<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
RENTAL SERVICE CORPORATION
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<PAGE>
REVISED PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED MAY , 1999
RENTAL SERVICE CORPORATION
6929 EAST GREENWAY PARKWAY, SUITE 200
SCOTTSDALE, ARIZONA 85254
CONSENT REVOCATION STATEMENT
BY THE BOARD OF DIRECTORS OF RENTAL SERVICE CORPORATION
IN OPPOSITION TO THE SOLICITATION OF CONSENTS
BY UNITED RENTALS, INC.
, 1999
The Board of Directors (the "RSC Board") of Rental Service Corporation, a
Delaware corporation ("RSC"), is furnishing this Consent Revocation Statement
and the accompanying WHITE Consent Revocation Card to the holders of the
outstanding shares of RSC's common stock, par value $.01 per share (the
"Shares"), in opposition to the solicitation by United Rentals, Inc. ("United
Rentals") of written consents from the stockholders of RSC.
United Rentals is conducting a consent solicitation to replace your duly
elected directors with nine hand-picked nominees of United Rentals. The action
by United Rentals follows the unsolicited tender offer for all of the
outstanding Shares at a price of $22.75 per share in cash by UR Acquisition
Corporation ("UR Acquisition"), a wholly owned subsidiary of United Rentals
(the "United Rentals Offer"), and proposed second-step merger (the "Proposed
Second-Step Merger") in which any Shares not acquired pursuant to the tender
offer would be converted into the right to receive the consideration paid in
the United Rentals Offer. The RSC Board is asking you to join it in opposing
United Rentals' attempt to acquire RSC at an inadequate price by gaining
control of your RSC Board.
Your RSC Board has determined that the United Rentals Offer is inadequate
and not in the best interests of RSC or its stockholders. We also believe that
the United Rentals nominees will have numerous conflicts of interest if
elected as RSC's directors. We believe that your RSC Board, which is composed
primarily of independent directors, is in the best position to protect the
interests of RSC's stockholders. We also believe that your RSC Board is best
qualified to evaluate any developments in the attempt to acquire RSC,
including any changes in United Rentals' offer. We are therefore asking you to
reject the United Rentals solicitation. CONSEQUENTLY, YOUR RSC BOARD
UNANIMOUSLY OPPOSES THE UNITED RENTALS CONSENT SOLICITATION AND URGES YOU NOT
TO SIGN THE BLUE CONSENT CARD SENT TO YOU BY UNITED RENTALS.
Even if you previously signed and returned United Rentals' BLUE Consent
Card, you can change your consent. We urge you to sign, date and mail the
enclosed WHITE Consent Revocation Card in the postage-paid envelope provided.
Your prompt action is important. Please return the WHITE Consent Revocation
Card today.
This Consent Revocation Statement and the enclosed WHITE Consent Revocation
Card are first being mailed to stockholders on or about , 1999.
If you have any questions about giving your revocation of consent or
require assistance, please call:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free: (800) 322-2885
<PAGE>
REASONS YOUR RSC BOARD OPPOSES THE UNITED RENTALS SOLICITATION
We believe the United Rentals solicitation is an attempt to pressure the
RSC Board to accept United Rentals' inadequate offer.
We believe United Rentals is attempting to put pressure on the RSC Board by
soliciting consents to facilitate the United Rentals Offer. United Rentals is
seeking consents to three proposals (the "United Rentals Proposals"). United
Rentals Proposal Nos. 1 and 2, taken together, are designed to enable United
Rentals to take control of your RSC Board. United Rentals Proposal No. 3 is
designed to nullify unspecified Bylaws which may be adopted by your RSC Board
in its efforts to act in and protect the interests of your company. Your RSC
Board also believes that the purpose of the United Rentals consent
solicitation is to pressure your RSC Board and limit its options and
flexibility in fully evaluating the United Rentals Offer. Such pressure by
United Rentals, we believe, has the potential to disadvantage RSC
stockholders. Your RSC Board opposes the solicitation by United Rentals. The
reasons to oppose United Rentals' solicitation include:
The United Rentals nominees have conflicts of interest since it is in the
interest of United Rentals to acquire RSC at the lowest possible price.
The United Rentals nominees, if elected, would have certain obligations
under the Delaware General Corporation Law (the "DGCL") to RSC. If United
Rentals' hand-picked nominees are elected as your directors, we believe they
would have conflicts of interest which can only be detrimental to the
interests of RSC and its stockholders, since it is in United Rentals' interest
to acquire RSC at the lowest possible price for RSC's shares, a price which
your RSC Board has already determined is inadequate.
Given United Rentals' attempt to acquire RSC, we believe it is contrary to
the interests of United Rentals to allow any United Rentals-designated
directors to take any further steps to enhance the value of the Shares. In
this connection it is significant that, as disclosed in United Rentals'
consent solicitation materials, the United Rentals nominees, if elected to the
RSC Board, will be indemnified by United Rentals "to the fullest extent
permitted by the DGCL and other applicable law" if they breach their fiduciary
duties to RSC and its stockholders. Such indemnification appears to indicate
United Rentals' awareness that conflicts of interest can cause its nominees to
be unable to fulfill their duties to United Rentals and also fulfill their
fiduciary duties to RSC and its stockholders. Furthermore, unless and until
United Rentals acquires control over RSC, United Rentals has no obligation to
protect the interests of RSC's stockholders; its sole obligation is to the
stockholders of United Rentals. Additionally, because United Rentals competes
directly with RSC in the equipment rental business, we believe that the United
Rentals nominees would be subject to conflicts of interest in serving as
directors of RSC.
United Rentals has also stated in its consent solicitation materials that
the "primary purpose" in seeking to elect its nominees to the RSC Board is to
facilitate the completion of the United Rentals Offer and the Proposed Second-
Step Merger. We believe that United Rentals' nominees will have conflicts of
interest and will not be independent of United Rentals given United Rentals'
statement that its goal in nominating its nominees is to effect the United
Rentals Offer and the Proposed Second-Step Merger.
As described under the heading "Certain Litigation" below, RSC amended its
counterclaims in the pending federal court litigation to allege that the slate
of nominees proposed by United Rentals violates the prohibitions of the
Clayton Act against interlocking directorates among competitors. On April 27,
1999, in response to RSC's Clayton Act counterclaims, United Rentals withdrew
six of its officers and directors from its original slate of nominees and
proposed six new nominees in substitution for these nominees. We believe the
conflicts of interest described above continue to exist notwithstanding United
Rentals' modification of its original slate of nominees. We further believe
that United Rentals' current nominees, while not officers or directors of
United Rentals, are not independent since they have been hand-picked by United
Rentals to facilitate the acquisition of RSC.
