in various capacities at Center Rentals, most recently as
Chairman of the Board (from October 1989 to December 1997) and President (from
May 1984 to October 1989).
CHRISTOPHER A. LAURENCE has served as a director of RSC since October 1995.
He is a general partner of Brentwood Associates and a member of Brentwood
Private Equity LLC. Prior to joining Brentwood Associates in 1991, he was an
analyst at Morgan Stanley & Co. Incorporated. He is also a director of HDA Parts
System, Inc. and several privately held companies.
ERIC L. MATTSON has served as a director of RSC since December 1996. From
July 1993 to May 1999, Mr. Mattson was Senior Vice President and Chief Financial
Officer of Baker Hughes Incorporated ("BHI"). For more than five years prior to
1993, Mr. Mattson was Vice President and Treasurer of BHI. Mr. Mattson is also a
director of Tuboscope.
BRITTON H. MURDOCH has served as a director of RSC since January 1997. Since
July 1997, he has been a Managing Director and Principal of V-Span, Inc., a
privately held company. He also served as Chief Financial Officer of Internet
Capital Group, LLP, a privately held company, from 1997 until June 1998. He is
currently the Advisory Board Venture Partner for Internet Capital Group. From
1990 to 1996, he was Vice President and Chief Financial Officer of Airgas, Inc.,
an industrial gas distribution and manufacturing company. From 1987 to 1990, he
was Vice President of Corporate Development of Airgas. He is also a director of
Founders' Bank, a subsidiary of Susquehanna Bancshares, Inc.
JOHN M. SULLIVAN has served as a director of RSC since July 1997. He is
presently a director of The Scotts Company, Bell Sports Corp. and Silver Cinemas
International, Inc. From October 1987 to January 1993, Mr. Sullivan was Chairman
of the Board and Chief Executive Officer of Prince Holdings, Inc. Prior to that
and since September 1984, Mr. Sullivan was President of Prince and Vice
President of Chesebrough-Pond's, Inc.
BOARD MEETINGS AND COMMITTEES
During 1998, the RSC Board held seven meetings, inclusive of telephonic
meetings. Each director attended at least 75% of the total number of meetings of
the RSC Board, and of committees of the RSC Board on which he served, held
during the year.
The RSC Board has the following standing committees: the Audit Committee,
the Compensation Committee, the Acquisition Committee and the Nominating
Committee.
The Audit Committee was established on August 20, 1996 to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the scope and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of RSC's internal accounting controls. The Audit Committee consists of
Messrs. Buch, Mattson and Lanoha. The Audit Committee met two times during 1998.
The Compensation Committee was established on December 5, 1996 to establish
remuneration levels for executive officers of RSC and to implement RSC's stock
option plans and any other incentive
4
<PAGE>
programs. The Compensation Committee consists of Messrs. Murdoch and Sullivan.
The Compensation Committee met three times during 1998.
The Acquisition Committee was established on September 30, 1997 to approve
acquisitions in which the consideration to be paid by RSC is less than $10
million. The Acquisition Committee consists of Messrs. Reid and Laurence. The
Nominating Committee was established on February 25, 1998 to make
recommendations regarding the nomination of members of the RSC Board. The
Nominating Committee consists of Messrs. Barnum, Mattson and Murdoch.
As publicly announced, Mr. Reid, upon the advice of his physicians, was
granted a medical leave of absence to pursue treatment of a heart condition. RSC
has established an Executive Committee consisting of Mr. Sullivan, as chairman,
Mr. Murdoch and Mr. Mattson. The Executive Committee will work with and
supervise the executive management of RSC on a daily basis, including Robert M.
Wilson, Executive Vice President, Chief Financial Officer, Secretary and
Treasurer of RSC, and Douglas A. Waugaman, President and Chief Operating Officer
of RSC, during Mr. Reid's leave of absence. RSC has entered into a consulting
agreement, dated May 19, 1999, with Frederick Warren, a former director of RSC,
pursuant to which Mr. Warren will provide advisory services to the RSC Board and
the Executive Committee during Mr. Reid's medical leave of absence. Mr. Reid is
currently undergoing treatment consistent with his doctor's recommendations.
Until the medical treatment is concluded, the likelihood and timing of Mr.
Reid's return to his duties as Chairman of the Board and Chief Executive Officer
of RSC is uncertain.
DIRECTOR COMPENSATION
RSC reimburses the directors on the RSC Board for their out-of-pocket
expenses incurred in connection with attending meetings of the RSC Board. In
addition to reimbursement for out-of-pocket expenses, all non-employee members
of the RSC Board receive $10,000 per year (payable $2,500 per quarter) as
compensation for serving on the RSC Board, plus $1,500 for attendance at each
RSC Board meeting and $500 for attendance at each committee meeting. Each
committee chairman receives an additional $1,500 per year. All non-employee
directors also receive non-qualified stock options under one of RSC's stock
option plans. In addition, Mr. Sullivan receives a fee of $40,000 per month for
his services as chairman of the Executive Committee. Neither Mr. Murdoch nor Mr.
Mattson receive any compensation for their services as members of the Executive
Committee.
EXECUTIVE OFFICERS OF RSC
Certain information concerning executive officers of RSC who are not also
directors is set forth below. Officers are appointed by, and serve at the
discretion of, the RSC Board. Each person is a citizen of the United States, and
the business address of each person is c/o Rental Service Corporation, 6929 East
Greenway Parkway, Suite 200, Scottsdale, Arizona 85254.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES WITH RSC
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Douglas A. Waugaman.................................. 41 President and Chief Operating Officer
Robert M. Wilson..................................... 41 Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
Ronald Halchishak.................................... 51 Senior Vice President of Operations
David G. Ledlow...................................... 40 Senior Vice President of Operations
</TABLE>
The principal occupations and positions for the past five years and, in
certain cases prior years, of the executive officers named above are as follows:
DOUGLAS A. WAUGAMAN has served as President and Chief Operating Officer of
RSC since April 1999. From April 1997 through April 1999, he served as Senior
Vice President of Operations of RSC. From
5
<PAGE>
January 1994 through April 1997, Mr. Waugaman served as Vice President, Chief
Financial Officer, Secretary and Treasurer of RSC. From June 1993 until joining
RSC, Mr. Waugaman served as Operations Manager for Plastiglide Manufacturing
Corporation, a subsidiary of Illinois Tool Works. From September 1991 until June
1993, Mr. Waugaman was Vice President of Finance for Knapp Communications
Corporation, a magazine publisher. From September 1989 until September 1991, Mr.
Waugaman was Controller for Plastiglide Manufacturing Corporation. Mr. Waugaman
is a Certified Public Accountant, and has public accounting experience with
Arthur Andersen and Co.
ROBERT M. WILSON joined RSC in April 1997 as Senior Vice President, Chief
Financial Officer, Secretary and Treasurer. In November 1998, he was promoted to
the position of Executive Vice President, Chief Financial Officer, Secretary and
Treasurer. From October 1994 until joining RSC, Mr. Wilson served as Senior Vice
President of Operations, Finance and Administration for Shade/Allied Inc. From
September 1989 through October 1994, Mr. Wilson served in various positions at
Simon Engineering plc, including Vice President of Finance for the United States
holding company of Simon Engineering plc and President of Simon LGI. Mr. Wilson
is a Certified Public Accountant, and has public accounting experience with
Arthur Andersen and Co.
RONALD HALCHISHAK joined RSC in October 1991 as Vice President of Purchasing
and Director of Safety. He became Region Manager for California in 1994. He was
appointed Regional Vice President of Operations in January 1995, and was
promoted to Senior Vice President of Operations in December 1996. Prior to
joining RSC, he worked for 13 years at Hertz Equipment Rental Corporation in
various positions, including Director of European Operations and Region Manager
of the Midwest Division.
DAVID G. LEDLOW joined RSC in conjunction with RSC's acquisition of Walker
Jones Equipment, Inc. in 1992. He had been employed by Walker Jones since 1982,
serving most recently as its Vice President of Marketing. He was promoted to
Regional Vice President of Operations in February 1993, and to Senior Vice
President of Operations in December 1996.
6
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Shares outstanding as of May 31, 1999 by (1) any person known to
RSC to beneficially own 5% or more of any class of voting securities of RSC; (2)
each director and executive officer of RSC; and (3) all directors and executive
officers of RSC as a group. Except as otherwise indicated, each stockholder
listed below has informed RSC that such stockholder has (A) sole voting and
investment power with respect to such Shares, except to the extent that
authority is shared by spouses under applicable law, and (B) record and
beneficial ownership with respect to such Shares.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF MAY 31, 1999(1)
-----------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Capital Research and Management Company(2).................................................. 1,600,000 6.5%
Pilgrim Baxter & Associates, Ltd.(3)........................................................ 1,384,000 5.6
Martin R. Reid(4)(5)(6)..................................................................... 538,545 2.2
Douglas A. Waugaman(4)(6)................................................................... 112,469 *
Robert M. Wilson(4)(6)...................................................................... 43,403 *
Ronald Halchishak(4)(6)..................................................................... 57,090 *
David G. Ledlow(4)(6)....................................................................... 53,511 *
William M. Barnum, Jr.(4)(7)................................................................ 455,317 1.8
James R. Buch(4)(6)......................................................................... 6,525 *
David P. Lanoha(4)(8)....................................................................... 149,855 *
Christopher A. Laurence(4)(7)............................................................... 7,261 *
Eric L. Mattson(4)(6)....................................................................... 5,625 *
Britton H. Murdoch(4)(9).................................................................... 7,625 *
John M. Sullivan(4)(6)...................................................................... 5,625 *
All directors and executive officers as a group (12 individuals)............................ 1,442,851 5.8%
</TABLE>
- ------------------------
* Beneficial ownership does not exceed 1% of the outstanding Shares.
(1) A person is deemed as of any date to have "beneficial ownership" of any
security that such person has a right to acquire within 60 days after such
date. Shares that each identified stockholder has the right to acquire
within 60 days of the date of the table set forth above are deemed to be
outstanding in calculating the percentage ownership of such stockholder, but
are not deemed to be outstanding as to any other person.
(2) Based on a Schedule 13G for the year ended December 31, 1998 and filed on
February 8, 1999. In that Schedule 13G, Capital Research and Management
Company reported that it beneficially owned a total of 1,600,000 Shares. Of
those Shares, it had sole investment discretion with respect to all of the
Shares and had voting authority with respect to none of the Shares. The
address of Capital Research and Management Company is 333 S. Hope Street,
Los Angeles, California 90071.
(3) Based on a Schedule 13G for the year ended December 31, 1998 and filed on
February 5, 1999. In that Schedule 13G, Pilgrim Baxter & Associates, Ltd.
reported that it beneficially owned a total of 1,384,000 Shares. Of those
Shares, it had sole investment discretion with respect to all of the Shares
and had voting authority with respect to 965,800 of the Shares. The address
of Pilgrim Baxter & Associates, Ltd. is 825 Duportail Road, Wayne,
Pennsylvania 19087.
7
<PAGE>
(4) Excludes Shares issuable upon exercise of options that are not exercisable
within 60 days of the date of the table set forth above, as follows: Mr.
Reid--330,058 Shares; Mr. Waugaman--112,000 Shares; Mr. Wilson--99,500
Shares; Mr. Halchishak--67,000 Shares; Mr. Ledlow--67,000 Shares; Mr.
Barnum--6,875 Shares; Mr. Buch--5,975 Shares; Mr. Lanoha--9,375 Shares; Mr.
Laurence-- 6,875 Shares; Mr. Mattson--6,875 Shares; Mr. Murdoch--6,875
Shares; and Mr. Sullivan--6,875 Shares.
(5) Includes Shares subject to vesting that may be repurchased by RSC if they
fail to vest.
(6) The address of this person is c/o Rental Service Corporation, 6929 E.
Greenway Parkway, Suite 200, Scottsdale, Arizona 85254.
(7) Mr. Barnum, a director of RSC, is a general partner of BBP, the general
partner of Brentwood RSC Partners, L.P., which owns 417,972 Shares.
Accordingly, Mr. Barnum may be deemed to be the beneficial owner of the
Shares owned by BBP and for purposes of this table they are included. Mr.
Barnum disclaims beneficial ownership of such Shares. The address of
Brentwood RSC Partners, L.P., Mr. Barnum and Mr. Laurence is 11150 Santa
Monica Boulevard, Suite 1200, Los Angeles, California 90025.
(8) The address of this person is c/o Rental Service Corporation, 11250 East
40th Avenue, Denver, Colorado 60239.
(9) The address of this person is c/o V-Span, 1100 First Avenue, Suite 400, King
of Prussia, Pennsylvania 19406.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires RSC's directors, officers and beneficial owners of
more than 10% of the Shares to file with the SEC initial reports of ownership
and reports of changes in ownership of the Shares and other equity securities of
RSC. Based solely on its review of the copies of such reports received by it, or
written representations from reporting persons, RSC believes that during the
fiscal year ended December 31, 1998, its officers, directors and holders of more
than 10% of the Shares complied with all Section 16(a) filing requirements with
the following exception: John Markle, an executive officer of RSC during the
fiscal year ended December 31, 1998, filed a late Form 4 reporting one
transaction.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table provides certain summary
information concerning compensation paid or accrued by RSC to or on behalf of
its Chief Executive Officer and each of its four other most highly compensated
executive officers for all services rendered in all capacities to RSC during the
fiscal years ended December 31, 1998, 1997 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------
---------------------------------------- NUMBER OF
ALL OTHER RESTRICTED SECURITIES
COMPENSATION STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($) AWARDS ($) OPTIONS (3)
- ----------------------------------- ---- ---------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief Executive
Officer........................ 1998 $ 516,704 $ 500,000 $10,500(2) $ 3,466,057(4) 173,411(5)
1997 339,361 300,000 10,122(2) -- 200,000(5)
1996 294,231 84,375 5,641(2) -- --
Douglas A. Waugaman (6)
President and Chief Operating
Officer........................ 1998 179,216 149,960 1,887(2) -- 16,000
1997 166,531 200,000 2,121(2) -- 100,000
1996 155,923 42,900 7,149(2) -- --
Robert M. Wilson
Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer................ 1998 180,796 103,185 4,209(2) -- 16,000
1997 99,300 -- 75,287(7) -- 75,000
1996 -- -- -- -- --
Ronald Halchishak
Senior Vice President of
Operations..................... 1998 173,193 123,058 2,128(2) -- 16,000
1997 148,260 75,000 1,408(2) -- --
1996 150,000 100,000 910(2) -- 71,250
David G. Ledlow
Senior Vice President of
Operations..................... 1998 154,274 120,000 522(2) -- 16,000
1997 137,132 75,000 16,754(2) -- --
1996 117,692 36,709 4,200(2) -- 71,250
</TABLE>
- ------------------------
(1) The amount of any bonus earned in each fiscal year is paid, and accounted
for in the preceding table, in the next succeeding fiscal year. As a result,
the preceding table does not include bonuses earned with respect to fiscal
year 1998, which were paid on March 31, 1999 as follows: Mr. Reid--$500,000;
Mr. Waugaman--$156,490; Mr. Wilson--$137,981; Mr. Halchishak--$146,250; and
Mr. Ledlow-- $143,774. In addition, the preceding table does not include
one-time cash bonuses awarded on June 12, 1999 as follows: Mr.
Waugaman--$75,000; Mr. Wilson--$75,000; Mr. Halchishak--$10,000; and Mr.
Ledlow--$10,000. These additional bonuses were awarded in recognition of the
contributions of the foregoing individuals to RSC and their efforts over the
course of several months in connection with the Agreement and Plan of Merger
(the "NationsRent Merger Agreement"), dated as of January 20, 1999, between
RSC and NationsRent, Inc. ("NationsRent"), which was terminated by
9
<PAGE>
mutual agreement of the parties on May 20, 1999, and related matters. Mr.
Reid did not receive any such bonus.
(2) Consists of one or more of the following: (1) an automobile allowance, (2)
relocation expenses reimbursed by RSC, and (3) insurance premiums paid by
RSC for life insurance and disability policies covering the officer.
(3) The preceding table does not include options granted on January 4, 1999 as
follows: Mr. Reid-- 200,000; Mr. Waugaman--50,000; Mr. Wilson--50,000; Mr.
Halchishak--25,000; and Mr. Ledlow-- 25,000. Each of these options was
granted at an exercise price of approximately $15.13 per Share.
(4) At December 31, 1998, Mr. Reid held 261,589 shares of restricted stock with
an aggregate market value of $4.1 million (based on the market price of the
Shares as reported by the New York Stock Exchange, Inc. on December 31,
1998). This restricted stock is subject to vesting in equal installments
over four years from the respective dates of grant; however, the vesting may
be accelerated under certain circumstances, including a change of control.
(5) In January 1998, Mr. Reid entered into an employment agreement with RSC. In
connection with this agreement, Mr. Reid's 200,000 then-outstanding options
to purchase Shares became immediately exercisable. Additionally, Mr. Reid
was granted stock options to purchase 190,000 Shares vesting in equal
installments over four years (or earlier if certain performance criteria are
met, or upon a change of control). On February 25, 1998, Mr. Reid
surrendered options to purchase 57,000 Shares. These surrendered options are
not included in this table. On April 29, 1998, Mr. Reid was granted stock
options to purchase 40,411 Shares vesting in equal installments over four
years (or earlier if certain performance criteria are met, or upon a change
of control).
(6) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
(7) Consists of relocation expenses reimbursed by RSC ($70,309), an automobile
allowance and insurance premiums paid by RSC for life insurance and
disability policies covering Mr. Wilson.
10
<PAGE>
OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS. The following table sets
forth information concerning individual grants of stock options made by RSC
during the year ended December 31, 1998 to its Chief Executive Officer and each
of its four other most highly compensated executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS
-------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE OR APPRECIATION FOR
UNDERLYING EMPLOYEES IN BASE PRICE OPTION TERM
OPTIONS FISCAL YEAR PER EXPIRATION --------------------
GRANTED(1)(2) 1998 SHARE($) DATE 5% ($) 10% ($)
------------- --------------- ----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief Executive
Officer............................. 190,000(3) 32.9% $ 20.19 1/14/08 $ 2,412 $ 6,113
40,411 7.0% 28.56 4/29/08 726 1,840
Douglas A. Waugaman (4)
President and Chief Operating
Officer............................. 13,656 2.4% 22.88 2/25/08 196 498
1,344 0.2% 26.38 4/15/08 22 56
1,000 0.2% 28.56 4/29/08 18 46
Robert M. Wilson
Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer....................... 13,656 2.4% 22.88 2/25/08 196 498
1,344 0.2% 26.38 4/15/08 22 56
1,000 0.2% 28.56 4/29/08 18 46
Ronald Halchishak
Senior Vice President of Operations... 13,656 2.4% 22.88 2/25/08 196 498
1,344 0.2% 26.38 4/15/08 22 56
1,000 0.2% 28.56 4/29/08 18 46
David G. Ledlow
Senior Vice President of Operations... 13,656 2.4% 22.88 2/25/08 196 498
1,344 0.2% 26.38 4/15/08 22 56
1,000 0.2% 28.56 4/29/08 18 46
</TABLE>
- ------------------------
(1) All options granted vest equally over four years from the date of grant;
however, those granted to Mr. Reid may vest earlier if certain performance
criteria are met or upon a "change of control" (as defined in the Reid
Employment Agreement).
(2) The preceding table does not include options granted on January 4, 1999 as
follows: Mr. Reid-- 200,000; Mr. Waugaman--50,000; Mr. Wilson--50,000; Mr.
Halchishak--25,000; and Mr. Ledlow-- 25,000. Each of these options was
granted at an exercise price of approximately $15.13 per Share.
(3) Includes options to purchase 57,000 Shares surrendered by Mr. Reid on
February 25, 1998.
(4) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
11
<PAGE>
AGGREGATED OPTION EXERCISES. The following table sets forth information (on
an aggregated basis) concerning each exercise of stock options made during the
year ended December 31, 1998 by RSC's Chief Executive Officer and each of its
four other most highly compensated executive officers and the year-end value of
unexercised options:
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS
OPTIONS AT FISCAL AT FISCAL YEAR-END(2)
NUMBER OF VALUE YEAR-END ---------------------------------
SHARES ACQUIRED REALIZED -------------------------- EXERCISABLE
ON EXERCISE(1) ($) EXERCISABLE UNEXERCISABLE ($) UNEXERCISABLE ($)
--------------- ----------- ----------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief Executive
Officer...................... -- -- 200,000 173,411 -- --
Douglas A. Waugaman(3)
President and Chief Operating
Officer...................... -- -- 25,000 91,000 -- --
Robert M. Wilson
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer...... -- -- 18,750 72,250 -- --
Ronald Halchishak
Senior Vice President of
Operations................... 11,150 $ 247,387 37,510 49,750 $ 11,988 $ 5,916
David G. Ledlow
Senior Vice President of
Operations................... 6,006 150,090 37,500 49,750 11,831 5,916
</TABLE>
- ------------------------
(1) As of the date of this Information Statement, none of the foregoing
individuals had exercised any options since December 31, 1998.
(2) Options are "in-the-money" at the fiscal year end if the fair market value
(based on the closing price of the Shares on the NYSE on December 31, 1998
of approximately $15.69 per Share) of the underlying securities on such date
exceeds the exercise or base price of the option.
(3) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
AGREEMENTS WITH MR. REID
EMPLOYMENT AGREEMENT. RSC and Mr. Reid are parties to an employment
agreement, dated as of January 14, 1998 (as amended, the "Reid Employment
Agreement"), pursuant to which Mr. Reid is employed as Chairman of the Board and
Chief Executive Officer. The term of the Reid Employment Agreement expires on
December 31, 2001, but will be automatically extended for one additional year at
the end of each calendar year, unless earlier terminated. The Reid Employment
Agreement provides for a base salary of no less than $500,000. Mr. Reid is also
eligible to receive a yearly bonus of up to $500,000, if specified performance
criteria are met. In addition, Mr. Reid is entitled to four weeks vacation and
all benefits generally available to other RSC executives.
The Reid Employment Agreement may be terminated by Mr. Reid or RSC at any
time, with or without cause. In addition, if requested by the RSC Board, Mr.
Reid will resign as Chief Executive Officer, but will remain as Chairman of the
Board and devote at least 50% of his time to RSC. Beginning with the first full
year after his resignation, Mr. Reid's base salary and corresponding bonus
opportunity would each
12
<PAGE>
be reduced to $250,000. The RSC Board may also request that Mr. Reid step down
as Chairman of the Board, and, in such circumstance, Mr. Reid would remain an
RSC employee at a base salary not less than $125,000, depending on the time he
devotes.
Except where there has been a "change of control," if Mr. Reid's active
employment in all capacities is terminated by RSC without "cause" (as defined in
the Reid Employment Agreement), Mr. Reid will be entitled to receive severance
pay equal to his then-current base salary through the remaining term of the Reid
Employment Agreement plus the maximum bonus opportunity available if he had
continued in the position from which he was terminated. Additionally, Mr. Reid
will be entitled to immediate vesting of all his unvested options and restricted
stock. In addition, for the remainder of the term of the Reid Employment
Agreement, Mr. Reid will be treated as an active employee for purposes of all
benefits and will be entitled to health insurance coverage until age 65. No
severance pay or benefit continuation will be available if Mr. Reid is
terminated for cause or if he resigns (other than due to a breach of the Reid
Employment Agreement by RSC) or is asked by the RSC Board to resign as Chief
Executive Officer or step-down as Chairman of the Board. Under the Reid
Employment Agreement, a "change of control" includes (1) the acquisition by any
person (other than any employee benefit plan maintained by RSC) of beneficial
ownership of 50% or more of the Shares; (2) the disposition of all or
substantially all of the business of RSC pursuant to a merger, consolidation or
other transaction in which either RSC is not the surviving company or the
stockholders of RSC immediately prior to the transaction do not continue to own
at least 60% of the surviving corporation immediately after the transaction; or
(3) individuals who constituted the RSC Board as of January 14, 1998 cease for
any reason to constitute at least a majority of the RSC Board (provided that any
individual whose election or nomination to the RSC Board was approved by at
least two-thirds of the directors comprising the RSC Board as of the date of the
Reid Employment Agreement shall be considered as though such individual were a
member of the RSC Board as of January 14, 1998, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
election contest with respect to the election or removal of directors or other
actual or overtly and publicly threatened solicitation of proxies or consents by
or on behalf of a person or entity other than the RSC Board).
Upon a change of control, all of Mr. Reid's unvested stock options and
restricted stock will vest. In addition, if within 24 months after a change of
control, Mr. Reid is terminated without cause or voluntarily terminates his
employment for "good reason" (as defined in the Reid Employment Agreement),
then, in place of other severance payments, he will receive a payment equal to
two and one-half times his highest base salary and annual bonus opportunity
during the term of the Reid Employment Agreement prior to the change of control.
RSC must also continue to provide Mr. Reid with health and life insurance
comparable to that in effect on the date of the change of control for 30 months
or until he is re-employed and eligible for health and life insurance benefits
from a new employer that are at least as favorable as those provided by RSC. In
addition, Mr. Reid will either be fully vested in his account under RSC's 401(k)
plan (as described herein) upon the change of control or receive payments equal
to the unvested portion of that account. RSC must also transfer to Mr. Reid the
company-owned car he was using at the time of the change of control or pay him
two and one-half times his annual car allowance.
During the term of the Reid Employment Agreement, and for four years after
any termination of employment for any reason, Mr. Reid cannot directly or
indirectly engage in any business that competes with RSC, whether as an owner,
director, officer, employee, consultant or otherwise, subject to limited
investments in public companies and a pre-existing loan to a family member.
If Mr. Reid's employment is terminated as a result of his death or
disability, all of his unvested options and restricted stock will vest, and he
or his estate will receive his unpaid base salary through the date of such death
or disability plus a pro rata portion of his maximum bonus opportunity for that
year.
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In connection with the execution of the Reid Employment Agreement, RSC
accelerated the vesting of Mr. Reid's 200,000 then-outstanding options to
purchase Shares and those options became immediately exercisable.