2
<PAGE>
The current RSC Board is composed primarily of independent directors.
The RSC Board believes that RSC stockholders should continue to be
represented by directors who are not hand-picked by United Rentals, who are
not committed to achieving only United Rentals' goals and who will not act in
furtherance of United Rentals' interests. At this critical time for the future
of RSC, when RSC is already a party to a merger agreement with NationsRent,
Inc. (the "NationsRent Merger Agreement") which the RSC Board has approved and
recommended to RSC stockholders, it is vital that RSC continue to have in
place a board of directors that is committed to continuing to act in the best
interests of RSC and its stockholders.
Your RSC Board believes the United Rentals nominees may deprive RSC
stockholders of the protection of the DGCL and the RSC stockholder rights
plan.
As you know, on January 20, 1999, RSC entered into the NationsRent Merger
Agreement. We believe the United Rentals nominees may take actions which would
facilitate the United Rentals Offer and Proposed Second-Step Merger, rather
than the merger with NationsRent. In fact, United Rentals has stated in its
public filings with the Securities and Exchange Commission (the "Commission")
that United Rentals' nominees, if elected, intend to redeem the rights issued
to RSC stockholders pursuant to the RSC stockholder rights plan recently
adopted by the RSC Board (the "Rights Plan"), amend the Rights Plan or
otherwise to cause the Rights Plan to be inapplicable to United Rentals, UR
Acquisition, the United Rentals Offer and the Proposed Second-Step Merger,
subject to their fiduciary duties as directors. These actions also could
include voting to exempt RSC from the provisions of Section 203 of the DGCL.
The Rights Plan and the provisions of Section 203 of the DGCL are designed to
protect stockholders by limiting the ability of acquirors to effect business
combinations with corporations in which they hold a significant interest. The
RSC Board adopted the Rights Plan as a supplement to the protections of
Section 203 of the DGCL, and the RSC Board urges you not to vote for nominees
committed to depriving you of the benefits of the Rights Plan and the
protections of Section 203 of the DGCL.
The United Rentals Offer is contingent upon a number of significant
conditions, which are not within the control of RSC or United Rentals.
The United Rentals Offer is highly conditional. Several of the conditions
are not within the control of either RSC or United Rentals, such as: (1) the
termination of the NationsRent Merger Agreement, (2) the invalidation or
termination of existing agreements with NationsRent to pay NationsRent a
termination payment equal to $35 million as liquidated damages and to
reimburse NationsRent for its expenses in an amount of $5 million
(collectively, the "Termination Amounts"), and (3) the termination or
invalidation of the option granted by RSC to NationsRent to purchase up to
4,795,431 Shares (subject to certain adjustments), or approximately 19.9% of
RSC's issued and outstanding Shares on January 19, 1999 (the "NationsRent
Option") in connection with the proposed merger with NationsRent (the
"NationsRent Merger"). If the United Rentals nominees are elected, but United
Rentals does not complete its tender offer because the conditions to the
United Rentals Offer are not fulfilled or waived, we believe that RSC
stockholders will not receive the tender offer consideration and will no
longer have a board of directors composed primarily of independent directors
committed to protecting the best interests of RSC and its stockholders. If the
United Rentals nominees are elected, the new RSC Board could, among other
things, withdraw or adversely modify its recommendation in favor of the merger
with NationsRent, which would allow NationsRent to terminate the NationsRent
Merger Agreement and exercise the NationsRent Option and would require RSC to
pay the Termination Amounts. If the NationsRent Merger Agreement were
terminated, the new RSC Board could then cause RSC to enter into a merger
agreement with United Rentals at a price lower than that of the current United
Rentals Offer.
Your RSC Board has determined the United Rentals Offer is inadequate and
has recommended you reject the United Rentals Offer.
RSC has filed with the Commission a Solicitation/Recommendation Statement
on Schedule 14D-9 (as amended through the date hereof, the "Schedule 14D-9")
which contains the RSC Board's recommendation that RSC stockholders reject the
United Rentals Offer and not tender Shares to United Rentals in the United
Rentals
3
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Offer. The Schedule 14D-9 discloses that the RSC Board determined that the
United Rentals Offer is inadequate and not in the best interests of RSC's
stockholders. In reaching its determination and recommendation, the RSC Board
considered the following factors:
(1) The presentation by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") concerning RSC and the financial aspects of
the United Rentals Offer and the written opinion of Merrill Lynch, dated
April 16, 1999, to the effect that the consideration being offered in the
United Rentals Offer is inadequate to the stockholders of RSC (other than
United Rentals and its affiliates), from a financial point of view.
(2) The financial position and prospects of RSC and whether the United
Rentals Offer was reflective thereof, including the following:
. RSC's reported first quarter revenues of $174.8 million, operating
income of $30.1 million and earnings per share of $0.32. These
results substantially exceeded analysts' expectations, and RSC's
reported earnings per share of $0.32 exceeded the First Call
consensus median estimate of $0.28 by $0.04. RSC's projected 1999
and 2000 earnings per share of $1.62 and $2.16 exceed First Call
consensus estimates of $1.57 and $1.92 by $0.05 and $0.24,
respectively. Additionally, RSC's projected five-year earnings per
share compound annual growth rate of 30% significantly exceeds the
First Call consensus estimate of 23%.
. United Rentals' offer is at a discount to RSC's historic trading
prices, which closed at $24.63 within the 30 trading days prior to
the United Rentals Offer--RSC's stock price closed above the $22.75
United Rentals Offer price on every trading day but one in February.
RSC's forward price-to-earnings multiple of more than 15x consensus
estimates during that period is also in excess of the 14.5x multiple
implied by the $22.75 per share United Rentals Offer.
. The 14.5x 1999 estimated price-to-earnings multiple implied by the
$22.75 per share price being offered in the United Rentals Offer
represents a discount of approximately 24% to United Rentals' fully-
distributed trading multiple of 19.1x 1999 estimated earnings per
share on April 15, 1999.
. Acquisitions of companies of comparable size to RSC have been at
multiples considerably higher than the multiples implied by the
United Rentals Offer. In comparison with the two most recent
comparable acquisitions in RSC's industry, the United Rentals Offer
represents a 47% discount to the equity valuation of RSC implied by
Atlas Copco AB's acquisition of Prime Service, and a 42% discount to
the equity valuation of RSC that United Rentals' own merger with
U.S. Rentals implies, in each case based upon multiples of trailing
12-month earnings before interest, taxes, depreciation and
amortization ("EBITDA"), pro forma to include the full year effect
of current year acquisitions. In specific, Atlas Copco paid 8.4x
latest twelve months pro forma EBITDA and 7.4x current-year pro
forma EBITDA for Prime Services, and United Rentals paid 7.9x latest
twelve months pro forma EBITDA and 6.4x current-year pro forma
EBITDA in its merger with U.S. Rentals. These multiples
significantly exceed the 6.1x latest twelve months pro forma EBITDA
and 4.6x current-year pro forma EBITDA multiples implied by the
$22.75 per share consideration being offered by United Rentals in
the United Rentals Offer. Equity valuations of RSC were implied by
applying the relevant multiples to RSC's pro forma EBITDA and then
deducting therefrom RSC's debt.
. The RSC Board estimates that a merger or other business combination
between RSC and United Rentals would be as much as three times more
accretive to United Rentals' earnings than the $0.10 per share
indicated by United Rentals in public statements regarding the
United Rentals Offer. This estimate is based on RSC's five-year
business forecast and assumes (1) United Rentals will obtain $10
million of synergies in 1999, $20 million of synergies in 2000 and
3% annual synergy growth thereafter, (2) transaction-related
expenses of $64 million, (3) financing fees of $35 million, (4) the
financing contemplated by the commitment letter, which was issued to
United Rentals (North America), Inc., a wholly owned subsidiary of
United Rentals, by Goldman Sachs
4
<PAGE>
Credit Partners L.P., having interest rates for the revolver, Term
Loan A and Term Loan B facilities of 7.0%, 7.0% and 7.5%,
respectively, and (5) payment of the Termination Amounts (the
"Commitment Letter").
(3) The significant uncertainties and contingencies associated with the
United Rentals Offer. The United Rentals Offer is highly conditional and
includes, among other things, the receipt by UR North America of financing
for the United Rentals Offer and the Proposed Second-Step Merger pursuant
to the Commitment Letter; RSC having entered into a definitive merger
agreement with United Rentals and UR Acquisition that would provide for the
acquisition of RSC pursuant to the United Rentals Offer and the Proposed
Second-Step Merger; UR Acquisition being satisfied, in its sole discretion,
that the NationsRent Merger Agreement has been terminated; the termination
or invalidation of the NationsRent Option without any Shares having been
issued thereunder; and the invalidation of the Termination Amounts or the
termination of the obligation to pay the Termination Amounts, without any
amount or portion thereof having been paid by RSC or any of its affiliates
pursuant to the NationsRent Merger Agreement or otherwise. Absent
NationsRent's consent or the occurrence of certain events not within the
control of RSC or United Rentals, certain of the conditions to the United
Rentals Offer are incapable of being, or are unlikely to be, satisfied.
Pursuant to the terms of the United Rentals Offer, however, United Rentals
could unilaterally waive, amend or reduce the conditions to the United
Rentals Offer and could improve the consideration offered.
(4) The RSC Board's conclusion that, in light of the uncertainties in
and conditionality of the United Rentals Offer, the RSC Board would not
take any action which would permit NationsRent to terminate the NationsRent
Merger Agreement and collect the Termination Amounts and/or have the right
to exercise the NationsRent Option.
(5) The RSC Board's continuing belief that the NationsRent Merger
represents an attractive transaction for RSC's stockholders, consistent
with the RSC Board's long-term growth strategy and desire to enhance long-
term value for RSC's stockholders, and with significant strategic benefits
that will create a more competitive national equipment rental company than
either RSC or NationsRent would be individually, with a higher potential
for earnings growth, better cost savings and operating efficiencies, a more
diversified national customer base, as well as beneficial overlap in
operations and management, in overall business strategies and in key
geographic regions. The RSC Board made no decision to sell RSC at the time
RSC entered into the NationsRent Merger Agreement.
(6) The RSC Board's commitment to protecting the best interests of
RSC's stockholders.
The Schedule 14D-9, which has been mailed to RSC stockholders, contains the
RSC Board's recommendation concerning the United Rentals Offer and other
important information.
Five-Year Business Forecast
RSC does not as a matter of course make public forecasts as to its future
financial performance or operations. However, RSC's management provided
Merrill Lynch with a business forecast for the years ended 1999, 2000, 2001,
2002 and 2003 in connection with Merrill Lynch's evaluation of the United
Rentals Offer. A summary of the five-year business forecast is set forth
below.
5
<PAGE>
RENTAL SERVICE CORPORATION
Five-Year Business Forecast for the Years Ended 1999-2003
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------
(in millions, except per Share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Total Revenues.............. $ 763.0 $ 955.6 $1,187.2 $1,480.9 $1,846.9
Operating Income............ 141.2 174.8 212.0 265.7 335.9
Interest Expense, Net....... 71.4 81.5 93.6 107.3 124.6
Provision for Income Taxes.. 30.0 40.1 50.9 68.1 90.9
-------- -------- -------- -------- --------
Net Income.................. $ 39.8 $ 53.2 $ 67.5 $ 90.3 $ 120.4
======== ======== ======== ======== ========
Diluted Earnings Per Share.. $ 1.62 $ 2.16 $ 2.76 $ 3.69 $ 4.92
======== ======== ======== ======== ========
Balance Sheet Data:
Assets:
Rental Equipment, Net....... $ 810.4 $ 982.7 $1,192.4 $1,442.0 $1,751.2
Non-Rental Equipment, Net... 77.0 81.1 91.3 104.4 110.2
Other Assets, Net........... 623.5 616.1 619.6 621.6 643.6
-------- -------- -------- -------- --------
Total Assets................ $1,510.9 $1,679.9 $1,903.3 $2,168.0 $2,505.0
======== ======== ======== ======== ========
Liabilities and
Stockholders' Equity:
Total Debt and Long-Term
Obligations................ $ 919.5 $1,027.0 $1,190.3 $1,359.1 $1,570.0
Other Liabilities........... 134.2 142.5 137.0 142.7 148.3
-------- -------- -------- -------- --------
Total Liabilities........... 1,053.7 1,169.5 1,327.3 1,501.8 1,718.3
-------- -------- -------- -------- --------
Total Stockholders' Equity.. 457.2 510.4 576.0 666.2 786.7
-------- -------- -------- -------- --------
Total Liabilities and
Stockholders' Equity....... $1,510.9 $1,679.9 $1,903.3 $2,168.0 $2,505.0
======== ======== ======== ======== ========
Cash Flow Statement Data:
Net Income.................. $ 39.8 $ 53.2 $ 67.5 $ 90.3 $ 120.4
Adjustments to Net Income to
Reconcile Net Income to Net
Cash Provided by Operating
Activities:
Depreciation and
Amortization............. 155.2 196.6 247.4 311.2 391.2
Other Non-Cash Items...... (13.9) (18.2) (24.4) (28.8) (37.8)
Changes in Operating
Assets and Liabilities... (0.1) 2.1 (21.0) (12.1) (31.1)
-------- -------- -------- -------- --------
Net Cash Provided by (Used
in) Operating Activities... $ 181.0 $ 233.7 $ 269.5 $ 360.6 $ 442.7
======== ======== ======== ======== ========
Capital Expenditures, Net of
Disposals.................. $ (291.9) $ (341.2) $ (429.3) $ (529.4) $ (653.6)
======== ======== ======== ======== ========
</TABLE>
The five-year business forecast set forth above was not prepared with a
view to public disclosure or compliance with published guidelines of the
Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding prospective financial information nor
was the information prepared with the assistance of, or reviewed, compiled or
examined by, independent accountants. The inclusion of the five-year business
forecast in this Consent Revocation Statement should not be regarded as an
indication that RSC or any of its representatives considers forecasted
financial results to be achievable, and none of such persons or entities
assumes any responsibility for the validity, reasonableness, accuracy or
completeness of the five-year business forecast.