RESTRICTED STOCK AND OPTION GRANTS. On January 14, 1998, Mr. Reid was
granted options to purchase 190,000 Shares, vesting in equal installments over
four years (or earlier if certain performance criteria are met), and 10,000
shares of restricted stock, vesting in equal installments over four years.
However, the options will vest immediately if Mr. Reid presents a chief
executive officer succession plan that is approved by the RSC Board, but in no
event earlier than one year from the grant of such options. In addition, the
vesting of the restricted stock may be accelerated under certain circumstances,
including a "change of control" (as defined in the Reid Employment Agreement).
On February 25, 1998, Mr. Reid surrendered to RSC options to purchase 57,000
Shares in order to ensure the number of Shares available for issuance pursuant
to the 1996 Equity Participation Plan described below was sufficient to allow
certain grants of stock options to other officers. On April 29, 1998, Mr. Reid
was granted options to purchase 40,411 Shares and 16,589 shares of restricted
stock. These options and restricted stock are subject to the same vesting as
those granted in January 1998.
On October 9, 1998, RSC issued Mr. Reid an additional 235,000 shares of
restricted stock. The restricted stock is subject to vesting in equal
installments over four years; however, the vesting may be accelerated under
certain circumstances, including a "change of control" (as defined in the Reid
Employment Agreement). RSC also entered into an agreement to loan Mr. Reid the
amount of any tax liability resulting from this grant of restricted stock (up to
$1.4 million). The loan accrues interest at a rate equal to the current rate on
RSC's revolving credit facility (which, as of June 28, 1999, was 7.3%), with
principal and interest due upon 100% vesting of the restricted stock and in
certain other circumstances. The loan is secured by the restricted stock and
will be forgiven based on the market price of the Shares reaching certain
levels, and in certain other circumstances if the vesting of the restricted
stock is accelerated. At June 28, 1999, Mr. Reid owed RSC $1.4 million,
including accrued interest, under this loan agreement.
On January 4, 1999, Mr. Reid was granted options to purchase 200,000 Shares
at an exercise price of approximately $15.13 per Share and vesting in equal
installments over four years.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
RSC has entered into severance agreements (collectively, the "Severance
Agreements") with each of Messrs. Waugaman, Wilson, Halchishak and Ledlow
providing for certain benefits upon termination of employment either by RSC
without cause or by the executive officer due to a reduction in base salary and
benefits (other than across the board salary cuts for employees at the executive
officer's level or changes in benefits). These benefits include a lump sum
severance payment equal to 100% of the executive officer's base salary, plus a
pro rata portion of the current-year bonus opportunity, plus life, disability,
accident and group health insurance benefits substantially similar to those
received by the executive officer immediately prior to termination for a 12
month period. In addition, all stock options granted prior to 1996, all stock
options scheduled to vest in the year of termination and one-third of all other
stock options held by such executive officer, if any, shall become vested and
exercisable effective as of the day immediately prior to the date of termination
of the executive officer. As consideration for these benefits, each of Messrs.
Wilson, Halchishak and Ledlow agreed that during the term of their Severance
Agreement and for 12 months after termination of employment for any reason they
would not solicit any customers of RSC or hire or offer employment to any of
RSC's employees. Mr. Waugaman agreed that during the term of his Severance
Agreement and for 3 months after termination of employment for any reason he
would not solicit any customers of RSC or hire or offer employment to any of
RSC's employees. The Severance Agreements: (1) with Messrs. Halchishak and
Ledlow will continue in effect through December 31, 2001, (2) with Mr. Wilson
will continue in effect through April 14, 2000, and (3) with Mr. Waugaman will
continue in effect through June 30, 2001.
14
<PAGE>
RSC has also entered into executive severance agreements (collectively, the
"Executive Severance Agreements") with Messrs. Waugaman, Wilson, Halchishak and
Ledlow providing that upon a "change of control," they will be entitled to
certain benefits upon the subsequent termination of their employment within two
years following the change of control, unless the termination is due to death or
disability or if the termination is by RSC for "cause" or by the officer other
than for "good reason" (each as defined in the Executive Severance Agreements).
The benefits under the Executive Severance Agreements include, in lieu of any
other severance obligation of RSC, severance payments equal to 200% of the
executive officer's base salary, plus an additional lump sum payment equal to
the maximum bonus for the current year plus the following two years, plus
certain "gross-up" payments if any of the other payments would be subject to
"golden parachute" excise taxes. The benefits also include continuation of
health and life insurance for 18 months following termination (unless earlier
provided by another employer) and vesting of all 401(k) plan accounts. In
addition, all stock options accelerate and become immediately vested and
exercisable, and all restricted stock immediately vests following a termination
that gives rise to the benefits under the Executive Severance Agreements. The
Executive Severance Agreements also provide that, for twelve months following a
termination that gives rise to the benefits thereunder, the executive officers
will not compete with RSC. Under the Executive Severance Agreements, the term
"change of control" has the same meaning given to such term in the Reid
Employment Agreement. The Executive Severance Agreements are, except as
specifically provided therein, in addition to the Severance Agreements.
THE 1999 SEVERANCE PLANS
The RSC Board believes that one of RSC's most important resources is its
employees and considers it essential to the best interests of RSC's stockholders
to foster the continuous employment of its employees and those of its
subsidiaries. In addition, the RSC Board recognizes that, as is the case with
many publicly-held corporations, the possibility of the consummation of a
transaction effecting a change in control of RSC may exist and that such
possibility, and the uncertainty and questions that it causes, could result in
the departure or distraction of personnel to the detriment of RSC and its
stockholders.
As a result of RSC's concern about the potentially disruptive effects of
such changes in control on its employees, RSC retained the independent
consulting firms Towers Perrin and Watson Wyatt & Company to advise the RSC
Board and to evaluate the possibility of implementing certain supplemental
severance pay plans to provide certain severance benefits to employees eligible
under such plans.
Based on the foregoing, at a meeting of the RSC Board on May 20, 1999, the
RSC Board approved and adopted, and authorized RSC to implement and establish,
(1) a Supplemental Severance Pay Plan (the "Supplemental Severance Plan") for
certain employees of RSC and its subsidiaries, (2) a Supplemental Severance Pay
Plan for Key Corporate Employees (the "Corporate Employee Severance Plan") for
certain key employees who are employed at RSC's corporate office, and (3) a
Supplemental Severance Pay Plan for Key Field Employees (the "Field Employee
Severance Plan") for certain key employees who are not employed at RSC's
corporate office. The sole purpose of the Supplemental Severance Plan, the
Corporate Employee Severance Plan and the Field Employee Severance Plan
(collectively, the "1999 Severance Plans") is to reinforce and encourage the
continued attention and dedication of RSC's employees to their duties and to
foster their continued employment with RSC without distraction arising from the
possibility of a change in control of RSC.
The 1999 Severance Plans generally provide for certain severance benefits to
eligible employees if, within twelve months following a "Change in Control," the
employment of an employee eligible for benefits under the 1999 Severance Plans
(1) is involuntarily terminated other than by reason of the employee's death or
disability or for "Cause" (as defined in the 1999 Severance Plans), or (2) is
voluntarily terminated for "Good Reason" (as defined in the 1999 Severance
Plans). Employees eligible for benefits under one of the 1999 Severance Plans
will not be eligible under any of the other 1999 Severance Plans.
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<PAGE>
The specific benefits and eligibility requirements under each of the 1999
Severance Plans are as follows:
- SUPPLEMENTAL SEVERANCE PLAN. The benefits under the Supplemental Severance
Plan include a lump sum cash payment in an amount equal to six weeks pay
based on the base compensation of the employee as of the date of
termination (or, if greater, as in effect immediately prior to the change
in control) and the continuation of medical and dental insurance for a
period of six weeks following the calendar month in which the employee is
terminated. An employee of RSC or any of its subsidiaries who is not an
eligible employee under either the Corporate Employee Severance Plan or
the Field Employee Severance Plan is eligible for severance benefits under
the Supplemental Severance Plan if such employee (1) is a regular,
full-time employee of RSC or its subsidiaries who is not covered by a
collective bargaining agreement providing for similar benefits, and (2) is
not a party to a written employment agreement or severance agreement with
RSC (other than RSC's standard employment offer letter). In addition, an
employee eligible under the Supplemental Severance Plan immediately prior
to a Change in Control whose scheduled work hours are unilaterally reduced
thereafter will continue to be eligible under the Supplemental Severance
Plan.
- CORPORATE EMPLOYEE SEVERANCE PLAN. The benefits under the Corporate
Employee Severance Plan include a lump sum cash payment in an amount equal
to twelve weeks pay based on the base compensation of the employee as of
the date of termination (or, if greater, as in effect immediately prior to
the Change in Control) and the continuation of medical and dental
insurance for a period of twelve weeks following the calendar month in
which the employee is terminated. An employee of RSC or any of its
subsidiaries who is employed in RSC's corporate office and who is not
covered by a collective bargaining agreement providing for similar
benefits is eligible for severance benefits under the Corporate Employee
Severance Plan if such employee (1) is not a party to a written employment
agreement or severance agreement with RSC (other than RSC's standard
employment offer letter), and (2) is designated by the RSC Board or the
Compensation Committee thereof as eligible to receive severance benefits
under the Corporate Employee Severance Plan. In addition, an employee
eligible under the Corporate Employee Severance Plan immediately prior to
a Change in Control remains eligible under the Corporate Employee
Severance Plan following the Change in Control.
- FIELD EMPLOYEE SEVERANCE PLAN. The benefits under the Field Employee
Severance Plan include a lump sum cash payment in an amount equal to eight
weeks pay based on the base compensation rate of the employee as of the
date of termination (or, if greater, as in effect immediately prior to the
Change in Control) and the continuation of medical and dental insurance
for a period of eight weeks following the calendar month in which the
employee is terminated. An employee of RSC or any of its subsidiaries who
is not employed in RSC's corporate offices or covered by a collective
bargaining agreement providing for similar benefits is eligible for
severance benefits under the Field Employee Severance Plan if such
employee (1) is not a party to a written employment agreement or severance
agreement with RSC (other than RSC's standard employment offer letter),
and (2) is designated by the RSC Board or the Compensation Committee
thereof as eligible to receive severance benefits under the Field Employee
Severance Plan. In addition, an employee eligible under the Field Employee
Severance Plan immediately prior to a Change in Control remains eligible
under the Field Employee Severance Plan following the Change in Control.
As defined in each of the 1999 Severance Plans, a "Change in Control" is
deemed to have occurred for purposes of the 1999 Severance Plans if: (1) any
person (other than any employee benefit plan maintained by RSC) acquires
beneficial ownership of 50% or more of the common stock of RSC; (2) RSC is a
party to a merger, consolidation or other transaction in which RSC is not the
surviving company or the stockholders of RSC immediately prior to the
transaction do not continue to own at least 60% of the surviving corporation
immediately after the transaction; (3) RSC is materially or completely
liquidated; or (4) individuals who constituted the RSC Board as of the effective
date of the 1999 Severance Plans cease
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<PAGE>
for any reason to constitute at least a majority of the RSC Board (provided that
any individual whose election or nomination to the RSC Board was approved by at
least two-thirds of the directors comprising the RSC Board as of the effective
date of the 1999 Severance Plans shall be considered as though such individual
were a member of the RSC Board as of such date, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
election contest with respect to the election or removal of directors or other
actual or overtly or publicly threatened solicitation of proxies or consents by
or on behalf of a person or entity other than the RSC Board).
The 1999 Severance Plans may be terminated by the RSC Board at any time and
the RSC Board may from time to time amend any of the 1999 Severance Plans as the
RSC Board may deem advisable. Notwithstanding the preceding sentence, no
termination of, or amendment to, any of the 1999 Severance Plans on or after a
change in control shall adversely affect the rights of any employee eligible
immediately prior to such change in control for benefits under the 1999
Severance Plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to December 1996, RSC had no Compensation Committee or other committee
of the RSC Board performing similar functions. Accordingly, decisions concerning
compensation of executive officers were made by the entire RSC Board. Other than
Mr. Reid, there were no officers or employees of RSC who participated in
deliberations concerning such compensation matters. Mr. Reid was an executive
officer of Tuboscope until April 1996. He served on the Executive Committee of
the Board of Directors of Tuboscope, which is responsible for Tuboscope's
compensation policies, until February 1998. Mr. Mattson, a director of RSC, is
also a director of Tuboscope.
COMPENSATION COMMITTEE REPORT
RSC's executive compensation policies are designed to develop a high quality
management team and to motivate this team to achieve RSC's short-term and
long-term goals. With this in mind, RSC seeks to develop overall compensation
programs that provide the competitive compensation levels necessary to attract
and retain experienced, innovative, and well-qualified executives. RSC then
seeks to provide such executives with performance bonuses closely linked to
their achievement of objective financial goals, such as growth in operating
income and a favorable return on equity, and to more subjective goals, such as
organizational development and corporate efficiency.
Within this framework, RSC's Compensation Committee is responsible for
determining all aspects of the compensation, including stock options or other
awards, for each of RSC's executive officers.
As one of the factors in its review of compensation matters, the
Compensation Committee considers the anticipated tax effect on RSC and its
executives of various payments and benefits. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), generally disallows a deduction
for compensation in excess of $1,000,000 paid to certain highly compensated
executive officers, unless such excess compensation qualifies as
"performance-based compensation." The Compensation Committee will not
necessarily limit executive compensation to that deductible by RSC under Section
162(m) of the Code.
The three key components of RSC's compensation programs are base salary,
performance bonuses and stock options and other awards.
BASE SALARY. Base salary levels for all executive officers are reviewed
annually. As part of this review, RSC takes into account the compensation
packages offered by other companies in the equipment rental industry, as well as
other consolidators comparable in size to RSC. RSC also gives consideration to
the experience, responsibilities, management and leadership abilities of its
individual executive officers and their actual performance on behalf of RSC.
PERFORMANCE BONUSES. The Compensation Committee also sets the bonuses of
the executive officers and consults with RSC's chief executive officer regarding
RSC's bonus policies. Currently, RSC maintains
17
<PAGE>
certain bonus programs for key corporate employees and for operations management
employees. The purpose of these programs is (1) to offer incentives to key
management of RSC to reward them for achieving financial goals and further the
alignment of interests of key management with RSC's stockholders, and (2) to
provide incentives to operations management to maintain a high level of
profitability and asset utilization and to achieve RSC's financial goals in
individual markets. Bonuses for key corporate employees are based on RSC's
achievement of certain earnings per share objectives. Each participant's bonus
award is calculated as a percentage of base salary, and ranges from 0% to 100%
of base salary. Bonuses for operations management employees are based on the
degree to which region or individual location operating profit objectives are
met, and generally range from 20% to 75% of the participant's base salary if
financial targets are achieved. If financial targets are exceeded, participants
may receive an additional bonus based on incremental regional or store profit.
STOCK OPTIONS AND OTHER AWARDS. The Compensation Committee utilizes stock
options, restricted stock and other equity awards as a key incentive to provide
executives with the opportunity to become stockholders of RSC, and thereby share
in the long-term appreciation in the value of the Shares. The Compensation
Committee believes such awards are beneficial to RSC and RSC's stockholders
because they directly align the interests of RSC's executives with those of
RSC's other stockholders.
The Compensation Committee determines the awards, if any, to be granted from
time to time to executives pursuant to RSC's stock option plans. With the
exception of the restricted stock awards to the chief executive officer,
substantially all of the awards have been incentive stock options, which are
granted at no less than the prevailing market value. Accordingly, such awards
will only benefit executives if the price of the Shares increases over the term
of the applicable option.
The number of stock options to be granted to executives is determined by a
formula which takes into account the executive's annual salary, RSC's stock
price, a percentage multiple of the employee's annual salary based on his or her
position, RSC's financial performance and an evaluation of compensation paid by
competitors. Options are granted as compensation for performance and as an
incentive to promote the future growth and profitability of RSC. In determining
the relationship between the options to be granted to executive employees and
the compensation paid by competitors to their executives, the Compensation
Committee takes into account the outstanding options already held by each
individual executive officer, and the projected value of the options based on
historical and assumed appreciation rates of the Shares.
CHIEF EXECUTIVE OFFICER COMPENSATION
As is the case for the other executive officers, RSC's chief executive
officer compensation package consists of base salary, performance bonus, stock
options and other awards.
Prior to 1997, the chief executive officer did not have an employment
contract. In 1997, at the direction of the RSC Board, the Compensation Committee
began a significant ongoing analysis of the chief executive officer's
compensation, which included the engagement of an independent compensation
consultant and a review of chief executive officer compensation packages
(including salary, stock options and restricted stock and various other
provisions) of a variety of diversified companies. As a result of that analysis,
the Compensation Committee authorized the drafting and negotiation of an
employment contract with RSC's chief executive officer. That contract was
approved by the RSC Board and was executed effective January 14, 1998. As a
result of additional information obtained from the initial public offerings of
competitors later in 1998 after the employment contract had been finalized, the
Compensation Committee recommended an award of restricted stock to increase the
chief executive officer's equity ownership of RSC so as to be more comparable
with that of the chief executive officers of peer companies. In determining the
chief executive officer's compensation and approving the employment contract and
the grants of restricted stock, the RSC Board considered the recommendation of
the Compensation Committee and the information provided by the compensation
consultant, particularly with regard to the overall compensation packages of
other chief executive officers in other companies in the equipment rental
18
<PAGE>
industry. In addition, the RSC Board considered RSC's performance and
achievement of its financial and business goals and evaluated the chief
executive officer's overall individual performance in the prior fiscal year. The
RSC Board did not assign relative weights or rankings to each of these factors,
but instead made its determination based on consideration of all factors.
Compensation Committee
BRITTON H. MURDOCH
JOHN M. SULLIVAN
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<PAGE>
PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder return,
assuming reinvestment of dividends, for: (1) the Shares; (2) the Standard &
Poor's 500 Stock Index; and (3) the Russell 2000 Index. Because RSC did not pay
dividends on the Shares during the measurement period, the calculation of the
cumulative total stockholders' return does not include dividends. The Russell
2000 Index is included because it is comprised of publicly traded issuers with
total market capitalization similar to that of RSC. Because of the small number
of publicly-traded companies in RSC's peer group, RSC does not believe it can
reasonably identify a group of peer issuers at this time. The graph assumes $100
was invested on September 18, 1996 (the date on which RSC consummated its
initial public offering and was registered under Section 12 of the Exchange
Act).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RENTAL
SERVICE
CORP S&P 500 INDEX RUSSELL 2000 INDEX
<S> <C> <C> <C>
9/18/96 100.00 100.00 100.00
9/30/96 99.43 100.00 100.00
12/31/96 126.44 108.34 105.20
3/31/97 87.36 111.24 99.76
6/30/97 120.69 130.66 115.93
9/30/97 103.16 140.45 133.16
12/31/97 112.93 144.48 128.70
3/31/98 106.90 164.63 141.65
6/30/98 154.60 170.07 135.04
9/30/98 82.76 153.15 107.84
12/31/98 72.13 185.77 125.10
</TABLE>
<TABLE>
<CAPTION>
MEASUREMENT PERIOD RUSSELL 2000
(FISCAL YEAR COVERED) RSC S&P 500 INDEX INDEX
- ------------------------------ --------- --------------- -----------------
<S> <C> <C> <C>
Measurement Pt.: 9/18/96 100.00 100.00 100.00
9/30/96 99.43 100.00 100.00
12/31/96 126.44 108.34 105.20
3/31/97 87.36 111.24 99.76
6/30/97 120.69 130.66 115.93
9/30/97 103.16 140.45 133.16
12/31/97 112.93 144.48 128.70
3/31/98 106.90 164.63 141.65
6/30/98 154.60 170.07 135.04
9/30/98 82.76 153.15 107.84
12/31/98 72.13 185.77 125.10
</TABLE>
401(K) PLAN
RSC maintains a 401(k) Retirement Savings Plan (the "401(k) Plan") to
provide retirement and other benefits to its employees and to permit its
employees a means to save for their retirement. The 401(k) Plan is intended to
be a tax-qualified plan under Section 401(a) of the Code.
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RSC's employees become eligible to participate in the 401(k) Plan, and to
have salary deferral contributions made on their behalf, after they complete six
months of service and attain the age of 18.
Subject to legal limitations, participants may elect, by salary reduction,
to have 401(k) Plan contributions of 2% to 16% of their compensation made to
their accounts. Under the 401(k) Plan, RSC may make discretionary profit sharing
contributions on behalf of participants who have completed 1,000 hours of
service during the plan year or six months of continuous employment and are
employed on the last day of
the plan year (or have retired after attaining age 65, died or incurred a
disability in a plan year), based on compensation. RSC made discretionary
contributions of $150,000 in 1996, $436,000 in 1997 and $990,000 in 1998 under
the 401(k) Plan.
Participants in the 401(k) Plan always have a 100% vested and nonforfeitable
interest in the value of their contributions. Participants become vested in
RSC's profit sharing and matching contributions based on a graded five year
vesting schedule (or upon a participant's retirement after attaining age 65,
death or disability, if earlier). Participants are entitled to receive the
vested amounts in their accounts in a single lump-sum payment on death,
disability, retirement or termination of employment. In certain circumstances,
participants may receive loans and hardship withdrawals from their 401(k) Plan
accounts.
STOCK OPTION PLANS
RSC currently maintains two plans, the Stock Option Plan for Key Employees
(the "1995 Plan") and the 1996 Equity Participation Plan (the "1996 Plan"),
pursuant to which specified employees or directors may obtain options or other
awards enabling them to participate in RSC's equity. The RSC Board adopted the
1996 Plan on December 5, 1996, and it was approved by RSC's stockholders on
February 5, 1997. The principal purposes of the 1996 Plan are to provide
incentives for RSC's officers, directors, key employees and consultants through
the granting of options, restricted stock and other awards, thereby stimulating
their personal and active interest in RSC's development and financial success,
and inducing them to remain in RSC's service. In addition to awards made to
officers, key employees or consultants, the 1996 Plan provides for the granting
of options ("Directors Options") to RSC's non-employee directors pursuant to a
formula. The 1995 Plan is maintained for the benefit of certain of RSC's
employees for similar purposes.
THE 1995 PLAN. The 1995 Plan provides that the RSC Board, or a committee
appointed by the RSC Board (in either case, the "1995 Plan Committee"), may
grant non-transferable incentive stock options ("ISOs") and non-qualified stock
options ("NQSOs") to key employees. The 1995 Plan Committee has the full
authority and discretion, subject to the terms of the 1995 Plan, to determine
those individuals who are eligible to be granted options and the amount and type
of these options. Terms and conditions of options are set forth in written
option agreements. An aggregate of up to 324,000 Shares are issuable under the
1995 Plan, however, as of the date of this Information Statement, none of these
Shares were available for future stock option grants.
THE 1996 PLAN. The 1996 Plan is administered by the Compensation Committee,
or a subcommittee thereof, with respect to grants to RSC's employees or
consultants, and by the RSC Board with respect to Director Options. Subject to
the terms and conditions of the 1996 Plan, the Compensation Committee or the RSC
Board, as applicable, has the authority to select the persons to whom awards are
to be made, to determine the number of Shares to be subject thereto and the
terms and conditions thereof, and to make all other determinations and to take
all other actions necessary or advisable for the administration of the 1996
Plan.
The 1996 Plan provides that the Compensation Committee may grant or issue
stock options, stock appreciation rights ("SARs"), restricted stock, deferred
stock, dividend equivalents, performance awards, stock payments and other
stock-related benefits and awards, or any combination thereof. Each award under
the 1996 Plan is set forth in a separate written agreement with the person
receiving such award. Under the 1996 Plan, not more than 2,000,000 Shares (or
the equivalent in other equity securities) are
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authorized for issuance upon exercise or vesting of any awards thereunder. As of
June 28, 1999, 192,748 Shares were available for future awards under the 1996
Plan. Furthermore, the maximum number of Shares that may be subject to options
or SARs granted under the 1996 Plan to any individual in any calendar year
cannot exceed 200,000.
Awards under the 1996 Plan may be granted to (1) individuals who are then
officers or other employees of RSC or any of its subsidiaries who are determined
by the Compensation Committee to be key employees, and (2) consultants of RSC
selected by the Compensation Committee for participation in the 1996 Plan.
Approximately 200 officers and other employees are currently eligible to
participate in the 1996 Plan. During the term of the 1996 Plan and pursuant to a
formula, (A) each non-employee director is automatically granted an NQSO to
purchase 10,000 Shares on the date of such director's initial election to the
RSC Board, and (B) each then-current non-employee director is automatically
granted an NQSO to purchase 2,500 Shares at each subsequent annual meeting at
which such director is reelected to the RSC Board.
MANAGEMENT INCENTIVE COMPENSATION PLAN
RSC maintains an annual bonus plan (the "Management Incentive Compensation
Plan") under which RSC's chief executive officer and certain other executives
(the "Covered Employees") are eligible to receive bonus payments. The Management
Incentive Compensation Plan is intended to provide an incentive for superior
work, to motivate Covered Employees toward even higher achievement and business
results, to tie their goals and interests to those of RSC and its stockholders
and to enable RSC to attract and retain highly qualified senior employees.
The Management Incentive Compensation Plan is administered by a committee
consisting of at least two members of the RSC Board who qualify as "outside
directors" under Section 162(m) of the Code (the "Bonus Committee"). The Bonus
Committee currently consists of the members of the Compensation Committee. The
Bonus Committee has the sole discretion and authority to administer and
interpret the Management Incentive Compensation Plan.
A Covered Employee may receive a bonus payment based upon the attainment of
performance objectives established by the Bonus Committee and related to one or
more of the following corporate business criteria, which may be limited, where
applicable with respect to any Covered Employee, to store-level or regional
operations: pre-tax income, operating income, cash flow, earnings per share,
EBITDA, return on equity, return on invested capital or assets, cost reductions
and savings, return on revenues, collection of accounts receivable or
productivity. The actual amount of future bonus payments under the Management
Incentive Compensation Plan is not presently determinable. However, the
Management Incentive Compensation Plan provides that the maximum bonus for a
Covered Employee shall not exceed $1,000,000 with respect to any fiscal year.