While presented with numerical specificity, the five-year business forecast
is based on and reflects the following material assumptions:
. The five-year business forecast assumes the continuation of RSC as an
independent publicly-traded company, without taking into account any
acquisition or merger involving RSC, including the NationsRent Merger.
6
<PAGE>
. The five-year business forecast assumes that, during all relevant time
periods, RSC (1) does not raise capital in the equity or debt markets,
and (2) there is sufficient availability under RSC's revolving credit
facility for working capital and other purposes and that interest rates
under RSC's revolving credit facility remain at current levels.
. Revenues are assumed to grow at a rate of approximately 25% annually.
. The five-year business forecast assumes that RSC makes sufficient
capital expenditures for rental and non-rental equipment to (1) grow
same store sales by approximately 15% to 20% annually; (2) fund an
additional 30 startup locations per year; and (3) maintain a rental
fleet with an average age of 2-3 years.
. Equipment utilization is assumed to remain constant in the range of 56%-
60% throughout all relevant periods.
. The five-year business forecast assumes a decrease in rental profit
margin over the course of the time periods set forth in the five-year
business forecast from 29.5% to 28%.
. The five-year business forecast assumes that profit margins on sales of
parts, supplies, and equipment (new and used) remain constant at
approximately current levels throughout all relevant periods.
. Selling, general and administrative expense as a percentage of total
revenue is assumed to range between 6.6%-7% for all relevant periods in
the five-year business forecast.
. During all relevant periods, all taxes recorded assume a constant
effective tax rate of 43% and all tax expense is assumed to have been
paid in the current year.
The foregoing assumptions are subject to significant uncertainties and
contingencies, all of which are difficult to quantify and many of which are
beyond the control of RSC. Accordingly, the five-year business forecast is
inherently imprecise and there can be no assurance that forecasted financial
results set forth in, or the assumptions made in preparing, the five-year
business forecast will prove accurate, and actual results may be materially
greater or less than those contained in the five-year business forecast. RSC
does not presently intend to update or publicly revise the five-year business
forecast to reflect circumstances existing or developments occurring after the
preparation of such information or to reflect the occurrence of unanticipated
events.
THE RSC BOARD UNANIMOUSLY OPPOSES THE UNITED RENTALS CONSENT SOLICITATION
AND URGES YOU NOT TO SIGN THE BLUE CONSENT CARD SENT TO YOU BY UNITED RENTALS.
Even if you previously signed and returned United Rentals' BLUE Consent
Card, you can change your consent. We urge you to sign, date and mail the
enclosed WHITE Consent Revocation Card in the postage-paid envelope provided.
If your Shares are held in "street name," only your broker or banker can
vote your Shares. Please contact the person responsible for your account and
instruct him or her to vote a WHITE Consent Revocation Card on your behalf
today.
If you have any questions, please call MacKenzie Partners, Inc. toll-free
at (800) 322-2885 or at (212) 929-5500 (call collect).
This Consent Revocation Statement does not constitute a solicitation of
proxies with respect to the proposed NationsRent Merger. Any such solicitation
by RSC will be made only by means of separate proxy materials complying with
the requirements of Section 14(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder.
7
<PAGE>
THE CONSENT PROCEDURE
On January 20, 1999, the RSC Board amended the Bylaws of RSC to adopt a
record date procedure in connection with written consent solicitations. On May
, 1999, the RSC Board fixed May , 1999 as the record date (the "Record
Date") for determining stockholders entitled to grant or revoke their written
consents with respect to the United Rentals Proposals. You are entitled to
grant or revoke consents for all Shares that you owned on the Record Date
(even if you subsequently sold or transferred any of those Shares). As of the
Record Date, [ ] Shares were outstanding.
Under the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, stockholders may act without a meeting, without prior notice
and without a vote, if consents in writing setting forth the action to be
taken are signed by holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereon were present
and voted. The action is effective when the necessary number of written
consents describing the action taken, dated and signed by approving holders,
are delivered to the corporation's registered office in Delaware or principal
place of business.
RSC's certificate of incorporation does not prohibit stockholder action by
written consent. The unrevoked consent of the holders of not less than (1) a
majority of the outstanding Shares entitled to vote on the Record Date must be
obtained within the time limits specified herein to adopt United Rentals
Proposal Nos. 1 and 2, and (2) 66 2/3% of the outstanding Shares entitled to
vote on the Record Date must be obtained within the time limits specified
herein to adopt United Rentals Proposal No. 3. None of the United Rentals
Proposals is subject to, or conditioned upon, the adoption of any of the other
United Rentals Proposals; however, United Rentals Proposal No. 2 cannot be
effected unless United Rentals Proposal No. 1 is adopted.
RSC's Bylaws provide that each stockholder shall be entitled to vote each
share or fractional share of stock which has voting rights on the matter in
question. Under the DGCL, no written consent is effective to take the action
referred to therein unless, within 60 days of the earliest dated consent
delivered, written consents signed by a sufficient number of stockholders
required to take such action are properly delivered to the corporation.
Failure to consent to any of the United Rentals Proposals and broker non-votes
will have the effect of a vote against those United Rentals Proposals.