The Management Incentive Compensation Plan is designed to ensure the annual
bonuses paid to Covered Employees are deductible by RSC, without limit under
Section 162(m) of the Code. Section 162(m) of the Code places a limit of
$1,000,000 on the amount of compensation that may be deducted in any tax year,
however, certain performance-based compensation is not subject to the deduction
limit. The Management Incentive Compensation Plan is designed to provide this
type of performance-based compensation.
Bonuses paid to Covered Employees are based upon bonus formulas that tie
bonuses to one or more objective performance standards. Bonus formulas for
Covered Employees are adopted in each performance period by the Bonus Committee
no later than the latest time permitted by Section 162(m) of the Code. No
bonuses are paid to Covered Employees unless and until the Bonus Committee makes
a certification in writing with respect to the attainment of the objective
performance standards as required by Section 162(m) of the Code. The Bonus
Committee may in its sole discretion reduce a bonus payable to a Covered
Employee, however, the Bonus Committee has no discretion to increase the amount
of a
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Covered Employee's bonus. The Bonus Committee has the discretion to apply or not
apply the foregoing provisions to bonuses paid to eligible employees who have
not been designated as Covered Employees.
EXECUTIVE INCENTIVE BONUS PLAN
RSC maintains a management bonus plan for key corporate employees. The
purpose of this bonus plan is to offer incentives to RSC's key management so as
to (1) reward them for achieving financial goals, and (2) further the alignment
of their interests with those of RSC's stockholders. Bonuses under this plan are
based on RSC's achievement of specified earnings per share objectives. Each
participant's bonus award is calculated as a percentage of base salary, and
generally ranges from 20% to 30% of base salary.
In addition, RSC maintains region manager and general manager bonus plans
(the "Operations Bonus Plan"). The Operations Bonus Plan is designed to provide
incentives to operations management to maintain a high level of profitability
and asset utilization and to achieve RSC's financial goals in their individual
market. Bonuses under the Operations Bonus Plan are based on the degree to which
region or individual location operating profit objectives are met and generally
range from 20% to 75% of the participant's base salary if financial targets are
achieved. If financial targets are exceeded, participants may receive an
additional bonus based on the incremental regional or store profit.
Bonuses under the Operations Bonus Plan are paid semi-annually. The first
payment is made after finalization of the first six months results, and
represents 50% of the bonus earned for that six months. The remainder of the
bonus earned in the first six months is paid at year end. The second payment is
calculated after RSC's year-end audited financial statements are finalized, and
represents the total bonus earned less the amount paid for the first six-month
period.
EXECUTIVE SAVINGS PLAN AND SURVIVOR PROTECTION PROGRAM
In January 1998, the RSC Board approved (1) an Executive Savings Plan (the
"ESP") pursuant to which RSC's senior executives may defer portions of their
cash compensation, and (2) a Survivor Protection Program (the "SPP") pursuant to
which RSC would pay survivor benefits to the beneficiaries of deceased senior
executives and certain other members of RSC's senior management.
THE ESP. RSC's senior executives may defer the receipt of a portion of
their cash compensation pursuant to the ESP, whereby amounts, while deferred,
earn interest at a rate of (1) for the first five years of the program, the
greater of 10% or the average long-term bond yield, and (2) after the first five
years of the program, the average of the long-term bond yield. In addition, an
annual deferral incentive rate will be determined each year, beginning with the
third year of the program, which rate will be added to the rates described in
the previous sentence. Participants in the ESP will receive payments under the
ESP upon the later of retirement or upon reaching age 55 with at least seven
years of service to RSC. If RSC terminates a participant's employment, that
participant will receive payments under the ESP upon reaching age 62. The
payments will be made over a 15 year period, subject to the one-time right of
participants to elect to receive 90% of their ESP account balance and forfeit
the remainder. The trust administering the ESP may purchase life insurance
policies to fund future payments under the ESP.
THE SPP. To date, RSC has not executed any agreements to implement or fund
potential obligations under the SPP. The contemplated benefit under the SPP is
three times annual base salary (less $100,000) for senior executives and two
times base salary (less $100,000) for other senior management participants, with
a maximum benefit of $500,000 for both groups. RSC may purchase life insurance
to fund payment of benefits under the SPP, and benefits would continue after a
participant's retirement, with eligibility to begin upon the earlier of (1) the
participant reaching age 62 or (2) the participant reaching age 55 with at least
seven years of service to RSC.
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EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
In 1997, RSC adopted the Employee Qualified Stock Purchase Plan (the "QSP
Plan"). In general, the QSP Plan authorizes RSC's employees to purchase Shares,
through payroll deductions, at a purchase price of 85% of the fair market value
of such Shares. The QSP Plan is intended to help RSC attract and retain
experienced and capable persons who can make significant contributions to RSC's
growth and success and to align their interests with those of RSC's
stockholders.
The QSP Plan provides for the issuance of up to 250,000 Shares. The QSP Plan
also provides for appropriate adjustments in the number and kind of Shares
subject to the QSP Plan and to outstanding purchase rights in the event of a
stock split, stock dividend or certain other similar changes in the Shares and
in the event of a merger, reorganization, consolidation or certain other types
of recapitalizations.
Each employee who has been employed by RSC for not less than six months and
who is customarily employed for more than 20 hours per week and more than five
months per calendar year is eligible to participate in the QSP Plan. RSC
presently has approximately 2,800 employees who are eligible to participate in
the QSP Plan.
The per Share exercise price of each purchase right under the QSP Plan shall
be an amount equal to the lesser of 85% of the fair market value of a Share on
the first day of the offering period in which the eligible employee began
participating in the QSP Plan or 85% of the fair market value of a Share on the
date of exercise of an installment of the purchase right. The QSP Plan commenced
on July 1, 1997. As of June 28, 1999, 203,474 Shares remain available under the
QSP Plan.
INDEMNIFICATION AGREEMENTS
Each of the directors on the RSC Board has entered into an indemnification
agreement with RSC which supplements the indemnification provisions set forth in
RSC's bylaws (collectively, the "Indemnification Agreements"). The
Indemnification Agreements generally provide that RSC will indemnify each
director, subject to certain limitations and exclusions, for any damages,
judgments, fines, penalties, settlements and costs, attorneys' fees and other
amounts, including any expenses of establishing a right to indemnification under
the Indemnification Agreements, incurred by such director in connection with any
threatened, pending or completed claim, action, suit or other proceeding brought
against or involving such director by reason of the fact that the director is or
was an officer or director of RSC or arising out of any action or inaction taken
while serving as a director. The Indemnification Agreements authorize the
director to bring suit to enforce a claim or request for indemnification
thereunder and to recover the expenses of prosecuting such suit if successful in
whole or in part. RSC also agrees, at the request of the director, to advance
the expenses of any proceeding (other than the amount of any settlement) giving
rise to a claim for indemnification under the Indemnification Agreements,
subject to repayment to the extent the director ultimately is not entitled to
indemnification.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, BBP has received investment banking fees from RSC in
connection with certain acquisitions. Investment banking fees paid to BBP
totaled $388,000 in 1996, $1.1 million in 1997, $0 in 1998 and $0 to date in
1999. RSC's obligation to pay these investment banking fees to BBP terminated
upon the completion of RSC's initial public offering in 1996. However, RSC, in
its discretion, may utilize BBP's investment banking services under the same fee
arrangement. Mr. Barnum, a general partner of BBP, also serves as a director of
RSC. Mr. Barnum does not receive additional compensation from BBP for service as
a director of RSC.
In connection with the acquisition of Center Rentals in December 1997, RSC
entered into leases for certain of Center Rentals' facilities with David P.
Lanoha, a director of RSC, and certain partnerships affiliated with Mr. Lanoha.
The leases initially expire in 2002, with options to extend for three periods of
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five years each. The aggregate annual rent under such leases is $720,000. RSC
believes the terms of these leases are no less favorable than those that could
be obtained from unaffiliated third parties. Prior to the acquisition of Center
Rentals, these locations had been leased by Center Rentals from Mr. Lanoha and
his affiliates and, in connection with the acquisition, these leases were
terminated.
In addition, RSC and Mr. Reid are parties to the Reid Employment Agreement
and Messrs. Waugaman, Wilson, Halchishak and Ledlow have entered into the
severance agreements described in this Information Statement.
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 28, 1999
AMONG
ATLAS COPCO NORTH AMERICA INC.
PANDION ACQUISITION CORP.
AND
RENTAL SERVICE CORPORATION,
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I.THE TENDER OFFER.............................................................................2
1.1 THE OFFER......................................................................................2
1.2 SEC FILINGS....................................................................................3
1.3 COMPANY ACTION.................................................................................4
1.4 COMPOSITION OF THE COMPANY BOARD...............................................................5
ARTICLE II.THE MERGER..................................................................................6
2.1 THE MERGER.....................................................................................6
2.2 CLOSING........................................................................................6
2.3 EFFECTIVE TIME.................................................................................6
2.4 EFFECTS OF THE MERGER..........................................................................7
2.5 CERTIFICATE OF INCORPORATION...................................................................7
2.6 BYLAWS.........................................................................................7
2.7 OFFICERS AND DIRECTORS.........................................................................7
2.8 EFFECT ON CAPITAL STOCK........................................................................7
2.9 SURRENDER AND PAYMENT..........................................................................9
ARTICLE III.REPRESENTATIONS AND WARRANTIES............................................................11
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................11
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT......................................................23
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................................25
ARTICLE IV.COVENANTS RELATING TO CONDUCT OF BUSINESS..................................................26
4.1 COVENANTS OF THE COMPANY......................................................................26
4.2 COVENANTS OF PARENT AND MERGER SUB............................................................29
4.3 ADVICE OF CHANGES; GOVERNMENT FILINGS.........................................................29
ARTICLE V.ADDITIONAL AGREEMENTS.......................................................................30
5.1 RECOMMENDATION; PREPARATION OF PROXY STATEMENT; THE COMPANY STOCKHOLDERS MEETING..............30
5.2 ACCESS TO INFORMATION.........................................................................31
5.3 APPROVALS AND CONSENTS; COOPERATION...........................................................31
5.4 TRANSACTION PROPOSALS.........................................................................32
5.5 EMPLOYEE BENEFITS.............................................................................34
5.6 FEES AND EXPENSES.............................................................................35
5.7 INDEMNIFICATION; DIRECTORS'AND OFFICERS'INSURANCE.............................................35
5.8 PUBLIC ANNOUNCEMENTS..........................................................................36
5.9 TAKEOVER STATUTES.............................................................................36
5.10 RIGHTS AGREEMENT..............................................................................37
5.11 PERFORMANCE BY MERGER SUB.....................................................................37
5.12 RESIGNATION OF DIRECTORS......................................................................37
5.13 FURTHER ASSURANCES............................................................................37
ARTICLE VI.CONDITIONS PRECEDENT.......................................................................37
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER....................................37
ARTICLE VII.TERMINATION AND AMENDMENT.................................................................38
7.1 TERMINATION...................................................................................38
7.2 EFFECT OF TERMINATION.........................................................................40
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
7.3 AMENDMENT.....................................................................................40
7.4 EXTENSION; WAIVER.............................................................................41
ARTICLE VIII.GENERAL PROVISIONS.......................................................................41
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER REPRESENTATIONS AND
WARRANTIES....................................................................................41
8.2 NOTICES.......................................................................................41
8.3 INTERPRETATION................................................................................42
8.4 COUNTERPARTS..................................................................................43
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES................................................43
8.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.............................................43
8.7 SEVERABILITY..................................................................................44
8.8 ASSIGNMENT....................................................................................44
8.9 ENFORCEMENT...................................................................................45
8.10 DEFINITIONS...................................................................................45
</TABLE>
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GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
<S> <C>
Agreement...............................................................Preamble
Board of Directors...............................................Section 8.10(a)
Business Day.....................................................Section 8.10(b)
Certificate of Merger................................................Section 2.3
Certificates......................................................Section 2.9(b)
Closing..............................................................Section 2.2
Closing Date.........................................................Section 2.2
Code..............................................................Section 3.1(i)
Company.................................................................Preamble
Company Assets....................................................Section 3.1(v)
Company Benefit Plans..........................................Section 3.1(m)(i)
Company Board...........................................................Recitals
Company Common Stock....................................................Recitals
Company Disclosure Schedule..........................................Section 3.1
Company Equity Plans..............................................Section 2.8(d)
Company Material Contracts........................................Section 3.1(l)
Company Permits...................................................Section 3.1(g)
Company Options...................................................Section 2.8(d)
Company Rights Agreement ......................................Section 3.1(c)(i)
Company SEC Reports............................................Section 3.1(e)(i)
Company Stockholders Meeting......................................Section 5.1(a)
Company Voting Debt..........................................Section 3.1(c)(iii)
Confidentiality Agreement ...........................................Section 5.2
Consolidated Group................................................Section 3.1(i)
Continuing Directors..............................................Section 1.4(c)
D&O Insurance........................................................Section 5.7
Delaware Secretary of State..........................................Section 2.3
DGCL....................................................................Recitals
Dissenting Shares ................................................Section 2.9(h)
Effective Time.......................................................Section 2.3
Environmental Claim.......................................Section 3.1(o)(vii)(A)
Environmental Laws........................................Section 3.1(o)(vii)(B)
Environmental Permits.........................................Section 3.1(o)(ii)
EQSPP.............................................................Section 2.8(d)
ERISA..........................................................Section 3.1(m)(i)
Exchange Act.................................................Section 3.1(d)(iii)
Exchange Agent....................................................Section 2.9(a)
Expenses.............................................................Section 5.6
Extension Conditions..............................................Section 7.1(b)
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
GAAP...........................................................Section 3.1(e)(i)
Governmental Entity..........................................Section 3.1(d)(iii)
Hazardous Materials.......................................Section 3.1(o)(vii)(C)
HSR Act......................................................Section 3.1(d)(iii)
Indemnified Party....................................................Section 5.7
Injunction...............................................................Annex A
Intellectual Property ...........................................Section 8.10(c)
Issue Right.......................................................Section 2.8(e)
Knowledge........................................................Section 8.10(d)
Liens.........................................................Section 3.1(c)(ii)
Material Adverse Effect..........................................Section 8.10(e)
Material Subsidiaries ...........................................Section 8.10(f)
Merger..................................................................Recitals
Merger Consideration..............................................Section 2.8(c)
Merger Sub..............................................................Preamble
Minimum Condition.................................................Section 1.1(a)
Minimum Shares....................................................Section 1.1(a)
NYSE.........................................................Section 3.1(d)(iii)
Offer...................................................................Recitals
Offer Documents...................................................Section 1.2(a)
Order....................................................................Annex A
Organizational Documents.........................................Section 8.10(g)
Outside Date......................................................Section 7.1(b)
Parent..................................................................Preamble
Parent Representatives ..............................................Section 5.2
Payment Fund .....................................................Section 2.9(a)
Person...........................................................Section 8.10(h)
Premium Limit........................................................Section 5.7
Price Per Share.........................................................Recitals
Proxy Statement................................................Section 3.1(f)(i)
Release...................................................Section 3.1(o)(vii)(D)
Required Company Vote.............................................Section 3.1(k)
Required Consents................................................Section 8.10(i)
Required Regulatory Approvals.....................................Section 6.1(d)
Rights Amendment....................................................Section 5.10
Schedule 14D-1....................................................Section 1.2(a)
Schedule 14D-9....................................................Section 1.2(b)
SEC...............................................................Section 1.1(b)
Securities Act................................................Section 3.1(c)(iv)
Subsidiary.......................................................Section 8.10(j)
Surviving Corporation................................................Section 2.1
Surviving Corporation Common Stock................................Section 2.8(a)
Takeover Statute.....................................................Section 5.9
Tax...........................................................Section 8.10(k)(i)
Taxable.......................................................Section 8.10(k)(i)
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Taxes.........................................................Section 8.10(k)(i)
Tax Return...................................................Section 8.10(k)(ii)
Terminating Company Breach........................................Section 7.1(h)
Terminating Parent Breach.........................................Section 7.1(i)
the other party..................................................Section 8.10(l)
Transaction Proposal.................................................Section 5.4
Violation.....................................................Section 3.1(d)(ii)
</TABLE>
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This AGREEMENT AND PLAN OF MERGER, dated as of June 28, 1999
(this "AGREEMENT"), by and among ATLAS COPCO NORTH AMERICA INC., a Delaware
corporation ("PARENT"), PANDION ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), and RENTAL SERVICE
CORPORATION, a Delaware corporation (the "COMPANY").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company each have approved the acquisition of the Company by Parent upon
the terms and subject to the conditions of this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to
cause Merger Sub to commence a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "OFFER") to purchase all of the
issued and outstanding shares of the common stock, par value $.01 per share, of
the Company ("COMPANY COMMON STOCK") at a price per share of Company Common
Stock of $29.00 net to the seller in cash (such price, as it may be increased in
accordance with the terms of this Agreement, the "PRICE PER SHARE") upon the
terms and conditions set forth in this Agreement, including ANNEX A hereto;
WHEREAS, Atlas Copco AB, a corporation formed and organized under
the laws of the Kingdom of Sweden ("Atlas Copco AB"), has agreed to guaranty,
pursuant to an instrument of even date herewith, the performance by Parent and
Merger Sub of their respective obligations under this Agreement.
WHEREAS, in order to complete such acquisition, the respective
Boards of Directors of Parent, Merger Sub and the Company have approved the
merger of Merger Sub with and into the Company (the "MERGER"), upon the terms
and subject to the conditions of this Agreement and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"), whereby each
issued and outstanding share of Company Common Stock not owned directly or
indirectly by Parent, Merger Sub or the Company will be converted into the right
to receive the Price Per Share;
WHEREAS, the Board of Directors of the Company (the "COMPANY
BOARD") has approved this Agreement, the Offer and the Merger, has determined
that the Offer and the Merger are fair to and in the best interests of the
Company's stockholders, has declared this Agreement and the adoption of this
Agreement advisable and is recommending that the Company's stockholders accept
the Offer, tender their shares of Company Common Stock thereunder and adopt this
Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
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NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
THE TENDER OFFER
1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article VII, then (i) not later than the first
Business Day after execution of this Agreement, Parent and the Company shall
issue separate public announcements regarding the execution of this Agreement
and (ii) Merger Sub shall, as soon as practicable, but in no event later than
five Business Days from and after the date of such announcement, including the
date of announcement as the first Business Day in accordance with Rule 14d-2
under the Exchange Act, commence (within the meaning of Rule 14d-2(a) of the
Exchange Act) the Offer to purchase all of the outstanding shares of Company
Common Stock at the Price Per Share. The initial expiration date of the Offer
shall be the twentieth Business Day from and after the date the Offer is
commenced, including the date of commencement as the first Business Day in
accordance with Rule 14d-2 under the Exchange Act. The Offer shall be made
pursuant to an Offer to Purchase and related Letter of Transmittal in form
reasonably satisfactory to the Company and containing terms and conditions set
forth in this Agreement. The obligation of Merger Sub to accept for payment and
pay for shares of Company Common Stock tendered pursuant to the Offer shall be
subject only to (i) there being at least that number of shares of Company Common
Stock representing a majority of the total issued and outstanding shares of
Common Stock on a fully diluted basis on the date such shares are purchased
pursuant to the Offer (the "MINIMUM SHARES") validly tendered and not withdrawn
prior to the expiration of the Offer (the "MINIMUM CONDITION") and (ii) the
satisfaction of the other conditions set forth in Annex A hereto, any of which
conditions may be waived by Merger Sub in its sole discretion; PROVIDED,
HOWEVER, that Merger Sub shall not waive the Minimum Condition without the prior
written consent of the Company. The Company agrees that no shares of Company
Common Stock held by the Company or any of its Subsidiaries will be tendered to
Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither
Parent nor Merger Sub will (i) decrease the Price Per Share payable in the
Offer, (ii) decrease the number of shares of Company Common Stock sought
pursuant to the Offer or change the form of consideration payable in the Offer,
(iii) change or amend the conditions to the Offer set forth in ANNEX A hereto or
impose additional conditions to the Offer, (iv) change the expiration date of
the Offer or (v) otherwise amend, add or waive any term or condition of the
Offer in any manner adverse to the holders of shares of Company Common Stock;
PROVIDED, HOWEVER, that if on any scheduled expiration date of the Offer any
conditions to the Offer have not been satisfied or waived, Merger Sub may, and
at the request of the Company shall, from time to time, extend the expiration
date of the Offer for up to 5 additional Business Days (but in no event shall
Merger
2
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Sub be required to extend the expiration date of the Offer beyond the 120th
day following commencement of the Offer unless the Offer is on or after such
date being extended due to an event described in subsection (a) of Annex A,
in which case the Offer may be required by the Company to be extended to the
180th day following commencement of the Offer); and PROVIDED FURTHER that
Merger Sub may (x) without the consent of the Company, extend the Offer for
any period required by any applicable law, including, without limitation, any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") applicable to the Offer and (y) a one-time extension
of the Offer if (1) the conditions to the Offer shall have been satisfied or
waived and (2) the number of shares of Company Common Stock that have been
validly tendered and not withdrawn represent more than 50% but less than 90%
of the total issued and outstanding shares of Company Common Stock on a fully
diluted basis; PROVIDED, HOWEVER, that in no event shall the extension
permitted under the foregoing clause (y) exceed, in the aggregate, 10
Business Days. Notwithstanding anything to the contrary in this Agreement,
Parent may extend the Offer during (but only to the end of) the period in
which the Company is attempting to cure a breach pursuant to Section 7.1(h).
Parent and Merger Sub will, subject to the terms and conditions of this
Agreement, use their best efforts to consummate the Offer. Assuming the
prior satisfaction or waiver of all the conditions to the Offer set forth in
ANNEX A hereto, and subject to the terms and conditions of this Agreement,
Merger Sub shall, and Parent shall cause Merger Sub to, accept for payment
and pay for, in accordance with the terms of the Offer, all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer as soon
as permitted under applicable law, recognizing that the parties wish to close
as expeditiously as possible following expiration or termination of the
waiting period under the HSR Act. Parent shall provide, or cause to be
provided, to Merger Sub, on a timely basis, the funds necessary to purchase
any shares of Company Common Stock that Merger Sub becomes obligated to
purchase pursuant to the Offer.
1.2 SEC FILINGS.
(a) As soon as reasonably practicable on the commencement
date of the Offer, Parent and Merger Sub shall file with the SEC, with respect
to the Offer, a Tender Offer Statement on Schedule 14D-1 (as amended from time
to time, the "SCHEDULE 14D-1"). The Schedule 14D-1 will comply as to form and
content in all material respects with the applicable provisions of the federal
securities laws and will contain or incorporate by reference the Offer to
Purchase, the related Letter of Transmittal and other ancillary documents and
agreements pursuant to which the Offer will be made (the Schedule 14D-1, the
Offer to Purchase, the Letter of Transmittal and such other documents being
collectively referred to herein as the "OFFER DOCUMENTS"). The Company and its
outside legal counsel shall be given a reasonable opportunity to review and
comment upon the Offer Documents and any amendment or supplement thereto prior
to the filing thereof with the SEC, and Parent and Merger Sub shall consider
such comments in good faith. Parent and Merger Sub agree to provide to the
Company and its outside legal counsel any comments which Parent, Merger Sub or
their counsel may receive from the Staff of the SEC with respect to the Offer
Documents promptly after receipt thereof and consult in good faith with the
Company and its outside legal counsel with respect thereto. Parent, Merger Sub
and the Company agree to correct promptly any information provided by any of
them for use in the Offer Documents which shall have become misleading in
3
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any material respect, and Parent and Merger Sub further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and disseminated to the Company's stockholders, in each case as and
to the extent required by the applicable provisions of the federal securities
laws.
(b) Upon commencement of the Offer, the Company shall
promptly file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (as amended from time to time, the "SCHEDULE 14D-9") containing the
recommendation of the Company Board described in Section 5.1(a) (subject to the
right of the Company Board to fail to make, withdraw or modify such
recommendation and/or its declaration of advisability in accordance with the
terms of this Agreement, including but not limited to, Section 5.4). The
Schedule 14D-9 will comply as to form and content in all material respects with
the applicable provisions of the federal securities laws. The Company will use
its reasonable best efforts to cause the Schedule 14D-9 to be filed with the SEC
on the same date that the Schedule 14D-1 is filed with the SEC; PROVIDED,
HOWEVER, that in any event the Schedule 14D-9 will be filed no later than five
Business Days following the commencement date of the Offer. The Company will
cooperate with Parent and Merger Sub in mailing or otherwise disseminating the
Schedule 14D-9 with the appropriate Offer Documents to the stockholders of the
Company. Parent and its outside legal counsel shall be given a reasonable
opportunity to review and comment upon the Schedule 14D-9 and any amendment or
supplement thereto prior to the filing thereof with the SEC, and the Company
shall consider any such comments in good faith. The Company agrees to provide
to Parent and Merger Sub and their outside legal counsel any comments which the
Company or its outside legal counsel may receive from the Staff of the SEC with
respect to the Schedule 14D-9 promptly after receipt thereof and consult in good
faith with Parent and its outside legal counsel with respect thereto. The
Company, Parent and Merger Sub agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause such Schedule 14D-9 as so corrected to be filed with
the SEC and disseminated to the Company's stockholders, in each case as and to
the extent required by the applicable provisions of the federal securities laws.
Parent, Merger Sub and the Company each hereby agree to provide promptly such
information necessary to the preparation of the Schedule 14D-9 and the Offer
Documents, including, without limitation, the exhibits and schedules thereto,
which the respective party responsible therefor shall reasonably request.
1.3 COMPANY ACTION. Promptly upon execution of this Agreement and in
connection with the Offer, the Company shall furnish Merger Sub with such
information (including a list of the stockholders of the Company, mailing labels
and a list of securities positions, each as of a recent date), and shall
thereafter render such assistance, as Parent or Merger Sub may reasonably
request in communicating the Offer to the Company's stockholders. Subject to
the requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Merger Sub and each of their respective affiliates and
associates shall (a) hold in confidence the information contained in any of such
labels and lists, (b) use such information only in connection with the Offer and
the Merger and (c) if this Agreement is terminated and at the written request of
the Company, promptly deliver to the Company all such information (written,
electronic or as otherwise
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embodied) and destroy all copies, extracts, compilations or derivations
thereof then in their possession or that of their representatives.