A stockholder may revoke any previously signed consent by signing, dating
and returning a WHITE Consent Revocation Card. If no direction is made on the
Consent Revocation Card with respect to one or more of the United Rentals
Proposals, or if a stockholder marks the "revoke consent" box on the Consent
Revocation Card with respect to one or more of the United Rentals Proposals,
all previously executed consents with respect to such United Rentals Proposals
will be revoked. A consent may also be revoked by delivery of a written
consent revocation to RSC or United Rentals. Stockholders are urged, however,
to deliver all consent revocations to MacKenzie Partners, Inc., the firm
assisting RSC in this solicitation, at 156 Fifth Avenue, New York, New York
10010. RSC requests that if a consent revocation is instead delivered to
United Rentals, a copy of the revocation also be delivered to RSC, c/o
MacKenzie Partners, Inc. at the address set forth above, so that RSC will be
aware of all revocations. Any consent revocation may itself be revoked at any
time by signing, dating and returning to United Rentals a subsequently dated
BLUE Consent Card sent to you by United Rentals, or by delivery of a written
revocation of such consent revocation to RSC or United Rentals.
If any Shares that you owned on the Record Date were held for you in an
account with a stock brokerage firm, bank nominee or other similar "street
name" holder, you are not entitled to vote such Shares directly, but rather
must give instructions to the stock brokerage firm, bank nominee or other
"street name" holder to grant or revoke consent for the Shares held in your
name. Accordingly, you should contact the person responsible for your account
and direct him or her to execute the enclosed WHITE Consent Revocation Card on
your behalf. You are urged to confirm in writing your instructions to the
person responsible for your account and provide a copy of those instructions
to RSC, c/o MacKenzie Partners, Inc. at the address set forth above so that
RSC will be aware of your instructions and can attempt to ensure such
instructions are followed.
8
<PAGE>
You have the right to revoke any consent you may have previously given to
United Rentals. To do so, you need only sign, date and return in the enclosed
postage-paid envelope the WHITE Consent Revocation Card which accompanies this
Consent Revocation Statement. If you do not indicate a specific vote on the
WHITE Consent Revocation Card with respect to one or more of the United
Rentals Proposals, the Consent Revocation Card will be used in accordance with
the RSC Board's recommendation to revoke any consent with respect to such
proposals.
If you do not support the United Rentals Proposals and have not signed a
United Rentals' BLUE Consent Card, you may show your opposition to the United
Rentals Proposals by signing, dating and returning the enclosed WHITE Consent
Revocation Card. This will better enable RSC to keep track of how many
stockholders oppose the United Rentals Proposals.
RSC has retained MacKenzie Partners, Inc. to assist in communicating with
stockholders in connection with the United Rentals consent solicitation and to
assist in our efforts to obtain consent revocations. If you have any questions
about how to complete or submit your WHITE Consent Revocation Card or any
other questions, MacKenzie Partners, Inc. will be pleased to assist you. You
may call MacKenzie Partners, Inc. toll-free at (800) 322-2885 or at (212) 929-
5500 (call collect).
THE UNITED RENTALS PROPOSALS
The "United Rentals Proposals" are to: (1) remove all eight existing
members of the RSC Board and any person(s) elected or designated by any of
such directors to fill any vacancy or newly created directorship; (2) elect
William E. Aaron, David A. Bronner, Richard N. Daniel, Peter Gold, Stephanie
R. Joseph, David C. Katz, Elliot H. Levine, Jeffrey M. Parker and Raymond S.
Troubh (collectively, the "Nominees") as the directors of RSC; provided, that,
in the event that the RSC Board continues to be fixed at eight (or fewer)
directors, the Nominees who receive the greatest number of votes shall fill
all available seats on the RSC Board; and (3) repeal each provision of RSC's
Bylaws or amendment thereto adopted subsequent to January 20, 1999 and prior
to the effectiveness of any of the Proposals.
None of the United Rentals Proposals is subject to, or conditioned upon,
the adoption of any of the other United Rentals Proposals; however, United
Rentals Proposal No. 2 cannot be effected unless United Rentals Proposal No. 1
is adopted.
BOARD OF DIRECTORS OF RSC
The names of the current members of the RSC Board, their ages as of April
30, 1999 and certain information about them are set forth below.
<TABLE>
<CAPTION>
Director
Name Age 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 31 1995 Director
Eric L. Mattson 47 1996 Director
Britton H. Murdoch 41 1997 Director
John M. Sullivan 63 1997 Director
</TABLE>
9
<PAGE>
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 a 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 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.
Eric L. Mattson has served as a director of RSC since December 1996. Mr.
Mattson is and has been Senior Vice President and Chief Financial Officer of
Baker Hughes Incorporated ("BHI") since July 1993. 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.
("Prince"). Prior to that and since September 1984, Mr. Sullivan was President
of Prince and Vice President of Chesebrough-Pond's, Inc.
10
<PAGE>
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 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.
RSC has established an Executive Committee consisting of Mr. Sullivan, as
chairman, and Mr. Murdoch. 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. 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.
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, members of the Executive Committee receive a fee of
$40,000 per month for their services.
11
<PAGE>
EXECUTIVE OFFICERS OF RSC
Information concerning executive officers of RSC who are not also directors
is set forth below:
<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 51 Senior Vice President of Operations
Halchishak
David G. Ledlow 40 Senior Vice President of Operations
John Markle 43 Senior Vice President of Strategy and
Chief Information Officer
David B. 45 Senior Vice President of Human Resources
Harrington
Milfred E. 51 Senior Vice President of Sales and Marketing
Howard
</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 Senior Vice President of Operations of
RSC since April 1997. In April 1999, he was promoted to the position of
President and Chief Operating Officer. From 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 our 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.
John Markle was promoted to the position of Senior Vice President of
Strategy and Chief Information Officer of RSC in November 1998. From January
1998 until this promotion, he served as a Senior Vice President of Operations
of RSC. He joined RSC in conjunction with the acquisition of Center Rentals in
December 1997. Prior to joining RSC, he served as President of Center Rentals
since 1989. Prior to joining Center Rentals, he spent ten years with Power
Rental.
12
<PAGE>
David B. Harrington joined RSC in June 1997 as Senior Vice President of
Human Resources. Prior to joining RSC, he worked for 19 years at General
Electric in various positions, including the most recent six years as Senior
Vice President of Human Resources for GE Capital Technology Management
Services.
Milfred E. Howard has served as Senior Vice President of Sales and
Marketing of RSC since August 1998. From June 1997 through July 1998, he
served as the Vice President of Sales for our industrial division. Prior to
joining RSC, he served as Vice President of Sales for Hertz Equipment Rental
Corporation.