1.4 COMPOSITION OF THE COMPANY BOARD.
(a) Promptly upon the acceptance for payment of, and payment
by Merger Sub in accordance with the Offer for, not less than a majority of the
total issued and outstanding shares of Company Common Stock on a fully diluted
basis pursuant to the Offer, Merger Sub shall be entitled to designate such
number of members of the Company Board, rounded up to the next whole number,
equal to that number of directors which equals the product of the total number
of directors on the Company Board (giving effect, if applicable, to (i) the
number of newly created directorships if the size of the Company Board is
increased pursuant to this Section 1.4(a) and (ii) the number of vacancies if
the resignation of any directors is secured pursuant to this Section 1.4(a))
multiplied by the percentage that such number of shares of Company Common Stock
then owned beneficially or of record in the aggregate by Merger Sub or Parent of
the total issued and outstanding shares of Company Common Stock on a fully
diluted basis; PROVIDED, HOWEVER, that until the Effective Time there shall be
at least two Continuing Directors serving as directors of the Company and Parent
and Merger Sub shall use their best efforts to ensure that at least two
Continuing Directors serve as directors of the Company until the Effective Time.
Upon the written request of Merger Sub, the Company shall, on the date of such
request, either increase the size of the Company Board or use its reasonable
efforts to secure the resignations of such number of its incumbent directors as
is necessary to enable Merger Sub's designees to be so elected to the Company
Board.
(b) The Company's obligations under this Section 1.4 shall be
subject to Section 14(f) of the Exchange Act and Rule l4f-1 promulgated
thereunder. The Company shall, at its sole expense, promptly take all actions
required pursuant to Section 14(f) of the Exchange Act and Rule l4f-1
promulgated thereunder in order to fulfill its obligations under this
Section 1.4, and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Parent
and Merger Sub will supply to the Company in writing and be solely responsible
for any information with respect to any of them and their nominees, officers,
directors and affiliates as may be required by Section 14(f) of the Exchange Act
and Rule l4f-1 promulgated thereunder and applicable rules and regulations.
(c) After the time that Merger Sub's designees constitute at
least a majority of the Company Board and until the Effective Time, any
(i) amendment or termination of this Agreement, (ii) amendment to the
Organizational Documents of the Company, (iii) extension of time for the
performance or waiver of the obligations or other acts of Parent or Merger Sub
or waiver of the Company's rights hereunder or (iv) action by the Company with
respect to this Agreement and the transactions contemplated hereby which
materially and adversely affects the interests of the stockholders of the
Company, shall require, in addition to any other affirmative vote required under
the DGCL, the affirmative vote of not less than a majority of (1) the entire
Company Board, which majority shall include the concurrence of a majority of the
Continuing Directors or (2) to the extent permitted under the DGCL, a committee
of the Company Board
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consisting of only Continuing Directors; PROVIDED, HOWEVER, that if the
foregoing provisions of this subsection (c) relating to the concurrence of a
majority of Continuing Directors or approval by a committee consisting of
Continuing Directors are invalid or incapable of being enforced under
applicable law, then neither Parent nor Merger Sub shall approve (either in
its capacity as a stockholder or as a party to this Agreement, as
applicable), and Parent and Merger Sub shall use their reasonable efforts to
prevent the occurrence of, any of the actions referred to in clauses (i) to
(iv) above unless such actions shall have received the unanimous approval of
the entire Company Board. For purposes of this Section 1.4, the term
"CONTINUING DIRECTORS" shall mean any directors of the Company then serving,
if any, who are directors as of the date hereof. If there is more than one
Continuing Director and prior to the Effective Time, the number of Continuing
Directors is reduced for any reason, the remaining Continuing Director or
Directors shall be entitled to designate persons to fill such vacancies who
shall be deemed Continuing Directors for purposes of this Agreement, and the
Company, Parent and Merger Sub shall, upon such designation, cause such
designee(s) to be so elected. In the event there is only one Continuing
Director and he or she resigns or is removed or if all Continuing Directors
resign or are removed, he, she or they, as applicable, shall be entitled to
designate his, her or their successors, as the case may be, each of whom
shall be deemed a Continuing Director for purposes of this Agreement, and the
Company, Parent and Merger Sub shall, upon such designation, cause such
designee(s) to be so elected. The Company Board shall not delegate any
matter set forth in this Section 1.4 to any committee of the Company Board
unless such committee consists only of Continuing Directors.
ARTICLE II.
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, as soon as practicable
following completion of the Offer, Merger Sub shall be merged with and into the
Company. Following the Merger, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation and as
a wholly-owned subsidiary of Parent (the "SURVIVING CORPORATION").
2.2 CLOSING. The closing of the Merger (the "CLOSING") will take
place two business days after satisfaction or waiver (as permitted by this
Agreement and applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article VI
(the "CLOSING DATE"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Winthrop, Stimson,
Putnam & Roberts, One Battery Park Plaza, New York, New York 10004-1490, unless
another place is agreed to in writing by the parties hereto.
2.3 EFFECTIVE TIME. Upon the Closing, the parties shall file with
the Secretary of State of the State of Delaware (the "DELAWARE SECRETARY OF
STATE") either (i) a certificate of merger or other appropriate documents, in
form and substance satisfactory to the Company and Parent, or (ii) in the event
Merger Sub shall have acquired (through the Offer or otherwise) 90% or more of
the outstanding shares of Company Common Stock (and Parent agrees to contribute
shares of Company Common Stock owned by Parent to Merger Sub for such purpose),
a
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certificate of ownership and merger (in either such case, the "CERTIFICATE OF
MERGER") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings, recordings or publications required under the
DGCL in connection with the Merger. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such time as the parties may agree and specify in
the Certificate of Merger (the time the Merger becomes effective being herein
referred to as the "EFFECTIVE TIME").
2.4 EFFECTS OF THE MERGER. At and after the Effective Time, the
Merger will have the effects set forth in Section 259 of the DGCL.
2.5 CERTIFICATE OF INCORPORATION. At the Effective Time and without
any further action on the part of the Company or Merger Sub, the certificate of
incorporation of the Company shall be amended in its entirety to read as the
certificate of incorporation of Merger Sub reads as in effect immediately prior
to the Effective Time and, as so amended, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, provided that such certificate of
incorporation shall be amended to reflect "Rental Service Corporation" as the
name of the Surviving Corporation.
2.6 BYLAWS. At the Effective Time and without any further action on
the part of the Company or Merger Sub, the bylaws of the Company shall be
amended in their entirety to read as the bylaws of Merger Sub read as in effect
immediately prior to the Effective Time and, as so amended, shall be the bylaws
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
2.7 OFFICERS AND DIRECTORS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be a director or until their respective successors are duly elected
and qualified, as the case may be. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be.
2.8 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holder of any shares of Company Common Stock or any shares of capital
stock of Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding
share of capital stock of Merger Sub shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation ("SURVIVING CORPORATION COMMON STOCK"). Each
certificate that prior to the Effective Time represented one (1) or more shares
of capital stock of Merger Sub shall thereafter represent that number of shares
of Surviving Corporation Common Stock into which the shares of capital stock of
Merger Sub theretofore represented by such certificate shall have been
converted; PROVIDED, HOWEVER, that each record holder of a certificate or
certificates that prior to the Effective Time represented one (1) or more shares
of capital stock of Merger Sub shall receive, upon surrender of such certificate
or certificates, a new certificate or certificates evidencing and representing
the number of shares
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of Surviving Corporation Common Stock to which such record holder shall be
entitled pursuant to the foregoing conversion.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
Each share of Company Common Stock that is owned by the Company or by any wholly
owned Subsidiary of the Company or by Parent, Merger Sub or any other wholly
owned Subsidiary of Parent shall automatically be retired (subject to the
certificate of incorporation of Merger Sub) and shall cease to be outstanding,
and no cash or other consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to
Section 2.9(h), at the Effective Time each issued and outstanding share of
Company Common Stock (other than shares of Company Common Stock to be retired in
accordance with Section 2.8(b)), whether or not then vested or subject to a
repurchase option in favor of the Company, shall be converted into the right to
receive $29.00 in cash, without interest (the "MERGER CONSIDERATION"). As of
the Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be retired (subject to the certificate of
incorporation of Merger Sub) and shall cease to be outstanding, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive upon
the surrender of such certificates, the Merger Consideration.
(d) STOCK OPTIONS AND RESTRICTED STOCK. At the Effective
Time, each unexpired and unexercised outstanding option, whether or not then
vested or exercisable in accordance with its terms, to purchase shares of
Company Common Stock (the "COMPANY OPTIONS") previously granted by the Company
or its Subsidiaries under any plan, agreement or arrangement (collectively, the
"COMPANY EQUITY PLANS") shall be automatically converted into the right to
receive from Parent, at the Effective Time, cash in an amount equal to the
product of (i) the Merger Consideration minus the exercise price per share under
such Company Option, times (ii) the number of shares of Common Stock which may
be purchased upon exercise of such Company Option (whether or not then
exercisable or vested), less any required withholding, and thereupon each
Company Option shall terminate and each holder thereof shall have no further
rights to any Company Common Stock. Prior to the Effective Time, the Company
will take all action necessary to (A) shorten the offering period under the
Company's Employee Qualified Stock Purchase Plan (the "EQSPP") in which the
Effective Time occurs so that such offering period terminates on the day prior
to the Effective Time, and (B) terminate the EQSPP effective as of the Effective
Time. Immediately prior to the Effective Time, the restrictions on all shares
of restricted Company Common Stock shall lapse and each such share of restricted
stock shall be fully vested and, at the Effective Time, shall be subject to
conversion pursuant to Section 2.8(c) into the right to receive the Merger
Consideration, less any applicable withholding thereon. Prior to or at the
Effective Time, the Company will adopt such resolutions or take such actions as
are necessary, subject if necessary to obtaining consents of holders thereof, to
carry out the terms of this Section 2.8(d).
(e) RIGHTS TO ACQUIRE COMPANY COMMON STOCK. At the Effective
Time, each right of a person to be issued Company Common Stock, whether or not
then vested or otherwise matured, previously granted by the Company in
connection with an acquisition (an "ISSUE
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RIGHT"), shall be automatically converted into the right to receive from
Parent, at the Effective Time, cash in an amount equal to the product of (i)
the Merger Consideration, times (ii) the number of shares of Company Common
Stock issuable pursuant to such Issue Right.
2.9 SURRENDER AND PAYMENT.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent
shall designate a bank or trust company reasonably acceptable to the Company to
act as agent (the "EXCHANGE AGENT") for the holders of shares of Company Common
Stock, Company Options and Issue Rights in connection with the Merger and the
payment of the Merger Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to Section 2.8. Prior to the filing of the
Certificate of Merger with the Delaware Secretary of State, Parent or Merger Sub
shall deposit with the Exchange Agent cash in an aggregate amount equal to the
product of (i) the number of shares of Company Common Stock issued and
outstanding (and not to be retired pursuant to Section 2.8(b)) immediately prior
to the Effective Time, multiplied by (ii) the Merger Consideration (plus an
additional amount as required to cash out Company Options pursuant to Section
2.8(d) and Issue Rights pursuant to Section 2.8(e)). The deposit made by Parent
or Merger Sub pursuant to the preceding sentence is hereinafter referred to as
the "PAYMENT FUND." The Exchange Agent shall cause the Payment Fund to be
(i) held for the benefit of the holders of Company Common Stock and
(ii) promptly applied to making the payments provided for in Section 2.8(c).
The Payment Fund shall not be used for any purpose that is not provided for
herein.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall provide to each holder of
record of a certificate or certificates or other instrument or instruments (the
"CERTIFICATES") which immediately prior to the Effective Time represented issued
and outstanding shares of Company Common Stock (other than shares to be retired
in accordance with Section 2.8(b)), (i) a Letter of Transmittal (which shall be
upon customary terms and may specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent, together
with such Letter of Transmittal, duly executed in accordance with the Letter of
Transmittal and the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the Exchange Agent shall pay the
holder of such Certificate the Merger Consideration in respect of such
Certificate, and the Certificate so surrendered shall forthwith be retired and
shall cease to exist. If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the shares of Company Common
Stock represented by the Certificate or Certificates surrendered in exchange
therefor, it shall be a condition to such payment that the Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such shares or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. Until surrendered as contemplated by this Section 2.9, each
Certificate (other than Certificates representing Dissenting Shares or shares of
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Company Common Stock to be retired pursuant to Section 2.8(b)) shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration upon such surrender.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Merger Consideration paid upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares of Company Common
Stock theretofore represented by such Certificates. At and after the Effective
Time, there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of shares of Company Common Stock. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II, except as otherwise provided by law.
(d) UNCLAIMED FUNDS. Any portion of the Payment Fund made
available to the Exchange Agent pursuant to Section 2.9(a) that remains
unclaimed by holders of Certificates for 180 days after the Effective Time of
the Merger shall be delivered to Parent, upon demand, and any holders of
Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of the Merger Consideration.
(e) NO LIABILITY. None of Parent, Merger Sub, the Company or
the Exchange Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) INVESTMENT OF FUNDS. The Payment Fund shall be invested
by the Exchange Agent in obligations of, or guaranteed by, the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investor Services, Inc. or Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies Inc., respectively, in each case with maturities not
exceeding six months. All earnings thereon shall inure to the benefit of
Parent.
(g) LOST CERTIFICATES. In the event that any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed before the Company has notice that the Certificate has been acquired
by a protected purchaser (as that term is defined in Section 8-303 of the
Delaware Uniform Commercial Code), and, if required by Parent, the posting by
such Person of a bond in such reasonable amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate or the payment of the Merger Consideration, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration with respect to such Certificate to which such Person is entitled
pursuant hereto.
(h) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such shares in accordance with the DGCL (the "DISSENTING SHARES"),
shall not be converted into the right to receive the Merger Consideration,
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<PAGE>
unless such holder fails to perfect or withdraws or otherwise loses its right
to appraisal. If, after the Effective Time, such holder fails to perfect or
withdraws or otherwise loses its right to appraisal, such shares of Company
Common Stock shall be treated as if they had been converted as of the
Effective Time into a right to receive the Merger Consideration. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of shares of Company Common Stock, and Parent shall have the right
to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
Parent or upon the entry of a final judgment by a court of competent
jurisdiction, make any payment with respect to, or settle or offer to settle,
any such demands.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the Company Disclosure Schedule delivered by the Company to Parent at
or prior to the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE")
or the Company SEC Reports, the Company represents and warrants to Parent and
Merger Sub as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company
and its Material Subsidiaries has been duly incorporated and is validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
requisite corporate power and authority to carry on its business as presently
conducted. Each of the Company and its Material Subsidiaries is duly qualified
and in good standing or otherwise authorized to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except where the failure to so
qualify could not reasonably be expected to have a Material Adverse Effect on
the Company or materially impair or delay the ability of the Company to
consummate the transactions contemplated hereby. The copies of the
Organizational Documents of the Company which were previously furnished or made
available to Parent are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(b) SUBSIDIARIES; INVESTMENTS. Section 3.1(b) of the Company
Disclosure Schedule sets forth the name, jurisdiction of incorporation,
authorized capitalization and share ownership of each direct or indirect
Subsidiary of the Company. Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, greater
than 4.9% of any capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest, including interests in
partnerships and joint ventures, in any business. There are no outstanding
options, warrants or other rights of any kind to acquire any additional shares
of capital stock of any Subsidiary or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares, nor is any Subsidiary committed to issue
any such option, warrant, right or security.
(c) CAPITAL STRUCTURE.
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(i) As of the date of this Agreement, the
authorized capital stock of the Company consists of (A) 40,000,000
shares of Company Common Stock, of which 24,271,458 shares are issued
and outstanding (including 177,238 shares of Company Common Stock issued
and outstanding and held in escrow by third party escrow agents for
release to other third parties, pursuant to acquisitions by the Company
or its Subsidiaries), and (B) 500,000 shares of preferred stock, par
value $.01 per share, of which no shares are issued and outstanding.
There are no shares of Preferred Stock issued and outstanding or in the
treasury of Company and no shares of Company Common Stock held in the
treasury of the Company. Except as set forth in Section 3.1(c) of the
Company Disclosure Schedule, no shares of capital stock or other equity
securities of the Company are issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company
are, and all shares which may be issued pursuant to the Company Equity
Plans will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. All issued and
outstanding shares of the capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, and no class
of capital stock is entitled to preemptive rights. As of the date of
this Agreement, there are no outstanding options, warrants or other
rights to acquire capital stock from the Company other than (1) rights
issued pursuant to the Rights Agreement, dated April 16, 1999, as
amended, between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "COMPANY RIGHTS AGREEMENT"), (2) options
representing in the aggregate the right to purchase 1,932,543 shares of
Company Common Stock under the Company Equity Plans, (3) Issue Rights to
acquire 228,992 shares of Company Common Stock and (4) rights to
purchase approximately 27,000 shares of Company Common Stock pursuant to
the EQSPP on or about July 6, 1999.
(ii) All of the issued and outstanding shares
of capital stock of the Company's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and are owned by the
Company, free and clear of any liens, claims, encumbrances,
restrictions, preemptive rights or any other claims of any third party
("LIENS"), other than restrictions on transfer under federal or state
securities laws.
(iii) As of the date of this Agreement, no
bonds, debentures, notes or other indebtedness of the Company having the
right to vote on any matters on which stockholders may vote ("COMPANY
VOTING DEBT") are issued or outstanding.
(iv) Except as otherwise set forth in this
Section 3.1(c), as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or its
Material Subsidiaries is a party or by which any of them is bound
obligating the Company or any Material Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or such Material
Subsidiary or obligating the Company or such Material Subsidiary to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. As of
the date of this
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Agreement, there are no outstanding obligations of the Company or any
Material Subsidiary to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or such Material Subsidiary.
There are no irrevocable proxies with respect to shares of capital
stock of the Company registered with the Company. Except as set
forth in the Company Disclosure Schedule, there are no agreements or
arrangements pursuant to which the Company is or could be required to
register shares of Company Common Stock or other securities under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
(d) AUTHORITY; NO CONFLICTS.
(i) The Company has all requisite corporate
power and corporate authority to enter into this Agreement and, subject
to the adoption of this Agreement and approval of the Merger by the
requisite vote of the holders of Company Common Stock, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of the Company, subject in the case of the consummation of the Merger to
the adoption of this Agreement by the requisite vote of the stockholders
of the Company, if required. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(ii) The execution and delivery of this
Agreement does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right of
consent, termination, amendment, cancellation or acceleration of or "put
right" with respect to any obligation or the loss of a material benefit
under, or the creation of a Lien on any assets (any such conflict,
violation, default, right of consent, termination, amendment,
cancellation or acceleration, loss or creation, a "VIOLATION") pursuant
to: (A) any provision of the Organizational Documents of the Company or
any of its Material Subsidiaries or (B) except as could not reasonably
be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby and, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, the Company's Material
Subsidiaries or their respective properties or assets, other than any
required consents of landlords.
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(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, any
supranational, national, state, municipal or local government, any
instrumentality, subdivision, court, administrative agency or commission
or other authority thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY"), is required by
or with respect to the Company or any Material Subsidiary in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby,
except for (x) those required under or in relation to (A) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), (B) the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), (C) the DGCL with respect to the filing and recordation
of appropriate merger or other documents, including the Certificate of
Merger, (D) rules and regulations of the New York Stock Exchange
("NYSE"), and (E) antitrust or other competition laws of other
jurisdictions and (y) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain would not reasonably be expected to have a Material Adverse
Effect on the Company or materially impair or delay the ability of the
Company to consummate the transactions contemplated hereby.
(e) REPORTS AND FINANCIAL STATEMENTS.
(i) The Company has filed all required
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC with respect to periods commencing on and after
January 1, 1997 (collectively, including all exhibits thereto, the
"COMPANY SEC REPORTS"). None of the Company SEC Reports, as of their
respective dates (and, if amended or superseded by a filing prior to the
date of this Agreement or of the Closing Date, then on the date of such
filing), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading. Each of the financial statements
(including the related notes) included in the Company SEC Reports
presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the
Company and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with U.S.
generally accepted accounting principles ("GAAP") consistently applied
during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to
the absence of complete notes and normal year-end adjustments. All of
such Company SEC Reports, as of their respective dates (and as of the
date of any amendment to the respective Company SEC Report), complied as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as set forth in the Company SEC
Reports filed prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
since December 31, 1998, the Company does not have any
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liabilities or obligations of any nature required by GAAP to be set
forth on a consolidated balance sheet of the Company which would be
reasonably expected to have a Material Adverse Effect on the Company.
(f) INFORMATION SUPPLIED.
(i) None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in
(A) the proxy statement related to the Company Stockholders Meeting (the
"PROXY STATEMENT"), if applicable, (B) the Schedule 14D-9 or (C) the
Offer Documents will, at the respective times such documents are filed,
and, with respect to the Offer Documents and the Proxy Statement, if
any, when first published, sent or given to the stockholders of the
Company, contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they are made, not misleading or, in the case of the Offer
Documents and the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the Company Stockholders Meeting (as
defined below), if any, and at the Effective Time, contain an untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made,
not misleading or necessary to correct any statement in any earlier
communication with respect to the Offer or the solicitation of proxies
for the Company Stockholders Meeting, if any, which shall have become
misleading. The Proxy Statement, if any, and Schedule 14D-9 will comply
as to form in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the
SEC thereunder.
(ii) Notwithstanding the foregoing provisions
of this Section 3.1(e), no representation or warranty is made by the
Company with respect to statements made or incorporated by reference in
the Proxy Statement, if any, or Schedule 14D-9 based on information
supplied by Parent or Merger Sub for inclusion or incorporation by
reference therein.
(g) COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS. The
Company and its Material Subsidiaries hold in full force and effect all permits,
licenses, certificates, franchises, registrations, variances, exemptions, orders
and approvals of all Governmental Entities, except for those which the failure
to hold would not reasonably be expected to have a Material Adverse Effect upon
the Company (the "COMPANY PERMITS"). The Company and its Material Subsidiaries
are in compliance with the terms of the Company Permits, except where the
failure to comply would not reasonably be expected to have a Material Adverse
Effect on the Company. Other than any Company Permits which are ministerial in
nature or the absence of which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect on the Company, no Company
Permits will be required, as a result of the Merger or the other transactions
contemplated hereby, to be issued, re-issued or transferred in order to permit
the Company following the Merger to continue to operate its business. The
businesses of the Company and its Material Subsidiaries are not being and have
not been conducted in
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violation of any law, ordinance, regulation, judgment, decree, injunction,
rule or order of any Governmental Entity, except for violations which would
not reasonably be expected to have a Material Adverse Effect on the Company.
As of the date of this Agreement, no investigation by any Governmental Entity
with respect to the Company or any Material Subsidiary is pending or, to the
knowledge of the Company, threatened, other than investigations which would
not reasonably be expected to have a Material Adverse Effect on the Company.
(h) LITIGATION. There is no litigation, arbitration, claim,
suit, action, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any Material Subsidiary
which would reasonably be expected to have a Material Adverse Effect on the
Company, nor is there any judgment, award, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any
Material Subsidiary which would reasonably be expected to have a Material
Adverse Effect on the Company.
(i) TAX RETURNS AND TAX PAYMENTS. Except as disclosed in the
Disclosure Schedule, the Company and each of its Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which the
Company or any of its Subsidiaries is or has been a member (a "CONSOLIDATED
GROUP") has timely filed all Tax Returns required to be filed by it or caused
all such Tax Returns to be so filed with respect to any such Consolidated Group,
in material compliance with all applicable laws, and such Tax Returns are
complete and correct in all material respects, all Taxes shown thereon to be due
have timely been paid and adequate reserves have been provided in its financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any Tax Returns. Except as disclosed in the Disclosure Schedule: (i) no
material claim for unpaid Taxes has become a lien against the property of the
Company or any of its Subsidiaries or a member of any Consolidated Group or is
being asserted against the Company or any of its Subsidiaries or a member of any
Consolidated Group; (ii) no audit of any Tax Return of Company or any of its
Subsidiaries or a member of any Consolidated Group is pending, being conducted
or, to the knowledge of the Company, threatened by a Tax authority; (iii) no
extension of the statute of limitations on the assessment of any Taxes has been
granted by Company, any of its Subsidiaries or a member of any Consolidated
Group and is currently in effect; (iv) no consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") has been filed with
respect to the Company; (v) the Company and each of its Subsidiaries is not a
party to any agreement or arrangement that would result, separately or in the
aggregate, in the actual or deemed payment by the Company or any of its
Subsidiaries of any "excess parachute payments" within the meaning of Section
280G of the Code; (vi) the Company and each of its Subsidiaries is not a party
to any tax sharing or allocation agreement, nor has it given any indemnity
against Taxes imposed on any other Person, that has not expired by its terms or
otherwise have been terminated and for which no amount is claimed to be owed;
(vii) the Company and each of its Subsidiaries has not been a United States real
property holding corporation with the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(viii) the Company and each of its Subsidiaries is neither doing business in nor
engaged in a trade or business in any jurisdiction in which it has not filed all
required income or franchise tax returns; (ix) the Company and each of its
Subsidiaries has made all payments of estimated Taxes required to be made under
Section 6655
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of the Code and any comparable state, local or foreign Tax provision; (x) all
Taxes required to be withheld, collected or deposited by or with respect to
the Company and each of its Subsidiaries have been timely withheld, collected
or deposited, as the case may be, and, to the extent required, have been paid
to the relevant taxing authority; (xi) the Company and each of its
Subsidiaries has not issued or assumed (A) any obligations described in
Section 279(a) of the Code, (B) any applicable high yield discount
obligations, as defined in Section 163(i) of the Code, or (C) any
registration-required obligations, within the meaning of Section 163(f)(2) of
the Code, that are not in registered form; (xii) there are no written
requests for information currently outstanding that could affect the Taxes of
the Company or any of its Subsidiaries other than requests for information in
audits; and (xiii) there is no power of attorney currently in force with
respect to any matter relating to Taxes that could materially affect the Tax
liability of the Company or any of its Subsidiaries.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998 through the date of this Agreement, (A) each of the Company and the
Company's Material Subsidiaries has conducted its business in the ordinary
course and has not incurred any material liability, except in the ordinary
course of their respective businesses; and (B) there has not occurred or arisen
any event, condition or occurrence affecting the Company or its Material
Subsidiaries that has had, or would reasonably be expected to have, a Material
Adverse Effect on the Company.