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Shares outstanding as of March 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 March 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)............................... 24,653 *
Ronald Halchishak (4)(6).............................. 53,340 *
David G. Ledlow (4)(6)................................ 49,761 *
John Markle (4)(6).................................... 62,906 *
Milfred E. Howard (4)(6).............................. 7,616 *
David B. Harrington (4)(6)............................ 8,382 *
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)(9)................................ 5,625 *
Britton H. Murdoch (4)(10)............................ 7,625 *
John M. Sullivan (4)(6)............................... 3,125 *
All directors and executive officers as a group (15
individuals)......................................... 1,493,005 6.0%
</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.
13
<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--118,250
Shares; Mr. Halchishak--70,750 Shares; Mr. Ledlow--70,750 Shares; Mr.
Markle--67,771 Shares; Mr. Harrington--40,143 Shares; Mr. Howard--47,848
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--9,375 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 Baker Hughes Incorporated, 3900 Essex
Lane, Suite 1200, Houston, Texas 77027.
(10) 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 Exchange Act requires RSC's directors, officers and
beneficial owners of more than 10% of the Shares to file with the Commission
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 filed a late Form 4 reporting one transaction.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of RSC that are intended to be presented by such
stockholders at an annual meeting of RSC must be properly presented in
accordance with RSC's Bylaws. In addition, stockholder proposals that such
stockholders desire to have included in RSC's proxy statement for its 1999
annual meeting must have been received by RSC no later than November 27, 1998
in order to be considered for possible inclusion in the proxy statement and
form of proxy relating to that meeting.
Under RSC's Bylaws, for business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of RSC. To be timely, a stockholder's
notice shall be delivered to the principal executive offices of RSC not later
than the close of business on the ninetieth (90th) day nor earlier than the
close of business on the one hundred twentieth (120th) day prior to the first
anniversary of the preceding year's annual meeting (provided, however, that in
the event that the date of the annual meeting is more than thirty (30) days
before or more than seventy (70) days after such anniversary date, notice by
the stockholder must be so delivered not earlier than the close of business on
the one hundred twentieth (120th) day prior to such annual meeting and not
later than the close of business on the later of the ninetieth (90th) day
prior to such annual meeting or the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by RSC).
Such deadline is referred to herein as the "Bylaw Deadline." In no event shall
the public announcement of an adjournment or postponement of an annual meeting
commence a new time period for the giving of a stockholder's notice as
described above. Such
14
<PAGE>
stockholder's notice shall set forth: (1) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act and Rule 14a-11 thereunder (and such person's written consent to
being named in the proxy statement as a nominee and to serving as a director
if elected); (2) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made, and in the
event that such business includes a proposal to amend the Bylaws of RSC, the
language of the proposed amendment; and (3) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (A) the name and address of such stockholder, as they appear
on RSC's books, and of such beneficial owner, (B) the class and number of
shares of capital stock of RSC which are owned beneficially and of record by
such stockholder and such beneficial owner, (C) a representation that the
stockholder is a holder of record of stock of RSC entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to propose
such business or nomination, and (D) a representation whether the stockholder
or the beneficial owner, if any, intends or is part of a group which intends
to deliver a proxy statement and/or form of proxy to holders of at least the
percentage of RSC's outstanding capital stock required to approve or adopt the
proposal or elect the nominee and/or otherwise solicit proxies from
stockholders in support of such proposal or nomination. RSC may require any
proposed nominee to furnish such other information as it may reasonably
require to determine the eligibility of such proposed nominee to serve as a
director of RSC.
Additionally, in the event that the number of directors to be elected to
the RSC Board at an annual meeting is increased and there is no public
announcement by RSC naming all of the nominees for director or specifying the
size of the increased RSC Board at least one hundred (100) days prior to the
first anniversary of the preceding year's annual meeting, a stockholder's
notice required by the Bylaws shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive offices of RSC
not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by RSC.
Notwithstanding the foregoing, in order to include information with respect
to a stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the Exchange Act.
If a stockholder wishes to present a proposal at RSC's annual meeting in
the year 1999 and the proposal is not intended to be included in RSC's proxy
statement relating to that meeting, the stockholder must give advance notice
to RSC prior to the Bylaw Deadline for such meeting determined in accordance
with the Bylaws, as described above. If a stockholder gives notice of such a
proposal after the Bylaw Deadline, the stockholder will not be permitted to
present the proposal to the stockholders for a vote at the meeting.
The Commission's rules establish a different deadline for submission of
stockholder proposals that are not intended to be included in RSC's proxy
statement with respect to discretionary voting (the "Discretionary Vote
Deadline"). The Discretionary Vote Deadline for the 1999 annual meeting is 45
calendar days prior to the anniversary of the mailing date of the proxy
statement for the 1998 annual meeting. If a stockholder gives notice of such a
proposal after the Discretionary Vote Deadline, RSC's proxy holders will be
allowed to use their discretionary voting authority to vote against the
stockholder proposal when and if the proposal is raised at RSC's 1999 annual
meeting. Because the Bylaw Deadline is not capable of being determined until
RSC publicly announces the date for its next annual meeting, it is possible
that the Bylaw Deadline may occur after the Discretionary Vote Deadline. In
such a case, a proposal received after the Discretionary Vote Deadline but
before the Bylaw Deadline would be eligible to be presented at next year's
annual meeting and RSC believes that its proxy holders would be allowed to use
the discretionary authority granted by the proxy card to vote against the
proposal at the meeting without including any disclosure of the proposal in
the proxy statement relating to such meeting.
15
<PAGE>
Executive Compensation
Summary information with respect to the compensation of RSC's chief
executive officer and certain other executive officers and certain other
information required under the applicable regulations of the Commission are
set forth in Annex A.
CERTAIN LITIGATION
The Delaware Litigation. On April 5, 1999, UR Acquisition and United
Rentals 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 (1) in providing
for the Termination Amounts and in granting the NationsRent Option, the
defendants breached their fiduciary duties to RSC's stockholders, (2) in
entering into the NationsRent Merger Agreement, the defendants failed to
obtain a transaction offering the best value available to all RSC
stockholders, (3) the conduct of the defendants was unreasonable in relation
to any "threat" posed by United Rentals and was not undertaken in good faith
after reasonable investigation, and (4) in failing to take actions necessary
to render Section 203 of the DGCL inapplicable to the United Rentals Offer,
including approving the United Rentals Offer, the defendants breached their
fiduciary duties to RSC's stockholders. The plaintiffs seek, among other
things, a determination that the Termination Amounts and the NationsRent
Option are unlawful and invalid and an order requiring RSC to provide UR
Acquisition and United Rentals with a fair and equal opportunity to acquire
RSC. The plaintiffs also seek to enjoin the defendants from taking any further
action with respect to such Termination Amounts or the NationsRent Option or
to adopt any defensive measures.