(k) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock (the "REQUIRED
COMPANY VOTE") is the only vote of the holders of any class or series of the
Company capital stock necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby, and such vote is not necessary in the
event of a merger described in clause (ii) of Section 2.3.
(l) CERTAIN AGREEMENTS. All contracts listed as an exhibit
to the Company's Annual Report on Form 10-K under the rules and regulations of
the SEC relating to the business of the Company and its Subsidiaries, (the
"COMPANY MATERIAL CONTRACTS") are valid, enforceable and in full force and
effect except to the extent they have previously expired or been terminated in
accordance with their terms, and neither the Company nor its Subsidiaries has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time, or both, could reasonably be expected to
constitute a default under the provisions of, any such Company Material
Contract, except where the lack of validity, full force and effect,
enforceability or defaults could not reasonably be expected to have a Material
Adverse Effect on the Company. To the knowledge of the Company, no counterparty
to any such Company Material Contract has violated any provision of, or
committed or failed to perform any act which, with or without notice, lapse of
time, or both, could reasonably be expected to constitute a default or other
breach under the provisions of, such Company Material Contract, except for
defaults or breaches which would not reasonably be expected to have a Material
Adverse Effect on the Company.
(m) EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
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(i) With respect to each employee benefit plan
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and with respect to each other
material employee benefit plan, program, arrangement and contract
(including any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination,
change in control and severance plan, program, arrangement and
contract), to which the Company or any Material Subsidiary is a party,
which is maintained or contributed to by the Company or any Material
Subsidiary, or with respect to which the Company or any Material
Subsidiary could incur material liability under Section 4069, 4201 or
4212(c) of ERISA (the "COMPANY BENEFIT PLANS"), the Company has made
available to Parent a true and complete copy of such Company Benefit
Plans.
(ii) Each of the Company Benefit Plans that is
an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA and that is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the United
States Internal Revenue Service, and the Company is not aware of any
circumstances likely to result in the revocation of any such favorable
determination letter that would reasonably be expected to have a
Material Adverse Effect on the Company.
(iii) With respect to the Company Benefit Plans,
no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances, in connection with which the
Company or any Material Subsidiary could be subject to any liability
under the terms of such Company Benefit Plans, ERISA, the Code or any
other applicable law which would reasonably be expected to have a
Material Adverse Effect on the Company.
(iv) Neither of the Company nor any Material
Subsidiary is a party to any collective bargaining or other labor union
contracts and no collective bargaining agreement is being negotiated by
the Company or any Material Subsidiary. There is no pending labor
dispute, lock-out, strike or work stoppage against the Company or any
Material Subsidiary which may interfere with the respective business
activities of the Company or any Material Subsidiary, except where such
dispute, lock-out strike or work stoppage would not reasonably be
expected to have a Material Adverse Effect on the Company. There is no
pending charge or complaint against the Company or any Material
Subsidiary by the National Labor Relations Board or any comparable state
agency, except where such unfair labor practice, charge or complaint
would not reasonably be expected to have a Material Adverse Effect on
the Company. Except as set forth in the Company Disclosure Schedule,
there are no current union organizing activities among the employees of
the Company or of any Subsidiary. The execution of this Agreement and
the consummation of the transaction contemplated by this Agreement will
not result in a breach or other violation of any collective bargaining
agreement to which the Company or any Subsidiary is a party, except for
such breaches or violations which would reasonably be expected to have a
Material Adverse Effect upon the Company.
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(v) Set forth in Section 3.1(m)(v) of the
Company Disclosure Schedule is a list of all binding employment
contracts or severance agreements with employees of the Company or of
any Subsidiary which are not set forth in the Company SEC Reports.
(n) INTELLECTUAL PROPERTY. As used herein, "Material
Intellectual Property" means (A) the Company's mark "Rental Service Corporation"
and the related logo, a copy of which is set forth on Section 3.1(n) of the
Company Disclosure Schedule and (B) its rights with respect to the Master
Agreement dated August 31, 1994 among Wynne Systems, Inc. and ACME Acquisition
Corp.
(i) Except as would not be reasonably likely
to have a Material Adverse Effect upon the Company, the Company owns,
has the right to acquire, is licensed or otherwise has the right to use
(in each case, free and clear of all Liens) all the Material
Intellectual Property as it is used in its business as it is currently
conducted.
(ii) (A) Except as would not be reasonably
likely to have a Material Adverse Effect upon the Company, none of the
Material Intellectual Property of the Company is the subject of any
license, security interest or other agreement granting rights therein to
any third party; (B) no judgment, decree, injunction, rule or order has
been rendered by any U.S. or foreign Governmental Entity which would
limit, cancel or question the validity of, or the Company's rights in
and to any Material Intellectual Property in any respect that would
reasonably be expected to have individually or in the aggregate a
Material Adverse Effect with respect to the Company; and (C) the Company
has not received notice of any pending or threatened suit, action or
proceeding that seeks to limit, cancel or question the validity of, or
the Company's rights in and to any Material Intellectual Property,
which, if adversely determined, would reasonably be expected to have
individually or in the aggregate a Material Adverse Effect with respect
to the Company.
(iii) Except as would not be reasonably likely
to have a Material Adverse Effect upon the Company, to the knowledge of
the Company (A) no claims are pending or threatened that the Company or
any Material Subsidiary is infringing on or otherwise violating the
rights of any person with regard to any Material Intellectual Property,
and (B) no person is infringing on or otherwise violating any right of
the Company or any Material Subsidiary with respect to any Material
Intellectual Property owned by and/or licensed to the Company or any
Material Subsidiary.
(o) ENVIRONMENTAL PROTECTION.
(i) The Company and each of its Subsidiaries
is in compliance with all applicable Environmental Laws and neither it
nor any of its Subsidiaries has received any communication from any
person or Governmental Entity that alleges that it or any of its
Subsidiaries is not in compliance with applicable Environmental Laws,
except where any failure or alleged failure to be in such compliance
would not reasonably
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be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
(ii) The Company and each of its Subsidiaries
has obtained or has applied for all environmental, health and safety
permits and governmental authorizations (collectively, the
"ENVIRONMENTAL PERMITS") necessary for the construction of their
facilities or the conduct of their operations except where the failure
to so obtain would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, and all
such Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency
approval, and it and its Subsidiaries are in compliance with all terms
and conditions of the Environmental Permits except as would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(iii) There is no Environmental Claim (as
defined below) pending or, to the knowledge of the Company's executive
officers, threatened (A) against the Company or any of its Subsidiaries,
(B) against any person or entity whose liability for such Environmental
Claim the Company or any of its Subsidiaries has retained or assumed
either contractually or by operation of law, or (C) against any real or
personal property or operations which the Company or any of its
Subsidiaries owns, leases, manages or operates in whole or in part,
which, in any such case described in this Section 3.1(o)(iii), would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(iv) Except as set forth in the environmental
audits, reports, surveys and assessments made available pursuant to
clause (vi) below, the Company has no knowledge of any Releases of any
Hazardous Materials (as defined below) that would be reasonably likely
to result in any Environmental Claim against the Company or any of its
Subsidiaries, or against any person or entity whose liability for such
Environmental Claim the Company or any of its Subsidiaries has retained
or assumed either contractually or by operation of law or which would
result in the Company incurring liability under any Environmental Law,
except for any Environmental Claim or liability which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(v) The Company has no knowledge, with respect
to any predecessor of it or any of its Subsidiaries or any real property
formerly owned, leased or operated by it or any of its Subsidiaries, of
any pending or threatened Environmental Claim which could reasonably be
expected to have a Material Adverse Effect on the Company, or of any
Release of Hazardous Materials that would be reasonably likely to result
in any Environmental Claim which would reasonably be expected to have a
Material Adverse Effect on the Company.
(vi) The Company has made available to Parent
true and complete copies of all material environmental audits, surveys,
reports and assessments
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relating to real property owned, leased or operated by the Company or
any of its Subsidiaries.
(vii) As used in this Agreement:
(A) "ENVIRONMENTAL CLAIM" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity (including
any Governmental Entity) alleging potential liability (including potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties) relating to
a Release or threatened Release into the environment of any Hazardous Materials
at any location, whether or not owned, operated, leased or managed by the
Company or any of its Subsidiaries any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(B) "ENVIRONMENTAL LAWS" means all applicable federal,
state and local laws, rules and regulations relating to pollution, the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), natural resources or protection of human health as it
relates to the environment including laws and regulations relating to Releases
or threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(C) "HAZARDOUS MATERIALS" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls; (B) any chemicals, materials or substances which are
now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or words
of similar import under any Environmental Law and (C) any other chemical,
material, substance or waste, exposure to or use of which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in which the
Company or any of its Subsidiaries operates.
(D) "RELEASE" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
(p) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except Merrill Lynch, Pierce
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Fenner & Smith Incorporated ("Merrill Lynch") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley").
(q) OPINIONS OF FINANCIAL ADVISORS. The Company has received
the opinions of Merrill Lynch and Morgan Stanley, each dated the date of this
Agreement, to the effect that, as of such date, the consideration to be received
by holders of Company Common Stock under this Agreement is fair, from a
financial point of view, to the holders of Company Common Stock.
(r) BOARD RECOMMENDATION. The Company Board, at a meeting
duly called and held, (i) has determined that this Agreement and the
transactions contemplated hereby, including the Merger, taken together are fair
to and in the best interests of the stockholders of the Company, and declared
advisable this Agreement, (ii) assuming that neither Parent nor Merger Sub is an
Interested Stockholder (as such term is defined in Section 203 of the DGCL)
immediately prior to the Company Board taking the actions described in this
Section 3.1(r), took all other actions necessary to render the restrictions on
business combinations contained in Section 203 of the DGCL inapplicable to the
Offer, the Merger, this Agreement, and the transactions contemplated hereby and
thereby and (iii) resolved to recommend that the holders of the shares of
Company Common Stock accept the Offer, tender all their shares of Company Common
Stock pursuant to the Offer and approve this Agreement and the transactions
contemplated herein, including the Merger.
(s) INSURANCE. Section 3.1(s) of the Company Disclosure
Schedule sets forth a true and complete list of all of the Company's material
insurance policies and agreements. The Company agrees to use its best efforts
to keep its existing insurance policies and agreements in place through the
Effective Time.
(t) RENTAL FLEET. The Company's rental fleet is "rental
ready," except where the failure to be rental ready would not reasonably be
expected to have a Material Adverse Effect on the Company. "Rental ready" means
that each item of rental equipment is fully operable and available for rental to
customers, excluding items which are undergoing maintenance and repairs in the
ordinary course of business and items scheduled to be sold without violation of
clause (iii) of Section 4.1(i).
(u) CERTAIN BUSINESS PRACTICES. Except as would not
reasonably be expected to have a Material Adverse Effect on the Company, none of
the Company, any of its Subsidiaries or, to the Company's knowledge, any
directors, officers, agents or employees of the Company or any of its
Subsidiaries has, in connection with the business or affairs of the Company or
its Subsidiaries, (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, or
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(v) PROPERTIES. Section 3.1(v) of the Disclosure Schedule
contains a true and complete list of all real properties owned or leased by the
Company. The Company has good and marketable title to all properties, assets
and rights of any kind whatsoever which are material to the conduct of its
business (whether real, personal or mixed, and whether tangible or intangible)
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owned by it (collectively, along with leased real property of the Company, the
"Company Assets"), in each case free and clear of all Liens and other
encumbrances except for such Liens which have been disclosed in the SEC
Documents or are listed on Section 3.1(v) of the Company Disclosure Schedule and
except those Liens and defects or burdens on title which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company. There are no pending or, to the knowledge of the Company,
threatened condemnation proceedings against or affecting any Company Asset, and,
to the knowledge of the Company, none of the Company Assets is subject to any
commitment or other arrangement for its sale to a third party outside the
ordinary course of business, which in the case of any such condemnation or sale
either individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect on the Company. Each of the leases for real property
under which the Company or any Subsidiary is currently a lessee is valid,
enforceable and in full force and effect, and neither the Company nor any
Subsidiary has violated any provision of, or failed to perform any act which,
with or without notice, lapse of time, or both, could reasonably be expected to
constitute a default under the provisions of, any such lease, except where the
lack of validity, full force and effect or enforceability or the existence of
such default would not reasonably be expected to have a Material Adverse Effect
on the Company.
(w) ARIZONA STATUTE. The Company is not a "issuing public
corporation" within the meaning of Section 10-2701 of the Arizona Revised
Statutes.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Parent has been duly
incorporated and is validly existing and in good standing under the laws of its
jurisdiction of organization and has requisite corporate power and authority to
carry on its business as presently conducted. Parent is duly qualified and in
good standing or otherwise authorized to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, except where the failure so to qualify could
not reasonably be expected to have a Material Adverse Effect on Parent. The
copies of the Organizational Documents of Parent which were previously furnished
or made available to the Company are true, complete and correct copies of such
documents as in effect on the date of this Agreement.
(b) AUTHORITY; NO CONFLICTS.
(i) Parent has all requisite corporate power
and corporate authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of Parent. This Agreement has been duly executed and delivered
by Parent and constitutes a valid and binding agreement of Parent,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting
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creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
(ii) The execution and delivery of this
Agreement does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby will not, result in any
Violation of: (A) any provision of the Organizational Documents of
Parent or any of its Material Subsidiaries or (B) except as could not
reasonably be expected to have a Material Adverse Effect on Parent or
materially impair or delay the ability of Parent to consummate the
transactions contemplated hereby and subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, any of its Material Subsidiaries or
their respective properties or assets.
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent in
connection with the execution and delivery of this Agreement by Parent
or the consummation by Parent of the transactions contemplated hereby,
except for (A) the consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to
clause (x) of Section 3.1(c)(iii) and (B) such consents, approvals,
orders, authorizations, registrations, declarations and filings the
failure of which to make or obtain could not reasonably be expected to
have a Material Adverse Effect on Parent or materially impair or delay
the ability of Parent to consummate the transactions contemplated
hereby.
(c) FINANCIAL STATEMENTS. Each of the financial statements
(including the related notes) included in the English language version of the
Annual Report for Atlas Copco AB for the year ended December 31, 1998 have been
prepared in conformity with generally accepted accounting principles in Sweden
and the Annual Accounts Act.
(d) INFORMATION SUPPLIED.
(i) None of (A) the Offer Documents or (B) the
information supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Proxy Statement, if any,
the Schedule 14D-9 and any other documents to be filed with the SEC in
connection with the transactions contemplated hereby, including any
amendment or supplement to such documents, will, at the respective times
such documents are filed, and, with respect to the Proxy Statement, if
any, and the Offer Documents, when first published, sent or given to
stockholders of the Company, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to made the statements made therein, in the light of
the circumstances under which they are made, not misleading or, in the
case of the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the
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Company Stockholders Meeting, if any, and at the Effective Time,
contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order
to made the statements made therein, in the light of the circumstances
under which they are made, not misleading or necessary to correct any
statement in any earlier communication with respect to the Offer or
the solicitation of proxies for the Company Stockholders Meeting, if
any, which shall have become misleading. The Offer Documents will
comply as to form in all material respects with the requirements of
the Exchange Act and Securities Act and the rules and regulations of
the SEC thereunder.
(ii) Notwithstanding the foregoing provisions
of this Section 3.2(d), no representation or warranty is made by Parent
or Merger Sub with respect to statements made or incorporated by
reference in the Offer Documents based on information supplied by the
Company for inclusion or incorporation by reference therein.
(e) VOTE REQUIRED. No vote of the holders of the outstanding
shares of equity securities of Parent or Atlas Copco AB is necessary to approve
this Agreement or any of the transactions contemplated hereby.
(f) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except Credit Suisse First Boston.
(g) OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date of
this Agreement, neither Parent nor any of its Subsidiaries or, to the best of
their knowledge, any of their respective affiliates or associates (as such terms
are defined under the Exchange Act) (i) beneficially owns, directly or
indirectly or (ii) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in case of either
clause (i) or (ii), shares of capital stock of the Company.
(h) FINANCING. Parent has available, and will make available
to Merger Sub, sufficient funds to consummate the Offer and the Merger on the
terms contemplated by this Agreement.
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent
and Merger Sub represent and warrant to the Company as follows:
(a) ORGANIZATION AND CORPORATE POWER. Merger Sub is a wholly
owned Subsidiary of Parent and a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware. The copies of the
Organizational Documents of Merger Sub which were previously furnished or made
available to the Company are true, complete and correct copies of such
documents.
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(b) CORPORATE AUTHORIZATION. Merger Sub has all requisite
corporate power and corporate authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger Sub
of the transactions contemplated hereby have been duly authorized by all
necessary corporate and stockholder action on the part of Merger Sub. This
Agreement has been duly executed and delivered by Merger Sub and constitutes a
valid and binding agreement of Merger Sub, enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(c) NON-CONTRAVENTION. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger Sub
of the transactions contemplated hereby do not and will not contravene or
conflict with the Organizational Documents of Merger Sub.
(d) NO BUSINESS ACTIVITIES. Merger Sub is not a party to any
material agreements and has not conducted any activities other than in
connection with the organization of Merger Sub, the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby.
Merger Sub has no Subsidiaries.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that Parent shall
otherwise consent in writing, which consent shall not be unreasonably withheld
or delayed):
(a) ORDINARY COURSE. The Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in all material respects, and shall use all reasonable efforts
to preserve intact their present business organizations and preserve their
relationships with customers, suppliers, lessors of real property and others
having business dealings with them; PROVIDED, HOWEVER, that no action by the
Company or its Subsidiaries with respect to matters specifically addressed by
any other provision of this Section 4.1 shall be deemed a breach of this
Section 4.1(a) unless such action would constitute a breach of one or more of
such other provisions.
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall
not, and shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable or exchangeable for any shares of its capital
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stock except as otherwise permitted under certain option agreements to effect
cashless option exercises.
(c) ISSUANCE OF SECURITIES. The Company shall not and shall
cause its Subsidiaries not to issue, deliver, sell, pledge or otherwise encumber
(except as pledged on the date hereof and disclosed pursuant to the Company
Disclosure Schedule or the Company SEC Reports), or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into or exercisable or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or Company Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than the issuance of Company Common Stock upon the exercise of
stock options or stock appreciation rights outstanding on the date hereof.
(d) ORGANIZATIONAL DOCUMENTS. Except to the extent required
to comply with their respective obligations hereunder or required by law, the
Company and its Material Subsidiaries shall not amend or propose to amend their
respective Organizational Documents.
(e) INDEBTEDNESS. The Company shall not (i) incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or guarantee any debt securities of other Persons other than (x)
indebtedness of the Company or its Subsidiaries to the Company or its
Subsidiaries or (y) in the ordinary course of business, including, without
limitation, indebtedness for acquisitions made in accordance with clause (ii) of
subsection (i) below, (ii) make any loans, advances or capital contributions to,
or investments in, any other Person, other than by the Company or its
Subsidiaries to or in the Company or its Subsidiaries or (iii) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than, in the case of clauses (ii)
and (iii), loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary course of
business.
(f) BENEFIT PLANS. The Company shall not, and shall not
permit its Material Subsidiaries to (i) increase the compensation payable or to
become payable to any of its executive officers or employees or (ii) take any
action with respect to the grant of any severance or termination pay, or stay,
bonus or other incentive arrangement (other than pursuant to benefit plans and
policies as in effect on the date of this Agreement), except (A) any such
increases made in the ordinary course of business, (B) any person subsequently
becoming eligible to participate in plans existing on the date hereof or (C) as
provided in Section 5.5.
(g) OTHER ACTIONS. The Company shall not, and shall not
permit its Subsidiaries to, take any action that could reasonably be expected to
result in (i) any of the representations or warranties of the Company set forth
in this Agreement that are qualified as to materiality becoming untrue, (ii) any
of such representations and warranties that are not so qualified becoming untrue
in any material respect or (iii) except as otherwise permitted by Sections
5.1(a) or 5.4, any of the conditions to the Merger set forth in Article VI not
being satisfied.
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(h) TAX ELECTIONS AND CONTROVERSIES. Except in the ordinary
course of business and consistent with past practice, the Company shall not make
any Tax election and shall not without the consent of Parent, which shall not be
unreasonably withheld, change its method of accounting or settle or compromise
any federal, state, local or foreign Tax liability.
(i) OTHER ACTIONS. The Company shall not, and shall not
permit its Subsidiaries to:
(i) revalue in any material respect any of its
assets, including writing down the value of inventory or equipment or
writing-off notes or accounts receivable, other than in the ordinary
course of business consistent with past practice or as required by
generally accepted accounting principles;
(ii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the stock
or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof, provided that the foregoing shall not restrict
acquisitions made in the ordinary course of business, consistent with
past practices and involving aggregate purchase price not exceeding $10
million (and in connection therewith, the Company agrees to consult as
to the terms thereof with Parent);
(iii) sell, lease, license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any of
its properties or assets other than any such properties or assets the
value of which does not exceed $250,000 individually and $2,000,000 in
the aggregate, except sales or encumbering or subjecting to Liens in the
ordinary course of business consistent with past practice;
(iv) acquire or agree to acquire any assets in
transactions not subject to clause (ii) above, other than in the
ordinary course of business consistent with past practice, that are
material, individually or in the aggregate, to the Company, or make or
agree to make any capital expenditures except capital expenditures
which, individually or in the aggregate, do not exceed $100 million (of
which $85 million is for capital expenditures committed but for which
the properties have not yet been received) in the aggregate;
(v) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization, except in respect of an entity
acquired after the date hereof;
(vi) change any material accounting principle
used by it, except as required by generally accepted accounting
principles, the SEC or applicable law; or
(vii) settle or compromise any litigation or
settle a dispute under any contract or other agreement (whether or not
commenced prior to the date of this Agreement) other than settlements or
compromises of litigation where the amount paid
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(net, after giving effect to insurance proceeds actually received or
used to satisfy such claim) by the Company in settlement or compromise
does not exceed $250,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such matters does
not exceed $1,000,000.
(j) AGREEMENT. The Company shall not, and shall not permit
its Subsidiaries, to enter into any agreement to do any of the foregoing.
4.2 COVENANTS OF PARENT AND MERGER SUB. During the period from the
date of this Agreement and continuing until the Effective Time (except as
expressly contemplated or permitted by this Agreement or to the extent that the
Company shall otherwise consent in writing) Parent shall carry on its business
in the usual, regular and ordinary course in all material respects, and shall
not, and shall not permit any of its Subsidiaries to, take any action that could
reasonably be expected to result in (i) any of the representations or warranties
of Parent or Merger Sub set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Merger set forth in Article VI not being satisfied.
4.3 ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall
(a) confer on a regular and frequent basis with the other, (b) report (to the
extent permitted by law, regulation and any applicable confidentiality
agreement) to the other on operational matters and (c) promptly notify the other
orally and in writing of (i) any representation or warranty made by it contained
in this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it (A) to comply with or satisfy in any respect any covenant,
condition or agreement required to be complied with or satisfied by it under
this Agreement that is qualified as to materiality or (B) to comply with or
satisfy in any material respect any covenant, condition or agreement required to
be complied with or satisfied by it under this Agreement that is not so
qualified as to materiality or (iii) any change, event or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect on such
party or materially and adversely affect its ability to consummate the Merger in
a timely manner; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall file all reports required to be filed by each of them with the
SEC and all other Governmental Entities between the date of this Agreement and
the Effective Time and shall (to the extent permitted by law or regulation or
any applicable confidentiality agreement) deliver to the other party copies of
all such reports promptly after the same are filed. Subject to applicable laws
relating to the exchange of information, each of the Company and Parent shall
have the right to review in advance, and to the extent practicable each will
consult with the other, with respect to all the information relating to the
other party and each of their respective Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials submitted
to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each
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party agrees that, to the extent practicable, it will consult with the other
party with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other party apprised of the status of matters
relating to completion of the transactions contemplated hereby.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 RECOMMENDATION; PREPARATION OF PROXY STATEMENT; THE COMPANY
STOCKHOLDERS MEETING.
(a) The Company shall, through the Company Board, recommend
to its stockholders that they accept the Offer and tender all of their shares of
Company Common Stock to Merger Sub and vote in favor of adoption of this
Agreement; PROVIDED, HOWEVER, that the Company Board may withdraw or modify such
recommendation (and its declaration of the advisability of this Agreement) to
the extent that the Company Board determines in good faith to do so consistent
with the exercise of its fiduciary duties (after consulting with outside legal
counsel and, if appropriate, its outside financial advisor, and other than in
connection with a Transaction Proposal) or as permitted under Section 5.4.
Except as provided in Section 5.4, if required by the DGCL or the Company's
Organizational Documents in order to consummate the Merger, the Company shall,
as soon as practicable following the acquisition by Merger Sub of the shares of
the Company Common Stock pursuant to the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS
MEETING") for the purpose of obtaining the Required Company Vote. Parent and
Merger Sub shall vote or cause to be voted all the shares of Company Common
Stock owned of record by Parent, Merger Sub or any of Parent's other
Subsidiaries in favor of the approval of the Merger and adoption of this
Agreement. After the date hereof and prior to the expiration of the Offer,
Parent shall not purchase, offer to purchase, or enter into any contract,
agreement or understanding regarding the purchase of shares of Company Common
Stock, except pursuant to the terms of the Offer and the Merger.
(b) Notwithstanding the preceding paragraph or any other
provision of this Agreement, in the event Parent, Merger Sub or any other
Subsidiary of Parent shall beneficially own, in the aggregate, at least 90% of
the outstanding shares of the Company Common Stock, the Company shall not be
required to call the Company Stockholders Meeting or to file or mail the Proxy
Statement, and the parties hereto shall, at the request of Parent or the Company
and subject to Article VI, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the acceptance for
payment of and payment for shares of the Company Common Stock by Merger Sub
pursuant to the Offer without a meeting of stockholders of the Company in
accordance with Section 253 of the DGCL.
(c) If required by applicable law, as soon as practicable
following Parent's request, the Company and Parent shall prepare and file with
the SEC the Proxy Statement. Each of the Company and Parent shall use
reasonable efforts to cause the Proxy Statement to be
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mailed to the Company's stockholders, as promptly as practicable. The Company
shall use its reasonable best efforts to obtain and furnish the information
required to be included by it in the Proxy Statement and, after consultation
with Parent, shall respond promptly to any comments of the SEC relating to
any preliminary proxy statement regarding the Merger and the other
transactions contemplated by this Agreement and to cause the Proxy Statement
to be mailed to its stockholders, all at the earliest practicable time. The
Company, acting through its Board of Directors, shall include in the Proxy
Statement the recommendation of its Board of Directors that stockholders of
the Company vote in favor of the approval and adoption of this Agreement and
the Merger. The Company shall use its reasonable best efforts to solicit
from stockholders of the Company proxies in favor of such approval and
adoption and shall take all other actions necessary or advisable to secure
the vote or consent of the Company's stockholders required by the DGCL to
effect the Merger. All obligations of the Company in this Section 5.1(c)
shall be subject to the Company's rights under Section 5.4.
5.2 ACCESS TO INFORMATION. From the date hereof until the earlier of
the Effective Time or the termination of this Agreement, upon reasonable notice,
the Company shall afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Parent ("PARENT
REPRESENTATIVES") reasonable access during normal business hours, to all of its
and its Subsidiaries' properties, books, contracts, commitments and records and
its officers, management employees and representatives and, during such period,
the Company shall furnish promptly to Parent, consistent with its legal
obligations, all information concerning its business, properties and personnel
as the other party may reasonably request; PROVIDED, HOWEVER, the Company may
restrict the foregoing access to the extent that (i) a Governmental Entity
requires the Company or any of its Subsidiaries to restrict access to any
properties or information reasonably related to any such contract on the basis
of applicable laws and regulations or (ii) any law, treaty, rule or regulation
of any Governmental Entity applicable to the Company or any of its Subsidiaries
requires the Company or any of its Subsidiaries to restrict access to any
properties or information (subject, however, to existing confidentiality and
similar non-disclosure obligations and the preservation of attorney client and
work product privileges). Such information shall be held in confidence to the
extent required by, and in accordance with, the provisions of the letter
agreement dated June 14, 1999, between the Company and Atlas Copco AB (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement shall,
notwithstanding language in such Confidentiality Agreement to the contrary,
remain in full force and effect.
5.3 APPROVALS AND CONSENTS; COOPERATION. Each of the Company and
Parent shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) its reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on their part under this Agreement and applicable laws to consummate the Offer
and consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including (i) preparing
and filing as promptly as practicable (including, without limitation, filing the
notifications provided for under the HSR Act within five business days following
the date of this Agreement) all documentation to effect all necessary
applications, notices, petitions, filings, tax ruling requests and other
documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be
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obtained from any third party and/or any Governmental Entity in order to
consummate the Offer or Merger or any of the other transactions contemplated
by this Agreement and (ii) taking all reasonable steps as may be necessary to
obtain all such consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. Without limiting the
generality of the foregoing, each of the Company and Parent agrees to make
all necessary filings in connection with the Required Regulatory Approvals as
promptly as practicable after the date of this Agreement, and to use its
reasonable efforts to furnish or cause to be furnished, as promptly as
practicable, all information and documents requested with respect to such
Required Regulatory Approvals and shall otherwise cooperate with the
applicable Governmental Entity in order to obtain any Required Regulatory
Approvals in as expeditious a manner as possible. Each of the Company and
Parent shall take all necessary action to cause the expiration of the notice
periods under the HSR Act with respect to the Offer or the Merger and the
other transactions contemplated by this Agreement as promptly as possible
after the execution of this Agreement. Each of the Company and Parent shall
take all necessary action to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to the Offer or the Merger
or any other transactions contemplated by this Agreement in connection with
the Required Regulatory Approvals. In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened
to be instituted) challenging the Offer or the Merger or any other
transaction contemplated by this Agreement as violative of applicable
antitrust or competition laws, each of the Company and Parent shall cooperate
and shall contest and resist, except insofar as the Company and Parent may
otherwise agree, any such action or proceeding, including any action or
proceeding that seeks a temporary restraining order or preliminary injunction
that would prohibit, prevent or restrict consummation of the Offer or the
Merger or any other transaction contemplated by this Agreement. The Company
and arent each shall, upon request by the other, furnish the other with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may reasonably be necessary or
advisable in connection with the Offer Documents, Schedule 14D-9, Proxy
Statement or any other statement, filing, tax ruling request, notice or
application made by or on behalf of the Company, Parent or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the Offer, the Merger or the other transactions contemplated
by this Agreement.
5.4 TRANSACTION PROPOSALS. Prior to the termination of this
Agreement, the Company shall not (whether directly or indirectly through
advisors, agents or other intermediaries), and shall not authorize or permit any
of its officers, directors, agents, representatives or advisors to (a) solicit,
initiate or knowingly encourage or facilitate the submission of inquiries,
proposals or offers from any Person (other than Merger Sub or Parent) relating
to (i) any acquisition or purchase of over 20% of the consolidated assets of the
Company or of over 20% of any class of equity securities of the Company, (ii)
any tender offer (including a self tender offer) or exchange offer that if
consummated would result in any third party beneficially owning over 20% of any
class of equity securities of the Company, or (iii) any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company other than
the transactions contemplated by this Agreement (collectively, "TRANSACTION
PROPOSALS"), (b) agree to or recommend to its stockholders any Transaction
Proposal, or (c) enter into or participate in any discussions or negotiations
regarding a Transaction Proposal, or furnish to any Person (other than
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Parent, Merger Sub or any of their representatives) any information with
respect to its business, properties or assets in connection with a
Transaction Proposal; PROVIDED, HOWEVER, that nothing in this Agreement shall
prohibit the Company (either directly or indirectly through advisors, agents
or other intermediaries) from (A) furnishing information pursuant to
appropriate terms of confidentiality concerning the Company and its business,
properties or assets to a third party who has indicated an interest in making
a bona fide Transaction Proposal (provided, that if such confidentiality
terms are less favorable to the Company in any material respect than the
terms of the Confidentiality Agreement, that the Confidentiality Agreement
shall be deemed amended to provide for such more favorable confidentiality
terms) , (B) engaging in discussions or negotiations with such third party,
(C) following receipt of a bona fide Transaction Proposal, taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or otherwise making disclosure to its stockholders, (D)
following receipt of a bona fide Transaction Proposal, failing to make or
withdrawing or modifying its recommendation and/or declaration of
advisability of the Offer and/or adoption of this Agreement, and to the
extent it does so, the Company may refrain from calling, providing notice of
and holding the Company Stockholders Meeting to adopt this Agreement and from
soliciting proxies or consents to secure the vote or written consent of its
stockholders to adopt this Agreement, (E) waiving the provisions of any
confidentiality and/or standstill agreement to which the Company is a party
(provided, that the Company shall be deemed to simultaneously waive any such
provisions of the Confidentiality Agreement), (F) taking any non-appealable,
final action ordered to be taken by the Company by any court of competent
jurisdiction and/or (G) making any disclosure or filing required by law
(including, without limitation, Delaware state law and the rules and
regulations promulgated under the federal securities laws), stock exchange
rules or the rules, regulations, order or request of any Governmental Entity
(including the SEC), but in each case referred to in the foregoing clauses
(A) through (E) only to the extent that the Company Board shall have
concluded in good faith after consulting with its outside legal counsel and
financial advisor that such action is consistent with the discharge of its
fiduciary duties to the stockholders of the Company under applicable law;
PROVIDED, FURTHER, that the Board of Directors of the Company shall not take
any of the foregoing actions referred to in clauses (A) through (D) above,
until after 24 hours notice to Parent with respect to such action. The
Company Board shall, to the extent that it has concluded in good faith after
consulting with its outside legal counsel and financial advisors that such
action is consistent with the discharge of its fiduciary duties to the
stockholders of the Company under applicable law, promptly inform Parent of
the initial material terms and conditions of such Transaction Proposal and
the identity of the Person making it. Upon execution of this Agreement, the
Company shall immediately cease and cause its advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations conducted heretofore with respect to any Transaction Proposal
with any party other than Parent, Merger Sub or their representatives, and
shall, upon consummation of the Offer, use its reasonable best efforts to
cause any such other party in possession of confidential information about
the Company that was furnished by or on behalf of the Company to return or
destroy all such information in the possession of any such party or in the
possession of any agent or advisor of any such party. Notwithstanding
anything to the contrary contained in Section 5.4 or elsewhere in this
Agreement, prior to the Effective Time, the Company may, in connection with a
possible Transaction Proposal, refer any third party to this Section 5.4 and
Section 7.2(b) and make a copy of this Section 5.4 and Section 7.2(b)
available to a third party.
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5.5 EMPLOYEE BENEFITS.
(a) Parent agrees that, and shall take all necessary action
to ensure that, during the period commencing at the Effective Time and ending on
the first anniversary thereof, the employees of the Company will continue to be
provided with (whether by Parent, the Surviving Corporation or otherwise)
employee benefit plans (other than stock option or other plans involving the
potential issuance of securities of the Company and other incentive or
performance based programs or arrangements) which in the aggregate are not
materially less favorable than those currently provided by Company to such
employees, to the extent permitted under laws and regulations in force from time
to time; PROVIDED, HOWEVER, that subject to compliance with this Section 5.5,
Parent reserves the right to review all employee benefits after the Effective
Time and to make such changes as it deems appropriate. Parent intends to cause
Surviving Corporation to provide or enter into incentive and performance based
compensation plans or arrangements with management employees of the Company, the
purpose of which will be to provide such management employees with incentive and
performance based compensation at levels of benefits and performance targets
which are to replace the incentive and performance based compensation that such
management employees are eligible to participate in and receive from the Company
on the date hereof (excluding any equity based incentive plans), however,
nothing in this Section 5.5(a) shall require the Surviving Corporation to
provide any specific type of plan or arrangement (i.e., stock options).
(b) For purposes of determining eligibility to participate,
waiting periods, vesting and accrual or entitlement to benefits where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Corporation or any of their respective Subsidiaries, employees of
the Company and its Subsidiaries as of the Effective Time shall receive service
credit for service with the Company and its Subsidiaries if and to the same
extent such service credit was granted for such purposes under the Company
Benefit Plans, subject to offsets for previously accrued benefits and no
duplication of benefits.
(c) Parent shall cause the Surviving Corporation to assume
and honor in accordance with their terms all written employment, severance and
termination plans and agreements (including change in control provisions) of
employees of the Company and its Subsidiaries as in effect on the Closing Date,
subject to all rights to amend or terminate as set forth therein, Section 5.5(a)
and the other agreements, plans and policies identified in Section 5.5(c) of the
Company Disclosure Schedule but excluding any obligations regarding compensation
plans linked to equity performance or earnings per share.
(d) From and after the Effective Time, Parent shall and shall
cause the Surviving Corporation and its Subsidiaries to (i) cause any
pre-existing condition or limitation and any eligibility waiting periods (to the
extent such conditions, limitations or waiting periods did not apply to the
employees of the Company under the Company Benefit Plans) under any group health
plans of Parent or any of its Subsidiaries to be waived with respect to
employees of the Company and it Subsidiaries and their eligible dependents, and
(ii) give each employee of the Company and its Subsidiaries credit for the plan
year in which the Effective Time occurs toward applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the
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Effective Time (or such later date on which participation commences) during
the applicable plan year.
5.6 FEES AND EXPENSES. Subject to Section 7.2(b), whether or not the
transactions contemplated hereby are consummated, all Expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such Expenses, except (a) if the Merger is
consummated, the Surviving Corporation shall pay, or cause to be paid, any and
all property or transfer taxes imposed on the Company or its Subsidiaries and
any real property transfer tax imposed on any holder or former holder of shares
of capital stock of the Company resulting from the Merger, (b) the Expenses
incurred in connection with the printing, filing and mailing to stockholders of
the Proxy Statement and the solicitation of stockholder approvals shall be
shared equally by the Company and Parent, and (c) as provided in Section 7.2.
As used in this Agreement, "EXPENSES" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Offer Documents and the Proxy
Statement and the solicitation of stockholder approvals and all other matters
related to the transactions contemplated hereby.
5.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Parent and
the Surviving Corporation shall cause to be maintained in effect (i) for a
period of six (6) years after the Effective Time, the current provisions
regarding indemnification of current or former officers and directors (each an
"INDEMNIFIED PARTY") contained in the Organizational Documents of the Company or
its Subsidiaries and in any agreements between an Indemnified Party and the
Company or its Subsidiaries, provided that in the event any claim or claims are
asserted or made within such six year period, all rights to indemnification in
respect of any claim or claims shall continue until final disposition of any and
all such claims, and (ii) for a period of six (6) years, policies of directors'
and officers' liability insurance and fiduciary liability insurance equivalent
to the current policies maintained by the Company (the "D&O Insurance") and
which are, in the aggregate, no less advantageous to the insured (and provided
that any substitution of policies shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time) with
respect to claims arising from facts or events that occurred on or before the
Effective Time; PROVIDED, that (A) the Company following the Merger shall not be
required to spend in excess of 200% of the amount spent on current annual
premiums for the D&O Insurance (the "PREMIUM LIMIT") per year therefor; PROVIDED
further that if the Company following the Merger would be required to spend in
excess of the Premium Limit per year to obtain insurance having the maximum
available coverage under such D&O Insurance policies, the Company will be
required to spend up to such amount to maintain or procure insurance coverage
pursuant hereto, subject to availability of such (or similar) coverage and
(B) such policies may in the sole discretion of the Company be one or more
"tail" policies for all or any portion of the full six year period, provided
that such "tail" policies, contain terms and conditions and provide coverage no
less advantageous to the insureds than the terms, conditions and coverage in the
D&O Insurance. The Company agrees that in the event it would be required to
spend in excess of the Premium Limit per year to obtain insurance having the
maximum available coverage under D&O
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Insurance policies, the Company will notify the officers and directors who
are the beneficiaries thereof and permit such officers and directors to pay
any excess amount over the Premium Limit which may be necessary to maintain
such policies. This covenant is intended to be for the benefit of, and shall
be enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives. For a period of six (6) years after the Effective
Time (provided that in the event any claim or claims are asserted or made
within such six year period, all rights to indemnification in respect of any
claim or claims shall continue until final disposition of any and all such
claims), Parent shall indemnify the Indemnified Parties to the same extent as
such Indemnified Parties are entitled to indemnification under the
instruments described and to the extent set forth in clause (i) of the first
sentence of this Section 5.7. Without limitation of the foregoing, in the
event any such Indemnified Party is or becomes involved in any action,
proceeding or investigation in connection with any matter occurring prior to
or on the Effective Time, including the transactions contemplated hereby,
Parent will pay as incurred such Indemnified Party's reasonable fees and
expenses of counsel selected by the Indemnified Party and reasonably
acceptable to Parent (including the cost of any investigation and preparation
and the cost of any appeal) incurred in connection therewith. This covenant
shall survive the closing of the transactions contemplated hereby and is
intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties and their respective heirs and legal representatives.
Notwithstanding the foregoing, Parent shall not, in connection with any one
action or proceeding for which it is obligated to indemnify the Indemnified
Parties hereunder or separate but substantially similar actions or
proceedings arising out of the same general allegations be liable for fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for all Indemnified Parties (except in the event
that one or more of the Indemnified Parties shall have an actual or potential
conflict of interest that would make it reasonably advisable to retain
separate counsel). Parent shall be entitled to participate in the defense of
any such action or proceeding and counsel selected by the Indemnified Party
shall, to the extent consistent with their professional responsibilities,
cooperate with Parent and any counsel designated by Parent.
5.8 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
the Company and Parent shall use all reasonable efforts to develop a joint
communications plan and each party shall use all reasonable efforts (i) to
ensure that all press releases and other public statements with respect to the
transactions contemplated hereby shall be consistent with such joint
communications plan and (ii) unless otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange, to consult with each other before issuing any press release or
otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
5.9 TAKEOVER STATUTES. The Company and the members of the Company
Board, subject to their fiduciary duties, shall have granted such approvals, if
any, and shall have taken such actions, if any, as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise shall have acted to render
inapplicable, eliminate or minimize the effects of Section 203 of the DGCL or
any other takeover statute ("TAKEOVER STATUTE") as may be applicable to the
transactions to be undertaken pursuant to this Agreement.
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5.10 RIGHTS AGREEMENT. As promptly as practicable on or after the date
hereof, but in no event later than the expiration date of the Offer, the Company
will execute an amendment to the Rights Agreement (the "Rights Amendment")
having the effects described in the subsequent sentences of this Section 5.10.
The Company represents that the Rights Amendment will be sufficient to render
the Rights (as defined in the Rights Agreement) inoperative with respect to any
acquisition of shares of Company Common Stock by Parent, Merger Sub or any of
their affiliates pursuant to this Agreement and for so long as this Agreement
remains in effect. The Company represents that as a result of the Rights
Amendment, the Rights will not be exercisable upon or at any time after
consummation of the Offer and for so long as this Agreement remains in effect by
reason of the transactions contemplated hereby.
5.11 PERFORMANCE BY MERGER SUB. Parent hereby agrees to cause Merger
Sub to comply with its obligations hereunder and under the Offer and to cause
Merger Sub to consummate the Merger as contemplated herein and whenever this
Agreement requires Merger Sub to take any action, such requirement shall be
deemed to include an undertaking of Parent to cause Merger Sub to take such
action. Without limitation of the foregoing, Parent shall vote all of its
shares of stock in Merger Sub for the adoption of this Agreement.
5.12 RESIGNATION OF DIRECTORS. At the Closing, the Company shall
deliver to Parent evidence satisfactory to Parent of the resignation of all
Continuing Directors, effective at the Effective Time.
5.13 FURTHER ASSURANCES. In case at any time after the Effective Time
any further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver (subject to Section 1.4(c)) on or prior to
the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained
all approvals of holders of shares of capital stock of the Company necessary to
approve this Agreement and all the transactions contemplated hereby (including
the Merger) to the extent required by law.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
a court or other Governmental Entity of competent jurisdiction shall be in
effect and have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger; PROVIDED, HOWEVER, that the provisions of this
Section 6.1(c) shall not be available to any party whose failure to fulfill its
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obligations pursuant to Section 5.3 shall have been the cause of, or shall have
resulted in, such order or injunction.
(d) REQUIRED REGULATORY APPROVALS. All Required Consents (as
defined in Section 8.10(h)) and all other authorizations, consents, orders and
approvals of, and declarations and filings with, and all expirations of waiting
periods imposed by, any Governmental Entity which, if not obtained in connection
with the consummation of the transactions contemplated hereby, could reasonably
be expected to have a Material Adverse Effect on the Company or materially
impair or delay the ability of the Company, Parent or Merger Sub to consummate
the transactions contemplated hereby (collectively, "REQUIRED REGULATORY
APPROVALS"), shall have been obtained, waived, declared or filed or have
occurred, as the case may be, and all such Required Regulatory Approvals shall
be in full force and effect.
(e) COMPLETION OF THE OFFER. Merger Sub shall have
(i) commenced the Offer pursuant to Article I hereof and (ii) purchased,
pursuant to the terms and conditions of such Offer, all shares of Company Common
Stock duly tendered and not withdrawn; PROVIDED, HOWEVER, that neither Parent
nor Merger Sub shall be entitled to rely on the condition in clause (ii) above
if either of them shall have failed to purchase shares of Company Common Stock
pursuant to the Offer in violation of the terms of this Agreement or the Offer.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, by action taken or authorized by the Board of Directors
of the terminating party or parties, whether before or after approval of this
Agreement and the matters contemplated herein, including the Merger, by the
stockholders of the Company:
(a) By mutual written consent of Parent and the Company, by
action of their respective Boards of Directors;
(b) By either the Company or Parent if the Merger shall not
have been consummated by the date which is six (6) months from the date of this
Agreement; provided that such date shall be extended to the date which is nine
(9) months from the date of this Agreement in the event all conditions to effect
the Merger other than those set forth in Sections 6.1(b), 6.1(c) and 6.1(d) (the
"EXTENSION CONDITIONS") have been or are capable of being satisfied at the time
of such extension and the Extension Conditions have been or are reasonably
capable of being satisfied on or prior to the date which is nine (9) months from
the date of this Agreement, (such date, as it may be so extended, shall be
referred to herein as the "OUTSIDE DATE"); provided further that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation or condition under this Agreement
has been the cause of, or resulted in, the failure of the Merger to occur on or
before such date and shall not be available to Parent if it has purchased shares
of the Company Common Stock pursuant to the Offer;
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(c) By the Company or Parent if the Offer is terminated or
withdrawn pursuant to its terms without any shares of Company Common Stock being
purchased thereunder; provided that Parent may terminate this Agreement pursuant
to this Section 7.1(c) only if Parent's or Merger Sub's termination or
withdrawal of the Offer is not in violation of the terms of this Agreement or
the Offer;
(d) By either the Company or Parent if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(which order, decree, ruling or other action the parties shall have used their
reasonable efforts to resist, resolve or lift, as applicable, subject to the
provisions of Section 5.3) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;
(e) By either Parent or the Company if any approval by the
stockholders of the Company required for the consummation of the Merger or the
other transactions contemplated hereby shall not have been obtained at the
Company Stockholders Meeting or any adjournment thereof by reason of the failure
to obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(f) By Parent, prior to the payment by Merger Sub for shares
of Company Common Stock pursuant to the Offer, if (i) the Company Board shall
have withdrawn or materially and adversely modified its recommendation of the
Offer or the adoption of this Agreement (it being understood, however, that for
all purposes of this Agreement, and without limitation, the fact that the
Company has supplied any Person with information regarding the Company or has
entered into discussions or negotiations with such Person as permitted by this
Agreement, or the disclosure of such facts, shall not be deemed a withdrawal or
modification of the Company Board's recommendation of the Offer or the adoption
of this Agreement); (ii) the Company Board shall have recommended to the
stockholders of the Company that they approve a Transaction Proposal other than
transactions contemplated by this Agreement and at least two Business Days have
elapsed since the recommendation; or (iii) a tender offer or exchange offer
that, if successful, would result in any Person or "group" becoming a
"beneficial owner" (such terms having the meaning in this Agreement as is
ascribed under Regulation 13D under the Exchange Act) of 50% or more of the
outstanding shares of Company Common Stock is commenced (other than by Parent or
an affiliate of Parent) and the Company Board recommends that the stockholders
of the Company tender their shares in such tender or exchange offer;
(g) By the Company, prior to the payment by Merger Sub for
shares of Company Common Stock pursuant to the Offer, if the Company Board
determines to take any action described in clause (D) of Section 5.4;
(h) By Parent, prior to the payment by Merger Sub for shares
of Company Common Stock pursuant to the Offer, upon a material breach of any
covenant or agreement on the part of the Company set forth in this Agreement, or
if (i) any representation or warranty of the Company that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty of
the Company that is not so qualified shall have become untrue in
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any material respect (a "TERMINATING COMPANY BREACH"); PROVIDED, HOWEVER,
that if such Terminating Company Breach is capable of being cured by the
Company prior to the 21st day following written notice of such breach by
Parent to Company through the exercise of its best efforts, so long as the
Company continues to exercise such best efforts, Parent may not terminate
this Agreement under this Section 7.1(h) prior to such 21st day; or
(i) By the Company, upon a material breach of any covenant or
agreement on the part of Parent or Merger Sub set forth in this Agreement, or if
(i) any representation or warranty of Parent or Merger Sub that is qualified as
to materiality shall have become untrue or (ii) any representation or warranty
of Parent or Merger Sub that is not so qualified shall have become untrue in any
material respect ("TERMINATING PARENT BREACH"); PROVIDED, HOWEVER, that, if such
Terminating Parent Breach is capable of being cured by Parent prior to the 21st
day following written notice of such breach by the Company to Parent through the
exercise of best efforts, so long as Parent continues to exercise such best
efforts, the Company may not terminate this Agreement under this Section 7.1(i)
prior to such 21st day;
(j) By the Company, if Merger Sub shall have failed to
commence the Offer within the five Business Day period specified in
Section 1.1(a) or Merger Sub fails to pay for validly tendered shares of Company
Common Stock in violation of the terms of the Offer or this Agreement; or
(k) By Parent or the Company, if the Offer terminates or
expires on account of the failure of any condition specified in Annex A without
Merger Sub having purchased any shares of Company Common Stock thereunder
(provided that the right to terminate this Agreement pursuant to this
subparagraph shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of any such condition).
7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either
the Company or Parent as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of Parent
or the Company or their respective officers or directors except (i) with respect
to the last sentence of Section 5.2, Section 5.6, this Section 7.2 and
Article VIII and (ii) with respect to any liabilities or damages incurred or
suffered by a party as a result of the willful breach by the other party of any
of its covenants or other agreements set forth in this Agreement.
(b) In the event that this Agreement is terminated pursuant
to Section 7.1(f) or 7.1(g), then the Company shall pay Parent a cash fee of
$20,000,000, which amount shall be payable by wire transfer of immediately
available funds no later than two Business Days after such termination.