On April 8, 1999, the Delaware Chancery Court granted the plaintiffs'
application for expedited discovery in the Delaware Litigation and scheduled a
hearing on the plaintiffs' application for a preliminary injunction for May
17, 1999. On April 16, 1999, RSC answered the plaintiffs' complaint in the
Delaware Litigation.
The Connecticut Litigation. On April 7, 1999, UR Acquisition and United
Rentals filed a verified complaint against James L. Kirk, RSC and NationsRent
in the United States District Court for the District of Connecticut 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 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 and correct allegedly false and misleading statements and
omissions of material fact made by NationsRent regarding the superiority of
the NationsRent Merger to the United Rentals Offer and by RSC regarding the
anticipated schedule for the special meeting of RSC's stockholders in
connection with the NationsRent Merger. In addition, the plaintiffs seek
injunctive relief enjoining the defendants and certain other persons from,
among other things, (1) soliciting from any stockholder of RSC any proxy,
consent or authorization to vote any Shares at any meeting to be held in
connection with the NationsRent Merger, and (2) soliciting any stockholder of
RSC with respect to whether or not to tender Shares in the United Rentals
Offer, in either case, unless and until the defendants comply in full with all
applicable provisions of the federal securities laws.
On April 8, 1999, UR Acquisition and United Rentals filed applications for
expedited discovery and a preliminary injunction with the court.
On April 16, 1999, RSC answered the complaint in the Connecticut Litigation
and filed a counterclaim against the plaintiffs seeking declaratory and
injunctive relief. Defendants counterclaim alleges, 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.
16
<PAGE>
On April 22, 1999, RSC amended its counterclaims in the Connecticut
Litigation. In addition to its counterclaims filed on April 16, 1999, RSC's
amended counterclaims further allege 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 seeks, 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 new nominees
for these nominees, and, on April 29, 1999, United Rentals moved to dismiss
RSC's counterclaims, as amended.
SOLICITATION OF CONSENT REVOCATIONS
Consent revocations may be solicited by mail, telephone, facsimile
transmission or other electronic media and in person. Solicitation of consent
revocations may be made by directors, officers and regular employees of RSC
for which they will receive no additional compensation.
In addition, RSC has retained MacKenzie Partners, Inc. to assist in the
solicitation of the consent revocations, for which MacKenzie Partners, Inc.
will receive reasonable and customary compensation and will be reimbursed for
its reasonable out-of-pocket expenses. RSC has also agreed to indemnify
MacKenzie Partners, Inc. for certain liabilities in connection with this
solicitation. Approximately 45 persons will be employed by MacKenzie Partners,
Inc. to solicit stockholders.
Banks, brokers, custodians, nominees and fiduciaries will be requested to
forward solicitation material to beneficial owners of Shares. RSC will
reimburse banks, brokers, custodians, nominees and fiduciaries for their
reasonable expenses for sending solicitation material to the beneficial
owners.
The entire cost of soliciting the consent revocations (including, without
limitation, costs, if any, relating to advertising, printing, fees of
attorneys, financial advisors, proxy solicitors, accountants, public
relations, transportation, litigation and related expenses and filing fees)
will be borne by RSC. RSC estimates that total expenditures relating to the
RSC Board's solicitation of the consent revocations will be approximately
$[ ]. Such costs do not include the amount normally expended for a
solicitation for an uncontested election of directors or costs represented by
salaries and wages of regular employees and officers. Approximately $[
] has been expended by RSC to date.
ABSENCE OF APPRAISAL RIGHTS
Pursuant to the DGCL, the stockholders of RSC are not entitled to appraisal
rights in connection with the United Rentals Proposals.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the Commission, each member of the RSC
Board, certain executive officers and other employees of RSC and certain other
persons may be deemed to be a "participant" in RSC's solicitation of
revocations of consent. The principal occupations and business addresses of
each participant are set forth in Annex B. Information about the present
ownership by directors and certain executive officers of RSC of RSC's
securities is provided in this Consent Revocation Statement and the present
ownership of RSC's securities by other participants is listed on Annex B.
17
<PAGE>
ANNEX A
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides certain summary
information concerning compensation paid or accrued by RSC to or on behalf of
its Chief Executive Officer and each of its four other most highly compensated
executive officers for all services rendered in all capacities to RSC during
the fiscal years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------- -------------------------
Number of
Restricted Securities
Name and Principal Salary All Other Stock Underlying
Position Year ($) Bonus ($)(1) Compensation ($) Awards ($) Options (3)
------------------ ---- -------- ------------ ---------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief 1998 $516,704 $500,000 $10,500(2) $3,466,057(4) 173,411(5)
Executive Officer..... 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 1998 179,216 149,960 1,887(2) -- 16,000
Operating Officer..... 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 1998 180,796 103,185 4,209(2) -- 16,000
Treasurer.............. 1997 99,300 -- 75,287(7) -- 75,000
1996 -- -- -- -- --
Ronald Halchishak
Senior Vice President 1998 173,193 123,058 2,128(2) -- 16,000
of Operations......... 1997 148,260 75,000 1,408(2) -- --
1996 150,000 100,000 910(2) -- 71,250
David G. Ledlow
Senior Vice President 1998 154,274 120,000 522(2) -- 16,000
of Operations......... 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.
(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 on the NYSE 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).
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<PAGE>
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 ($70,309), an automobile
allowance and insurance premiums paid by RSC for life insurance and
disability policies covering Mr. Wilson.
Options Granted to Certain Executive Officers. The following table sets
forth information concerning individual grants of stock options made by RSC
during the year ended December 31, 1998 to its Chief Executive Officer and
each of its four other most highly compensated executive officers:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------ ---------------------
Percent of
Number of Total Options
Securities Granted to Exercise or
Underlying Employees in Base Price
Options Fiscal per Expiration
Granted (1) (2) Year 1998 Share ($) Date 5% ($) 10% ($)
---------------- -------------- ----------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid
Chairman and Chief 190,000(3) 32.9% $20.19 1/14/08 $ 2,412 $ 6,113
Executive Officer..... 40,411 7.0% 28.56 4/29/08 726 1,840
Douglas A. Waugaman (4)
President and Chief 13,656 2.4% 22.88 2/25/08 196 498
Operating Officer..... 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, 13,656 2.4% 22.88 2/25/08 196 498
Secretary and 1,344 0.2% 26.38 4/15/08 22 56
Treasurer ............ 1,000 0.2% 28.56 4/29/08 18 46
Ronald Halchishak
Senior Vice President 13,656 2.4% 22.88 2/25/08 196 498
of Operations......... 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 13,656 2.4% 22.88 2/25/08 196 498
of Operations.......... 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 $15.13 per Share.