7.3 AMENDMENT. Subject to Section 1.4(c), this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the
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stockholders of the Company, but, after any such approval, no amendment shall
be made which by law or in accordance with the rules of NYSE requires further
approval by such stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
7.4 EXTENSION; WAIVER. Subject to Section 1.4(c), at any time prior
to the Effective Time, the parties hereto, by action taken or authorized by
their respective Boards of Directors, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. No delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties hereto may otherwise have at law or in
equity. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, Warranties and Agreements; No
Other Representations and Warranties. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained herein
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement, none
of the Company, Parent or Merger Sub makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement, the documents and the instruments referred to
herein, or the transactions contemplated hereby or thereby, notwithstanding the
delivery or disclosure to the other party or the other party's representatives
of any documentation or other information with respect to any one or more of the
foregoing.
8.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, (b) on the first Business Day following the date of
dispatch if delivered by a nationally recognized next-day
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courier service, (c) on the earlier of the date of receipt or the tenth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy sent on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:
(a) if to Parent or Merger Sub, to
Atlas Copco North America Inc.
1211 Hamburg Turnpike
Suite 214
Wayne, NJ 07470
Attention: Mark Cohen
Telecopy: (973) 633-9722
with copies to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Stephen R. Rusmisel, Esq.
Telecopy: (212) 858-1500
(b) if to the Company, to:
Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
Attention: Rosemary Strunk, Esq.
General Counsel
Telecopier No.: (480) 905-3300
with a copy to:
Latham & Watkins
633 West 5th Street, Suite 4000
Los Angeles, CA 90071
Attention: Elizabeth A. Blendell
Telecopier No.: (213) 891-8763
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes"
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or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties and no presumption or
burden or proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local or foreign statue or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the content
requires otherwise. It is understood and agreed that neither the
specifications of any dollar amount in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items,
are or are not material, and neither party shall use the fact of setting of
such amounts or the fact of the inclusion of such item in the Schedules or
Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement (including the Schedules and Exhibits and
Annex A) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Article II and Sections 1.4(c), 5.5 and 5.7 (each of which is intended to
be for the benefit of the Persons covered thereby and may be enforced by such
Persons).
8.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL
(a) This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might be applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United States
of America, sitting in Delaware, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby
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irrevocably and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of
any such action or proceeding may be heard and determined in such Delaware
State court or, to the extent permitted by law, in such Federal court, (iii)
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
such action or proceeding in any such Delaware State or Federal court, and
(iv) waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such Delaware State or Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.2.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND
(iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.6(c).
8.7 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible. Any provision of this Agreement
held invalid or unenforceable only in part, degree or certain jurisdictions will
remain in full force and effect to the extent not held invalid or unenforceable.
To the extent permitted by applicable law, each party waives any provision of
law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether
44
<PAGE>
by operation of law or otherwise), without the prior written consent of the
other parties, and any attempt to make any such assignment without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective permitted successors and assigns.
8.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
8.10 DEFINITIONS. As used in this Agreement:
(a) "BOARD OF DIRECTORS" means the Board of Directors of any
specified Person and any properly serving and acting committees thereof.
(b) "BUSINESS DAY" means any day on which banks are not
required or authorized to close in the City of New York.
(c) "INTELLECTUAL PROPERTY" shall mean patents, copyrights,
trademarks (registered and unregistered), service marks, brand names, trade
names, and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing.
(d) "KNOWLEDGE" with respect to the Company means the actual
knowledge of the following officers and employees (as well as any of their
successors) of the Company: Chief Financial Officer, Vice-President--Finance and
Corporate General Counsel, and, without duplication, the employees primarily
responsible for environmental and Tax matters concerning the Company.
(e) "MATERIAL ADVERSE EFFECT" means, with respect to any
Person, any adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, is
materially adverse to the business, operations, assets, liabilities, financial
condition or results of operations of such entity and its Subsidiaries taken as
a whole; provided that (i) with respect to Parent the term Material Adverse
Effect shall include also, without limitation, any adverse change, circumstance,
event or effect that is materially adverse to Parent's ability to pay the Price
Per Share or the Merger Consideration or otherwise perform its obligations under
this Agreement, and (ii) with respect to the Company the term Material Adverse
Effect shall not include (x) any change, circumstance, event, effect or legal
claim that relates to or results primarily from the execution and delivery of
this Agreement or the announcement (or other disclosure) or consummation of the
transactions contemplated by this Agreement, or (y) changes in general economic
conditions, financial markets (including fluctuations in the price of shares of
Company Common Stock or shares of capital stock of Parent) or conditions
generally affecting the equipment rental industry or related industries.
(f) "MATERIAL SUBSIDIARIES" of a Person shall mean the
"Significant Subsidiaries" of such Person as defined under Regulation S-X of the
Securities Act.
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<PAGE>
(g) "ORGANIZATIONAL DOCUMENTS" means, with respect to any
entity, the certificate of incorporation, bylaws or other similar governing
documents of such entity.
(h) "PERSON" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
(i) "REQUIRED CONSENTS" - There are no Required Consents.
(j) "SUBSIDIARY" when used with respect to any Person means
any corporation, partnership, association, joint venture or other organization,
whether incorporated or unincorporated, (i) of which such Person or any other
Subsidiary of such Person is a general partner (excluding partnerships, the
general partnership interests of which held by such Person or any Subsidiary of
such Person do not have a majority of the voting and economic interests in such
partnership) or (ii) at least a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries.
(k) (i) "TAX" (including, with correlative meaning, the terms
"TAXES" and "TAXABLE") means all federal, state, local and foreign income,
profits, franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy, transfer and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax, and
(ii) "TAX RETURN" means all returns and reports (including elections, claims,
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a Tax authority in any jurisdiction relating
to Taxes.
(l) "THE OTHER PARTY" means, with respect to the Company,
Parent and Merger Sub and means, with respect to Parent and Merger Sub, the
Company.
46
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ATLAS COPCO NORTH AMERICA INC.,
a Delaware corporation
By: /s/ Mark Cohen
--------------------------------
Name: Mark Cohen
-------------------------
Title: Executive Vice President
-------------------------
PANDION ACQUISITION CORP.,
a Delaware corporation
By: /s/ Mark Cohen
--------------------------------
Name: Mark Cohen
-------------------------
Title: President
-------------------------
RENTAL SERVICE CORPORATION,
a Delaware corporation
By: /s/ Robert M. Wilson
--------------------------------
Name: Robert M. Wilson
-------------------------
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
-------------------------
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
The Offer shall be conditioned upon the Minimum Shares being validly
tendered and not withdrawn prior to the date which is 20 Business Days following
the commencement of the Offer in accordance with the terms hereof or such later
date as the Offer may be extended by an amendment to this Agreement in
accordance with the provisions of the Agreement. Moreover, notwithstanding any
other provision of the Offer, and subject to the terms and conditions of the
Agreement, Merger Sub shall not be obligated to accept for payment any shares of
Company Common Stock until expiration of all applicable waiting periods (and
extensions thereof) under the HSR Act, and Merger Sub shall not be required to
accept for payment, purchase or pay for, and may delay the acceptance for
payment of or payment for, any shares of Company Common Stock tendered in the
Offer, or if the Minimum Shares shall not have been validly tendered pursuant to
the Offer and not withdrawn, may terminate or amend the Offer, subject to the
terms and conditions of the Agreement and Merger Sub's obligation to extend the
Offer pursuant to Section 1.1(b) if, prior to the time of acceptance for payment
of any such shares of Company Common Stock (whether or not any other shares of
Company Common Stock have theretofore been accepted for payment or paid for
pursuant to the Offer), any of the following shall occur and remain in effect:
(a) an order shall have been entered in any action or proceeding before
any United States federal or state Governmental Entity (an "Order"), or a
preliminary or permanent injunction by a United States federal or state court of
competent jurisdiction shall have been issued and remain in effect (an
"Injunction"), which, in either case, would have the effect of (i) making the
purchase of, or payment for, some or all of the Shares pursuant to the Offer or
this Agreement illegal, (ii) otherwise preventing consummation of the Offer or
Merger, or (iii) imposing material limitations on the ability of Merger Sub or
Parent effectively to exercise full rights of ownership of the Shares, including
the right to vote the Shares purchased by it on all matters properly presented
to the shareholders of the Company; provided, however, that in order to invoke
this condition, Parent and Merger Sub shall have used their commercially
reasonable efforts to prevent such Order or Injunction or ameliorate the effects
thereof; and provided, further, that, if the Order or Injunction is a temporary
restraining order or preliminary injunction of a court of competent
jurisdiction, Merger Sub may not, by virtue of this condition alone amend or
terminate the Offer, but may only extend the Offer and thereby postpone
acceptance for payment or purchase of Shares;
(b) there shall have been any United States or foreign federal or state
statute, rule or regulation enacted or promulgated after the date of the Offer
that would reasonably be expected to result in any of the material adverse
consequences referred to in paragraph (a) above;
(c) the Agreement shall have been terminated by the Company or Parent
pursuant to its terms; or
<PAGE>
(d) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a national
securities exchange in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified increase or decrease in a market
index or similar "circuit breaker" process) which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or the European Union generally which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions, (iii) any newly initiated
material limitation (whether or not mandatory) by any Governmental Entity on, or
other similar event that materially and adversely affects, the extension of
credit in the United States or the European Union generally by banks or other
lending institutions, or (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving the
United States or the European Union generally which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions.
The foregoing conditions are for the sole benefit of Parent and Merger
Sub and may be asserted by Parent and Merger Sub regardless of the circumstances
giving rise to such condition or, except for the Minimum Condition, may be
waived by Parent and Merger Sub in whole or in part at any time and from time to
time. The failure by Parent or Merger Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
The capitalized terms used in this ANNEX A shall have the meanings set
forth in the Agreement to which it is annexed, except that the term Agreement
shall be deemed to referred to the Agreement to which this ANNEX A is appended.
<PAGE>
ATLAS COPCO AB GUARANTY
THIS GUARANTY (this "Guaranty"), dated as of June 28, 1999, by ATLAS
COPCO AB, a corporation formed and organized under the laws of the Kingdom of
Sweden ("Guarantor"), in favor of Rental Service Corporation, a Delaware
corporation ("RSC"). Guarantor hereby unconditionally guarantees to RSC the
prompt payment and performance of the obligations and agreements of each of
Atlas Copco North America Inc. ("Parent") and Pandion Acquisition Corp.
("Purchaser") under the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of June 28, 1999, by and among Parent, Purchaser and RSC; PROVIDED,
HOWEVER, that this undertaking and agreement shall terminate immediately
following the earlier of (i) the Effective Time of the Merger (as each is
defined in the Merger Agreement) and (ii) the termination of the Merger
Agreement in accordance with its terms. Guarantor agrees that this Guaranty is
a guaranty of payment and performance and not of collection, and that its
obligations under this Guaranty shall be primary, absolute and unconditional,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, the Merger
Agreement or any other agreement, document or instrument to which
Guarantor, Parent, Purchaser and/or RSC is or may become a party;
(b) the absence of any action to enforce this Guaranty or the Merger
Agreement or the waiver or consent by RSC with respect to any of
the provisions thereof;
(c) the insolvency of Parent or Purchaser; or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety
or guarantor.
In addition to the waivers set forth above, Guarantor waives and agrees
that it shall not at any time insist upon, plead or in any manner whatever claim
or take the benefit or advantage of, any appraisal, valuation, stay, extension,
marshaling of assets or redemption laws, or exemption, whether now or at any
time hereafter in force, which may delay, prevent or otherwise affect the
performance by Guarantor of its obligations under, or the enforcement by RSC of,
this Guaranty. Guarantor hereby waives diligence, presentment and demand
(whether for non-payment or protest or of acceptance, maturity, extension of
time, change in nature or form of the obligations, acceptance of further
security, release of further security, composition or agreement arrived at as to
the amount of, or the terms of, the obligations under this Guaranty, notice of
adverse change in Parent's or Purchaser's financial condition or any other fact
which might increase the risk to Guarantor) with respect to any of the
obligations under this Guaranty or all other demands whatsoever and, except as
otherwise provided in this Guaranty, waives the benefit of all provisions of law
which are or might be in conflict with the terms of this Guaranty.
<PAGE>
Guarantor represents, warrants and agrees that, as of the date of this Guaranty,
its obligations under this Guaranty are not subject to any offsets or defense
against RSC, Parent or Purchaser of any kind. Guarantor further agrees that its
obligations under this Guaranty shall not be subject to any counterclaims,
offsets or defenses against RSC, Parent or Purchaser of any kind which may arise
in the future. It is agreed between Guarantor and RSC that the foregoing
waivers are the essence of the transaction contemplated by the Merger Agreement
and that, but for this Guaranty and such waivers, RSC would not have entered
into or would decline to enter into the Merger Agreement.
Guarantor hereby represents and warrants to RSC that (1) it has full
corporate power and authority to execute and deliver this undertaking and
perform its obligations hereunder, (2) it has taken all corporate actions
necessary to authorize the execution, delivery and performance of this
undertaking by it, (3) such execution, delivery and performance do not conflict
with, violate or otherwise result in a default under its Certificate of
Incorporation, By-laws or other organizational documents, and (4) this
undertaking is the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms, except that (A) such enforcement may
be subject to applicable bankruptcy, insolvency or similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (B) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
This Guaranty shall remain in full force and effect and continue to be
effective should any petition be filed by or against Guarantor, Parent or
Purchaser for liquidation or reorganization, should Guarantor, Parent and/or
Purchaser become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
Guarantor's, Parent's and/or Purchaser's assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the obligations under this Guaranty, or any part thereof, are,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by RSC, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the obligations under this Guaranty shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
This Guaranty shall be governed and construed in accordance with the
laws of the State of Delaware, without regard to the laws that might be
applicable under conflicts of laws principles. The choice of the laws of the
State of Delaware as the governing law of this Guaranty shall be upheld as a
valid choice of law in any action in the Swedish courts.
Guarantor hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of any Delaware State court, or
Federal court of the United States of America, sitting in Delaware, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Guaranty or the transactions contemplated hereby or for
recognition or enforcement of any judgment relating thereto, and each of the
parties hereby irrevocably and unconditionally (i) agrees not to commence any
such action or proceeding
<PAGE>
except in such courts, (ii) agrees that any claim in respect of any such action
or proceeding may be heard and determined in such Delaware State court or, to
the extent permitted by law, in such Federal court, (iii) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such action or proceeding in any
such Delaware State or Federal court, and (iv) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such Delaware State or Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law, including, without limitation,
any judgment in relation to this Guaranty obtained in any Delaware State court
or Federal court of the United States of America, sitting in Delaware, against
Guarantor shall be recognized and enforced in Sweden without retrial or
examination of the merits in the case.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS GUARANTY IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS GUARANTY. GUARANTOR CERTIFIES AND ACKNOWLEDGES THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, AND (iii) IT MAKES SUCH WAIVERS
VOLUNTARILY.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Guaranty as of the date first above written.
ATLAS COPCO AB
(public)
By: /s/ Lennart Johansson
------------------------------
Name: Lennart Johansson
----------------------------
Title: Senior Vice President
---------------------------
By: /s/ Hakan Osvald
------------------------------
Name: Hakan Osvald
----------------------------
Title: Vice President
---------------------------
<PAGE>
[RENTAL SERVICE CORPORATION LETTERHEAD]
June 14, 1999
Atlas Copco AB
S-105
23 Stockholm, Sweden
Attention: Lennart Johansson, Senior Vice President
Ladies and Gentlemen:
In connection with your consideration of a possible negotiated
transaction (the "Transaction") with Rental Service Corporation (the "Company"),
the Company and its Representatives (as defined below) are prepared, upon your
execution and delivery of this letter, to make available to you and your
Representatives certain information concerning the Company and the Company's
subsidiaries' business, financial condition, prospects, operations, assets,
properties and liabilities. All such information (whether written or oral)
relating, directly or indirectly, to the Company or its subsidiaries furnished,
delivered or disclosed by the Company or its Representatives before, on or after
the date hereof (whether prepared by the Company, its Representatives or
otherwise and regardless of the manner in which it is furnished) and all notes,
analyses, compilations, extracts, forecasts, studies, interpretations or other
documents prepared by you or your Representatives in connection with your or
their review of, or your interest in, a Transaction which contain, reflect or
are based, in whole or in part, upon any such information, is hereinafter
referred to in this letter agreement as "Evaluation Material." As a condition
to, and in consideration of, Evaluation Material being furnished to you and your
Representatives, you agree to treat such Evaluation Material in accordance with
the provisions of this letter agreement, and to take or abstain from taking
certain other actions as hereinafter set forth. As used in this letter
agreement, the term "Representatives" means, as to any person, such person's
affiliates and its and their directors, officers, employees, shareholders,
partners, subsidiaries, affiliates, agents, advisors (including, without
limitation, attorneys, accountants, consultants, bankers, appraisers and
financial advisors), controlling persons, potential financing sources or other
representatives. The term "person" as used in this letter agreement shall be
broadly interpreted to include any corporation, partnership, group, individual
or other entity (including the media).
The term "Evaluation Material" does not include, however,
information which (a) is or becomes generally available to the public other than
as a result of a disclosure by you or your Representatives in contravention of
this letter agreement, (b) was available to you on a non-confidential basis
prior to its disclosure by the Company or its Representatives, provided that the
source of such information was not known by you after due inquiry to be bound by
a confidentiality agreement or other contractual, legal or fiduciary obligation
of confidentiality to the Company or any other party with respect to such
information, (c) is or becomes available to you on a non-confidential basis from
a source (other than the Company or any of its
<PAGE>
Representatives), provided that the source of such information was not known
by you after due inquiry to be bound by a confidentiality agreement or other
contractual, legal or fiduciary obligation of confidentiality to the Company
or its Representatives with respect to such information, or (d) is
independently developed by you without violating your obligations under this
letter agreement.
You hereby agree that you and your Representatives (a) will
not use any Evaluation Material other than in connection with your evaluation of
a Transaction, (b) will keep the Evaluation Material confidential, and (c) will
not disclose or reveal any Evaluation Material or any information about a
possible Transaction (including the terms and conditions thereof or any other
facts relating thereto) to any person in any manner whatsoever without the
Company's prior written consent, except as otherwise provided in this letter
agreement or as may be required by law, stock exchange rules or court order
subject to the provisions set forth below. Notwithstanding the foregoing clause
(c), you may disclose Evaluation Material to your Representatives who are
actively and directly participating in your evaluation of a Transaction and who
need to know such information for the sole purpose of evaluating a Transaction;
PROVIDED, HOWEVER, such Representatives are informed by you of the confidential
nature of the Evaluation Material and such Representatives agree to comply with
the terms of this letter agreement applicable to such Representatives; and
PROVIDED, FURTHER, that such information shall not be provided to your financing
sources (if any) without prior notification of their identities to the Company
(which identities the Company shall keep strictly confidential). You shall be
responsible for the breach of this letter agreement by your Representatives
(including those who subsequent to the first date of disclosure of Evaluation
Material cease to be a Representative), and you agree, at your sole expense, to
take all reasonable measures to restrain your Representatives from disclosure or
use of the Evaluation Material in contravention of this letter agreement.
In addition to the foregoing, you agree that, except as
required by law (including, without limitation, Delaware state law and the rules
and regulations promulgated under the federal securities laws), stock exchange
rules or the rules, regulations, order or request of any governmental entity
(including the Securities and Exchange Commission) or as otherwise provided in
this letter agreement, without the prior written consent of the Company you and
your Representatives will not disclose to any other person the fact that the
Evaluation Material exists or has been made available, that you are considering
or are interested in a possible Transaction or any other transaction involving
the Company or that discussions or negotiations are taking place concerning a
Transaction or involving the Company (or any of the terms, conditions or other
facts with respect thereto, including the status thereof). Without limiting the
generality of the foregoing, you agree that, without the prior written consent
of the Company, or as otherwise specifically provided in this letter agreement,
you will not, directly or indirectly, enter into any agreement, arrangement or
understanding, or any discussions which might lead to such an agreement,
arrangement or understanding, with any person other than your Representatives
regarding a possible Transaction. The Company agrees that, without your prior
written consent, except as required by law (including, without limitation,
Delaware state law and the rules and regulations promulgated under the federal
securities laws), stock exchange rules or the rules, regulations, order or
request of any governmental entity (including the Securities and Exchange
2
<PAGE>
Commission) it will not make any general public announcement or disclosure
which specifically identifies you and in connection therewith announces or
discloses (a) that the Evaluation Material has been made available to you,
(b) that you are considering or are interested in a possible Transaction or
any other transaction involving the Company or (c) that discussions or
negotiations are taking place with you concerning a Transaction or involving
the Company (or any of the terms, conditions or other facts with respect
thereto, including the status thereof).
In the event that you or any of your Representatives are requested
pursuant to, or required by, applicable law or regulation or by legal process
(by oral questions, interrogatories, requests for information or documents in
legal proceedings, subpoena, civil investigative demand or other similar process
or by applicable state, rule or regulation or by governmental regulatory
authorities or otherwise) to disclose any Evaluation Material or any other
information concerning a Transaction, you agree to provide the Company with
prompt written notice of any such request or requirement and a copy of such
request so that the Company may seek a protective order or other appropriate
remedy and/or may consult with you with respect to taking steps to resist or
narrow the scope of such request or, in the Company's sole discretion, waive
compliance, in whole or in part, with the provisions of this letter agreement.
If, in the absence of a protective order or other remedy or a waiver by the
Company of compliance with the terms of this letter agreement, you or any of
your Representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Evaluation Material, you or your Representatives will
disclose only that portion of the Evaluation Material as to which you are
advised by such counsel in writing is legally required to be disclosed (and as
to which you provide a certification to the Company to that effect), and you
will exercise your reasonable best efforts to preserve the confidentiality of
the Evaluation Material so disclosed, including, without limitation, by
cooperating with the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Evaluation
Material.
You hereby acknowledge that you are aware, and that you will
advise your Representatives who are informed as to the matters which are the
subject of this letter agreement, that the United States securities laws
prohibit any person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter
agreement from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
At any time upon your decision not to proceed with a
Transaction, you will promptly inform either Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") or Morgan Stanley & Co. Incorporated
("Morgan Stanley"), the Company's financial advisors, of such decision. In such
event or at any time upon the request of the Company or any of its
Representatives for any reason, you will promptly deliver to the Company all
Evaluation Material furnished to you or your Representatives or otherwise in
your or your Representatives' possession and destroy all copies, reproductions,
summaries, extracts or compilations thereof or based thereon and all other
Evaluation Material prepared by you or your Representatives shall be destroyed
and no copy thereof shall be retained; PROVIDED, HOWEVER, in the event you
become a party to any lawsuit, court action or legal proceeding relating to the
Company, a Transaction or
3
<PAGE>
this letter agreement (and for so long as such lawsuit, court action or legal
proceeding is pending), you shall be entitled to retain any Evaluation
Material if, in the written opinion of your outside legal counsel, such
Evaluation Material may not be returned or destroyed due to such lawsuit,
court action or legal proceeding (but, in such circumstances, such Evaluation
Material shall be removed from your premises and escrowed solely in the
office of such outside counsel). Any destruction of Evaluation Material
pursuant to this paragraph shall be confirmed to the Company in writing by an
authorized officer. Notwithstanding the return or destruction of the
Evaluation Material, you and your Representatives will continue to be bound
by their respective obligations of confidentiality and other obligations
hereunder (including with respect to any oral Evaluation Material).
You understand and acknowledge that none of the Company,
Merrill Lynch, Morgan Stanley or any of the Company's other Representatives
(and none of their respective officers, directors, employees, agents,
controlling persons) makes any express or implied representation or warranty
as to the accuracy or completeness of the Evaluation Material. You agree that
none of the Company, Merrill Lynch, Morgan Stanley or any of the Company's
other Representatives (and none of their respective officers, directors,
employees, agents, controlling persons) shall have any liability to you or to
any of your Representatives relating to, arising out of or resulting from the
Evaluation Material or the use thereof or any errors therein or omissions
therefrom. You further agree that you are not entitled to rely on the
accuracy or completeness of the Evaluation Material and that only those
representations or warranties which are made in a final definitive agreement
regarding any Transaction, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect.
You agree that, for a period of one (1) year from the date of
this letter agreement, neither you nor any of your affiliates or Representatives
will in any manner, directly or indirectly, without the prior written consent of
the Company or its Board of Directors:
(a) effect or seek, offer or propose (whether publicly or
otherwise) to effect, agree to effect or cause or
participate in, directly or indirectly, or in any way
assist any other person to effect, offer or propose
(whether publicly or otherwise) to effect or
participate in (i) any acquisition, directly or
indirectly, by purchase or otherwise, of any
securities (or beneficial ownership thereof), or
rights to acquire any securities, of the Company or
any subsidiary thereof or any successor to or person
in control of the Company, or any assets of the
Company or any subsidiary thereof or of any such
successor or controlling person; (ii) any tender or
exchange offer, merger, consolidation or other
business combination involving the Company; (iii) any
recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with
respect to the Company or any material portion of the
Company's business; or (iv) any direct or indirect
"solicitation" of "proxies" (as such terms are used
in the proxy rules of the Securities and Exchange
Commission) or written consents in lieu of a meeting
as to any voting securities of the Company (or seek
to advise or
4
<PAGE>
influence any person with respect to the voting of
any voting securities of the Company);
(b) act, alone or in concert with others, to seek to
control or influence the management, Board of
Directors or policies of the Company or propose any
matter for submission to a vote of stockholders of
the Company;
(c) make any public announcement with respect to, or
submit a proposal for, or offer of (with or without
conditions) any extraordinary transaction involving
the Company or any subsidiary thereof or any of its
securities or assets or relating to any of the types
of matters set forth in clause (a) above;
(d) form, join or in any way participate in a "group" (as
defined under the Securities Act of 1934, as amended)
with respect to any of the foregoing; or
(e) enter into any discussions or arrangements with any
third party with respect to any of the foregoing or
advise, assist, encourage, finance or seek to
persuade others to take any action with respect to
the foregoing.
You will promptly notify the Company of any inquiry or proposal made to you with
respect to any of the foregoing. You also agree during such period not to
request the Company (or its directors, officers, employees or agents) or its
Representatives, directly or indirectly, to amend or waive any provision of this
paragraph (including this sentence).
In consideration of the Evaluation Material being furnished
hereunder, you agree that, for a period of one (1) year from the date of this
letter agreement, neither you nor any of your affiliates will, directly or
indirectly, solicit for employment or employ any employee of the Company or any
of its subsidiaries with whom you or your Representatives have had contact in
connection with your receipt or review of Evaluation Material or your
consideration of a possible negotiated transaction without obtaining the prior
written consent of the Company, provided that this paragraph shall not prohibit
you or your affiliates from discussing employment opportunities with, or hiring,
any employee of the Company who contacts you or initiates such discussions with
you or your affiliate without any direct or indirect solicitation or
encouragement by you or pursuant to a general solicitation for employment which
is not specifically directed at the Company's employees.
You and the Company each understand and agree that no contract
or agreement providing for any Transaction shall be deemed to exist between the
parties unless and until a final definitive agreement has been executed and
delivered by the parties. You and the Company each also agree that unless and
until a final definitive agreement regarding a Transaction has been executed and
delivered by the parties, neither you, the Company nor any of their respective
Representatives will be under any legal obligation and shall have no liability
to the other party of any kind whatsoever with respect to a Transaction, other
than pursuant to this letter agreement.
5
<PAGE>
In connection with your consideration of a Transaction, you acknowledge that
the Board of Directors of the Company has not made any determination to enter
into any transaction or agreement with you solely by virtue of the Company's
execution of this letter agreement.
You agree that all communications regarding a Transaction,
requests for additional information, facility tours or management meetings and
discussions or questions regarding procedures with respect to a Transaction will
be first submitted or directed to either Merrill Lynch or Morgan Stanley, and
not to the Company. You further acknowledge and agree that the Company reserves
the right, in its sole discretion, (a) to conduct any process for any
transaction involving the Company in such manner as the Company may determine
(including, without limitation, negotiating with any other interested parties
and entering into a definitive agreement with any third party without notice to
you or any other person), (b) to change the procedures relating to any process
or our consideration of any transaction involving the Company at any time
without notice to you or any other person, (c) to reject any and all proposals
made by you or any of your Representatives with regard to a Transaction, and (d)
to terminate discussions and negotiations with you at any time and request the
return of all Evaluation Material in accordance with this letter agreement.
The provisions of this letter agreement cannot be amended or
waived except with the written consent of each of the parties hereto. You and
the Company each understand and agree that no failure or delay by the other
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege hereunder. No modification, waiver, termination, rescission, discharge
or cancellation of this letter agreement and no waiver of any provision of or
default under this letter agreement by you or the Company shall affect the
rights of either party thereafter to enforce any other provision or to exercise
any right or remedy in the event of any other default, whether or not similar.
You and the Company further understand and agree that money
damages would be an inadequate remedy for any actual or threatened breach of
this letter agreement by the other party or its Representatives and that you or
the Company, as the case may be, shall be entitled to equitable relief,
including injunctive relief, to prevent any breach of the provisions of this
letter agreement, without the necessity of proving actual damages or of posting
any bond, and specific performance, as a remedy for any such breach. Such
remedies shall not be deemed to be the exclusive remedies for a breach of this
letter agreement, but shall be without prejudice to and in addition to all other
rights and remedies available to you or the Company. In the event of litigation
relating to this letter agreement, if a court of competent jurisdiction
determines that either party or such party's Representatives have breached this
letter agreement, then you shall be liable and shall reimburse the non-breaching
party for its costs and expenses (including, without limitation, legal fees and
expenses) incurred by the breaching party in connection with such breach or
litigation, including any appeals therefrom.
If any term, provision, covenant or restriction of this letter
agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms,
6
<PAGE>
provisions, covenants and restrictions of this letter shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
This letter agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute the same agreement and shall become a binding agreement when a
counterpart has been signed by each party and delivered to the other party. This
letter agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understanding and representations, whether oral or
written, of the parties in connection herewith. No covenant, condition or
representation not expressed in this letter agreement shall affect or be
effective to interpret, change or restrict this letter agreement. No prior
drafts of this letter agreement and no words or phrases from any such prior
drafts shall be admissible into evidence in any action, suit or other proceeding
involving this letter agreement. This letter agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Any assignment of this letter agreement by you without the prior
written consent of the Company shall be void.
This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed in and to be performed in that state.
7
<PAGE>
Please confirm your agreement with the foregoing by signing
and returning one copy of this letter agreement to the undersigned, whereupon
this letter agreement shall become a binding agreement between you and the
Company.
Very truly yours,
RENTAL SERVICE CORPORATION
By: /s/ Robert M. Wilson
---------------------------------------------
Name: Robert M. Wilson
Title: Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
ACCEPTED AND AGREED as of the
date first written above:
ATLAS COPCO AB (public)
By: /s/ Lennart Johansson By: /s/ Hakan Osvald
----------------------------- --------------------------
Name: Lennart Johansson Name: Hakan Osvald
--------------------------- -------------------------
Title: Senior Vice President Title: Vice President
-------------------------- --------------------------
<PAGE>
[RENTAL SERVICE CORPORATION LOGO]
June 29, 1999
To Our Stockholders:
We are pleased to inform you that on June 28, 1999, Rental Service
Corporation entered into a definitive merger agreement pursuant to which Atlas
Copco North America Inc., a U.S. subsidiary of Atlas Copco AB, will acquire all
of the common stock of RSC for $29.00 per share in cash through a tender offer,
to be followed, as soon as practicable upon completion of the offer, by a
second-step merger. The Atlas Copco Group, based in Stockholm, Sweden, is a
global provider of specialized equipment and services, with 24,000 employees and
1998 revenue of $4.176 billion.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE ATLAS COPCO
OFFER AND THE MERGER, AND HAS DETERMINED THAT THE ATLAS COPCO OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF RSC'S STOCKHOLDERS. Accordingly,
your board of directors recommends that you accept the Atlas Copco offer and
tender your RSC shares into the Atlas Copco offer.
We believe the Atlas Copco offer provides an attractive premium for your
shares--in fact, Atlas Copco's $29.00 per share price represents a 27% premium
to the $22.75 price per share previously offered by United Rentals, Inc. RSC's
financial advisors, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co. Incorporated, have each delivered their written opinions to
your board of directors to the effect that the consideration to be received by
RSC's stockholders pursuant to the merger agreement is fair to RSC's
stockholders from a financial point of view. The Atlas Copco offer is not
subject to a financing condition.
Accompanying this letter is RSC's Schedule 14D-9 filed with the Securities
and Exchange Commission, which describes the Atlas Copco offer and the merger
and your board of directors' reasons for recommending the Atlas Copco offer and
the merger and includes the fairness opinions from RSC's financial advisors. We
urge you to read it carefully.
If you have any questions or need any assistance, please contact MacKenzie
Partners, Inc. at (800) 322-2885 (toll-free) or at (212) 929-5500 (collect).
Your board of directors thanks you for your continued support.
On behalf of the Board of Directors,
Sincerely,
/s/ John M. Sullivan
John M. Sullivan
Chairman of the Executive Committee
<PAGE>
RENTAL SERVICE CORPORATION TO BE ACQUIRED BY
ATLAS COPCO IN $29.00 PER SHARE CASH TENDER OFFER
SCOTTSDALE, AZ -- June 28, 1999 -- Rental Service Corporation (NYSE: RSV)
("RSC") today announced that it has entered into a definitive merger
agreement with Atlas Copco North America Inc., a U.S. subsidiary of
Swedish-based Atlas Copco AB, pursuant to which Atlas Copco North America
will acquire all of the outstanding shares of RSC's common stock for $29.00
per share in cash, or a total of approximately $730 million.
In accordance with the terms of the merger agreement, a wholly owned subsidiary
of Atlas Copco North America will promptly commence a tender offer for all
outstanding shares of RSC's common stock at a purchase price of $29.00 per share
in cash. Following the completion of the tender offer, subject to the terms and
conditions of the merger agreement, the parties will effect a second-step merger
in which all shares not purchased in the tender offer will be converted into the
right to receive $29.00 in cash.
RSC's Board of Directors has approved the merger agreement and the
transactions contemplated by the merger agreement, including the Atlas Copco
offer and the merger, and has determined that the Atlas Copco offer and the
merger are fair to and in the best interests of RSC's stockholders.
Accordingly, RSC's Board of Directors has determined to recommend that RSC's
stockholders tender their shares in the Atlas Copco offer. RSC's financial
advisors, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan
Stanley & Co. Incorporated, have each delivered their written opinions to
RSC's Board of Directors to the effect that the consideration to be received
by RSC's stockholders pursuant to the merger agreement is fair to RSC's
stockholders from a financial point of view.
<PAGE>
John M. Sullivan, Chairman of the Executive Committee of RSC's Board of
Directors, said, "We are pleased with this merger agreement. For our
stockholders, this transaction provides an extremely attractive opportunity to
realize significant value for their shares. Specifically, the Atlas Copco offer
represents a 27 percent premium over the $22.75 per share being offered in
United Rentals' tender offer. For our employees, the merger provides the
potential for expanding career opportunities as part of a major worldwide
organization."
The Atlas Copco offer will be conditioned upon the tender of a majority of RSC's
outstanding common stock on a fully diluted basis and other customary
conditions, including the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. The offer is not subject
to a financing condition.
After the transaction is completed, RSC is expected to operate as a separate
division in Atlas Copco's rental service business area under the leadership
of current RSC management with its headquarters in Scottsdale, Arizona.
Atlas Copco North America Inc. is the owner of North American companies such as
Prime Service, Inc., with 182 locations, Milwaukee Electric Tool Company, and
Chicago Pneumatic Tool Company. The Atlas Copco Group, based in Stockholm, is an
international group of companies which manufactures compressors, construction
and mining equipment, power tools, assembly systems and motion control products.
With revenues of $4.176 billion in 1998, it has nearly 24,000 employees, of
which more than 7,000 are in North America.
Rental Service Corporation is a leader in the rapidly growing equipment rental
industry, serving the needs of a wide variety of industrial, manufacturing and
construction markets. Headquartered in Scottsdale, Arizona, RSC operates 272
locations throughout the United States and Canada.
<PAGE>
Contacts:
MEDIA: INVESTORS:
Kekst and Company MacKenzie Partners
Thomas Davies or David Kronfeld Daniel H. Burch/Mark H. Harnett
(212) 521-4800 (212) 929-5548/(212) 929-5877
# # #
<PAGE>
[LOGO]
June 28, 1999
Board of Directors
Rental Service Corporation
6929 E. Greenway Parkway
Suite 200
Scottsdale, AZ 85254
Members of the Board of Directors:
Rental Service Corporation (the "Company"), Atlas Copco North America Inc.
(the "Acquiror") and Pandion Acquisition Corp., a wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger dated as of June 28, 1999 (the "Agreement") pursuant to which (i) the
Acquiror and the Acquisition Sub would commence a tender offer (the "Tender
Offer") for all outstanding shares of the Company's common stock, par value
$0.01 per share, of the Company (the "Company Shares") for $29.00 per share, net
to the seller in cash (the "Consideration"), and (ii) the Acquisition Sub would
be merged with the Company in a merger (the "Merger"), in which each Company
Share not acquired in the Tender Offer, other than Company Shares held in
treasury or held by the Acquiror or any affiliate of the Acquiror or as to which
dissenter's rights have been perfected, would be converted into the right to
receive the Consideration. The Tender Offer and the Merger, taken together, are
referred to as the "Transaction".
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning the matters described in clauses 1 and 2 above;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
<PAGE>
(8) Reviewed the Agreement;
(9) Participated in the Company's review of its strategic alternatives; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Company's management as
to the expected future financial performance of the Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof.
We are acting as financial advisor to the Company in connection with the
Transaction and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We are currently acting as financial
advisor to the Company in connection with the unsolicited tender offer for all
of the outstanding Company Shares at a price of $22.75 per share in cash by UR
Acquisition Corporation, a wholly owned subsidiary of United Rentals, Inc. We
have, in the past, provided financing services to the Company, including acting
as lead underwriter in connection with an offering of the Company Shares in
August 1998. We are currently providing financial advisory services and have, in
the past, provided financing and financial advisory services to the Acquiror and
its affiliates, including acting as lead manager in connection with a debt
offering for an affiliate of the Acquiror in 1998 and as dealer manager in
connection with a tender offer for Prime Service, Inc. by a wholly owned
subsidiary of the Acquiror in 1997, and expect to continue to do so and have
received, and may receive, fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the Company Shares
and other securities of the Company, as well as securities of the Acquiror and
other securities of the Acquiror for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any stockholder as to whether such stockholder should tender
any Company Shares pursuant to the Tender Offer and how such stockholder should
vote on the proposed Merger or any matter related thereto.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be received by the holders of the
Company Shares pursuant to the Merger Agreement is fair from a financial point
of view to the holders of such shares.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
[LOGO]
June 28, 1999
Board of Directors
Rental Service Corporation
6929 East Greenway Parkway
Suite 200
Scottsdale, Arizona 85254
Members of the Board:
We understand that Rental Service Corporation ("Rental Service" or the
"Company"), Atlas Copco North America Inc. ("Atlas Copco") and Pandion
Acquisition Corp., a wholly owned subsidiary of Atlas Copco ("Acquisition Sub")
propose to enter into an Agreement and Plan of Merger, dated as of June 28, 1999
(the "Merger Agreement"), which provides, among other things, for (i) the
commencement by Acquisition Sub of a tender offer (the "Tender Offer") for all
outstanding shares of common stock, par value $0.01 per share (the "Common
Stock") of Rental Service for $29.00 per share net to the seller in cash (the
"Consideration"), and (ii) the subsequent merger (the "Merger") of Acquisition
Sub with and into Rental Service. Pursuant to the Merger, Rental Service will
become a wholly owned subsidiary of Atlas Copco and each outstanding share of
Common Stock, other than shares held in treasury or held by Rental Service or
Atlas Copco or any affiliate of Rental Service or Atlas Copco or as to which
dissenters' rights have been perfected, will be converted into the right to
receive the Consideration. The terms and conditions of the Tender Offer and the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration to be received by
the holders of shares of Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain information, including financial forecasts relating
to the business, earnings, cash flow, assets, liabilities and
prospects of the Company furnished to us by the Company;
(iii) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(iv) reviewed the reported prices and trading activity for the Common
Stock;
(v) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(vii) considered discussions and negotiations among representatives of the
Company and Atlas Copco and their financial and legal advisors;
(viii) reviewed the Merger Agreement;
(ix) participated in the Company's review of its strategic alternatives;
and
<PAGE>
(x) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. In
addition, we have assumed that the Tender Offer and Merger will be consummated
in accordance with the terms set forth in the Merger Agreement. We have not made
any independent valuation or appraisal of the assets or liabilities of the
Company, nor have we been furnished with any such appraisals. Our opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. We are
currently acting as financial advisor to Rental Service in connection with the
unsolicited tender offer for all of the outstanding Common Stock at a price of
$22.75 per share in cash by UR Acquisition Corporation, a wholly owned
subsidiary of United Rentals, Inc (the "United Rentals Offer").
It is understood that this letter is for the information of the Board of
Directors of the Company only and may not be used for any other purpose without
our prior written consent, except that a copy of this opinion may be included in
its entirety in any filing made by the Company in respect of the transaction or
the United Rentals Offer with the Securities and Exchange Commission. In
addition, Morgan Stanley expresses no opinion or recommendation as to whether
the stockholders of the Company should accept the Tender Offer.
Based on the foregoing, we are of the opinion on the date hereof that the
Consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Paul J. Taubman
----------------------------------
Paul J. Taubman
Managing Director
<PAGE>
AMENDMENT NO. 2
TO RIGHTS AGREEMENT
OF RENTAL SERVICE CORPORATION
THIS AMENDMENT NO. 2, dated as of June 28, 1999 (this "Amendment"),
to the Rights Agreement, dated as of April 16, 1999 (the "Rights Agreement"),
as amended by the Amendment, dated as of June 9, 1999 between RENTAL SERVICE
CORPORATION, a Delaware corporation (the "Company"), and CHASEMELLON
SHAREHOLDER SERVICES, L.L.C. (the "Rights Agent").
The Company and the Rights Agent have heretofore executed and
entered into the Rights Agreement. Pursuant to Section 26 of the Rights
Agreement, the Company and the Rights Agent may from time to time supplement or
amend the Rights Agreement in accordance with the provisions of Section 26
thereof. All acts and things necessary to make this Amendment a valid agreement
according to its terms have been done and performed, and the execution and
delivery of this Agreement by the Company and the Rights Agent have been in all
respects authorized by the Company and the Rights Agent.
The Company, Atlas Copco North America, Inc., a Delaware
corporation ("Parent") and Pandion Acquisition Corp. (the "Subsidiary") have
entered into an Agreement and Plan of Merger dated as of June 28, 1999.
In consideration of the foregoing premises and mutual
agreements set forth in the Rights Agreement and this Amendment, the parties
hereto agree as follows:
1. The second sentence of Section 1.1 of the Rights Agreement
is hereby amended and restated to read in its entirety as follows:
"Notwithstanding anything in this Agreement to the contrary, no
Person who is or shall become the Beneficial Owner of 10% or more of
the Common Shares of the Company then outstanding shall be an
"Acquiring Person" solely as the result of any one or more of the
following: (i) an acquisition of Common Shares by the Company which,
by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to
10% or more of the Common Shares of the Company then outstanding or
(ii) the acquisition by Parent or any Affiliate of Parent of
Beneficial Ownership of Common Shares of the Company pursuant to the
Offer (as defined in the Agreement and Plan of Merger dated as of
June 28, 1999 by and among Atlas Copco North America, Inc., a
Delaware corporation, Pandion Acquisition Corp. and the Company (the
"Plan of Merger")), or pursuant to the Merger (as defined in the
Plan of Merger), in each case in accordance with the terms of the
Plan of Merger, as the same may from time to time be amended."
<PAGE>
2. Section 3.1 of the Rights Agreement is hereby amended by adding
as the final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as a
result of (i) the approval, execution or delivery of the Plan of
Merger or (ii) the making or acceptance for payment of Common Shares
pursuant to the Offer or the consummation of the Merger or the other
transactions contemplated thereby, in each case in accordance with
the terms of the Plan of Merger, as the same may from time to time
be amended."
3. Section 13.1 of the Rights Agreement is hereby amended by
adding as the final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, a
transaction of the kind referred to in this Section 13.1 shall not
be deemed to have occurred solely as a result of (i) the approval,
execution or delivery of the Plan of Merger or (ii) the making or
acceptance for payment of Common Shares pursuant to the Offer or the
consummation of the Merger or the other transactions contemplated
thereby, in each case in accordance with the terms of the Plan of
Merger, as the same may from time to time be amended."
4. Notwithstanding the terms of Section 7.1 to the contrary, the
Expiration Date established by clause (iii) thereof shall be the consummation
of the Merger and no earlier.
5. Except as expressly amended hereby, the Rights Agreement remains
in full force and effect in accordance with its terms.
6. The Rights Agreement, as amended by this Amendment, and each
Right Certificate issued under the Rights Agreement shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State;
except that all provisions regarding the rights, duties and obligations of
the Rights Agent shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
7. This Amendment to the Rights Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
8. This Amendment to the Rights Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed an original, and all such counterparts shall together constitute
but one and the same instrument.
<PAGE>
9. Except as expressly set forth herein, this Amendment to the
Rights Agreement shall not by implication or otherwise alter, modify, amend
or in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Rights Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Rights Agreement to be duly executed as of the day and year first above
written.
RENTAL SERVICE CORPORATION
By: /s/ Robert M. Wilson
----------------------------------
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By: /s/ Michael E. Dzieciolowski
----------------------------------
Title: Assistant Vice President
<PAGE>
[TEXT OF REMARKS OF GIULIO MAZZALUPI TO EMPLOYEES]
Good morning. My name is Giulio Mazzalupi and I am the Chief Executive Officer
of Atlas Copco. I am very happy to be with you today as we embark upon a new
road together.
As you may know, Atlas Copco is based in Stockholm, Sweden. But we are truly an
international company, with operations in Asia, Africa, South America, Europe
and North America, including Canada, the United States, and Mexico. I am sure
you know some of our companies and products. They include Milwaukee Electric
Tool, Chicago Pneumatic and, of course, Atlas Copco air compressors. Total 1998
revenues for Atlas Copco were more than $4 billion.
In 1997, we acquired Prime Equipment Company. We were attracted to the rapidly
growing equipment rental industry and the many quality employees and stong
historical results of this company. We made few changes to the successful format
already in place at Prime. We did not mandate a change to Atlas Copco air
compressors. However, the compressor group has earned the trust, respect and
business of Prime.
We currently plan to operate Prime and RSC as separate brand identities. We see
at RSC a strong culture of entrepreneurial service and customer focus similar to
ours. We want that to continue...and to flourish.
The overriding rationale behind this transaction is growth, not cost savings. We
will, of course, find ways to maximize our opportunities for joint purchasing,
identification of best practices, sharing of services and other activities made
possible by common ownership. We plan to provide growth opportunities and
exciting challenges for each separate company while we will continue to add
value to the product for our customers.
RSC and Prime offer Atlas Copco the two best-run companies in the equipment
rental industry, with a clear focus on long-term operational success. Our
equipment rental division will be a market leader for many years to come.
Our goal is to be the best in the eyes of our customers and employees.
<PAGE>
[RENTAL SERVICE CORPORATION LOGO]
June 28, 1999
Dear Rental Service Employee:
We are pleased to inform you that this morning, Rental Service Corporation
announced that we have entered into a merger agreement with Atlas Copco North
America Inc., a U.S. subsidiary of Atlas Copco AB, a major global manufacturer
and marketer of industrial equipment and machinery based in Stockholm, Sweden.
Attached is a copy of the press release we issued this morning. Atlas Copco has
agreed to offer $29.00 per share in cash for all the outstanding common shares
of Rental Service, a price we believe represents an attractive opportunity for
our stockholders and reflects a recognition of our quality assets, our superior
professional capabilities, and our excellent position in the equipment rental
industry.
Through Atlas Copco North America Inc., the Atlas Copco Group has a significant
North American presence in the equipment rental industry. Its major operating
units include North American companies such as Prime Service, Inc., with 182
locations, as well as Milwaukee Electric Tool Company and Chicago Pneumatic Tool
Company. With revenues of $4.176 billion in 1998, Atlas Copco employs nearly
24,000 people, of which more than 7,000 are in North America.
After the transaction is completed, RSC is expected to operate as a division
in the rental service business area of Atlas Copco under the leadership of
current RSC management, both locally and nationally, with its headquarters in
Scottsdale, Arizona.
As part of the Atlas Copco worldwide family, Rental Service expects to gain
expanded coverage for our national accounts program, important access to world
markets for used equipment sales, and valuable additional insight into
distribution.
<PAGE>
We envision a continued bright future for our company and the opportunity for
expanded career horizons for you, our employees, within an organization that
also values its employees as the key element in delivering quality service to
customers. We are keenly aware that recent events, including the terminated
merger agreement with NationsRent, Inc. and the unsolicited offer from United
Rentals, Inc., may have been unsettling for you. We are now moving forward with
a clear sense of our future direction.
We thank you for all your efforts, particularly during the past six months.
Despite difficult distractions, you have remained dedicated to making our
customers, as always, our number one priority. That is what has made us so
successful in the past and will continue to be our greatest strength going
forward. We appreciate your continued support and full commitment to making RSC
the best operating company in the industry.
Over the next several weeks and months, there will undoubtedly be additional
information to share with you. We will continue to keep you informed of new
developments as promptly as possible through conference calls and e-mails to our
stores.
Please forward any questions to Kim Edwards at (408) 905-3346
([email protected]), your manager, or your regional human
resources manager.
Sincerely,
Jack Sullivan Rob Wilson Doug Waugaman
<PAGE>
[RENTAL SERVICE CORPORATION LOGO]
June 29, 1999
Dear Valued Rental Service Customer:
We are pleased to inform you that on Monday, June 28, 1999, Rental Service
Corporation announced that it has entered into a merger agreement with Atlas
Copco North America Inc., a U.S. subsidiary of Atlas Copco AB, a major global
manufacturer and marketer of industrial equipment and machinery based in
Sweden, with a significant North American presence in the equipment rental
industry.
We believe that as part of the Atlas Copco worldwide family, we will enhance our
ability to service you with the best range of equipment in an even more
efficient and responsive manner.
After the transaction is completed, RSC is expected to operate as a division
in the rental service business area of Atlas Copco under the leadership of
current RSC management, both locally and nationally, with its headquarters in
Scottsdale, Arizona.
We look forward to continuing our relationship with you. As always, our
employees are dedicated to serving you and your equipment needs.
If you have any questions, please feel free to contact the undersigned, or
your regular Rental Service representative.
Sincerely,
Douglas Waugaman Robert M. Wilson (Local Store Manager)
President & Executive Vice President &
Chief Operating Officer Chief Financial Officer
<PAGE>
[RENTAL SERVICE CORPORATION LOGO]
June 29, 1999
Dear Valued Business Partner:
We are pleased to inform you that on Monday, June 28, 1999, Rental Service
Corporation announced that it has entered into a merger agreement with Atlas
Copco North America Inc., a U.S. subsidiary of Atlas Copco AB, a major global
manufacturer and marketer of industrial equipment and machinery based in
Sweden, with a significant North American presence in the equipment rental
industry.
As part of the Atlas Copco worldwide family, we believe we will enhance our
ability to service our customers with a wide range of equipment and
strengthen our relationships with our valued business partners.
After the transaction is completed, RSC is expected to operate as a division
in the rental service business area of Atlas Copco under the leadership of
current RSC management, both locally and nationally, with its headquarters in
Scottsdale, Arizona.
We look forward to continuing our relationship with you and we are very excited
about this new development and the growth opportunities it presents.
If you have any questions, please contact the undersigned or your regular Rental
Service representative.
Sincerely,
Douglas Waugaman Robert M. Wilson
President & Executive Vice President &
Chief Operating Officer Chief Financial Officer