(3) Includes options to purchase 57,000 Shares surrendered by Mr. Reid on
February 25, 1998.
(4) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
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<PAGE>
Options Exercised by Certain Executive Officers. The following table sets
forth information (on an aggregated basis) concerning each exercise of stock
options made during the year ended December 31, 1998 by RSC's Chief Executive
Officer and each of its four other most highly compensated executive officers
and the year-end value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- "In-the-Money" Options
Number of End at Fiscal Year-End (2)
Shares Acquired Value ------------------------- ---------------------------------
on Exercise (1) Realized ($) Exercisable Unexercisable Exercisable ($) Unexercisable ($)
--------------- ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid......... -- -- 200,000 173,411 -- --
Chairman and Chief
Executive Officer
Douglas A. Waugaman
(3)................... -- -- 25,000 91,000 -- --
President and Chief
Operating Officer
Robert M. Wilson....... -- -- 18,750 72,250 -- --
Executive Vice
President,
Chief Financial
Officer, Secretary and
Treasurer
Ronald Halchishak...... 11,150 $247,387 37,510 49,750 $11,988 $5,916
Senior Vice President
of
Operations
David G. Ledlow........ 6,006 150,090 37,500 49,750 11,831 5,916
Senior Vice President
of Operations
</TABLE>
- --------
(1) As of April 30, 1999, 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 $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 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
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<PAGE>
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.
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
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<PAGE>
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 April 30, 1999 was equal to
7.2%), 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 April 30, 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, Ledlow,
Harrington and Howard 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, Ledlow,
Harrington and Howard 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, (3) with Messrs. Harrington and
Howard will continue in effect through May 30, 2000, and (4) with Mr. Waugaman
will continue in effect through June 30, 2001.
In addition to the Severance Agreements, RSC has also entered into executive
severance agreements (collectively, the "Executive Severance Agreements") with
Messrs. Waugaman, Wilson, Halchishak, Ledlow and Harrington 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
A-5
<PAGE>
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.
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 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
executives of various payments and benefits. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), generally disallows RSC's
deduction for compensation in excess of $1,000,000 paid to RSC's chief
executive officer or to any of the four other most 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 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 so as to (A)
reward them for achieving financial goals and (B) further the alignment of
interests of key management with RSC's stockholders, and (2) to provide
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<PAGE>
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 achieving
certain earnings per share objectives, and 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 because
they 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 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
A-7
<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).
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) RSC S&P 500 Index Russell 2000 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.
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.
A-8
<PAGE>
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 6 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 April 30, 1999, 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 (collectively, "Awards"), or any combination
thereof. Each Award is set forth in a separate written agreement with the
person receiving the Award. Under the 1996 Plan, not more than 2,000,000
Shares (or the equivalent in other equity securities) are authorized for
issuance upon exercise or vesting of any Awards. As of April 30, 1999, 165,346
Shares were available for future Awards. 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 present or future
subsidiaries who are determined by the Compensation Committee to be key
A-9
<PAGE>
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 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.
A-10
<PAGE>
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.
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.
A-11
<PAGE>
Each employee who has been employed by RSC for not less than 6 months and
who is customarily employed for more than 20 hours per week and more than 5
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 April 30, 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 who also serves as a
director of RSC, does not receive additional compensation from BBP for service
as a director.
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 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
described under the heading "Executive Compensation--Agreements with Mr.
Reid--Employment Agreement" above and RSC and Messrs. Waugaman, Wilson,
Halchishak, Ledlow, Harrington and Howard have entered into the severance
agreements described under the heading "Executive Compensation--Termination of
Employment and Change-in-Control Arrangements" above.
A-12
<PAGE>
ANNEX B
INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
AND EMPLOYEES OF RSC AND OTHER PARTICIPANTS WHO MAY ALSO
SOLICIT REVOCATIONS OF CONSENTS
The following tables set forth the name, principal business address and the
present office or other principal occupation or employment, and the name,
principal business and the address of any corporation or other organization in
which such employment is carried on, of the directors and certain executive
officers and employees of RSC and other representatives of RSC who may also
solicit revocations of consents from stockholders of RSC. Unless otherwise
indicated, the principal occupation refers to such person's position with RSC
and the business address is Rental Service Corporation, 6929 East Greenway
Parkway, Suite 200, Scottsdale, Arizona 85254.
Directors
The principal occupations of RSC's directors who are deemed participants in
the solicitation are set forth in "Board of Directors of RSC" on pages 9 and
10 of the Consent Revocation Statement. The principal business address of each
of such persons is as follows:
<TABLE>
<CAPTION>
Name Principal Business Address
- ---- --------------------------
<S> <C>
Martin R. Reid......................... Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
William M. Barnum, Jr.................. Brentwood RSC Partners, L.P.
11150 Santa Monica Boulevard, Suite 1200
Los Angeles, California 90025
James R. Buch.......................... Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
David P. Lanoha........................ Rental Service Corporation
11250 East 40th Avenue
Denver, Colorado 60239
Christopher A. Laurence................ Brentwood RSC Partners, L.P.
11150 Santa Monica Boulevard, Suite 1200
Los Angeles, California 90025
Eric L. Mattson........................ Baker Hughes Incorporated
3900 Essex Lane, Suite 1200
Houston, Texas 77027
Britton H. Murdoch..................... V-Span
1100 First Avenue, Suite 400
King of Prussia, Pennsylvania 19406
John M. Sullivan....................... Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
</TABLE>
B-1
<PAGE>
Executive Officers, Management and Other Employees
The principal occupations of certain of RSC's executive officers and
certain other members of management who are deemed participants in the
solicitation are set forth below. The principal business address of each of
such persons is that of RSC.
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
Robert M. Wilson...... Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
</TABLE>
Information Regarding Ownership of RSC's Securities by Participants
None of the participants owns any of RSC's securities of record but not
beneficially. The number of Shares held by directors and certain executive
officers is set forth in "Security Ownership" on pages 13 and 14 of the
Consent Revocation Statement.
Information Regarding Transactions in RSC's Securities by Participants
The following table sets forth purchases and sales of Shares by the
participants listed below during the past two years. Unless otherwise
indicated, all transactions are in the public market.
<TABLE>
<CAPTION>
Transaction Number of Shares
Name Date Acquired or (Sold) Footnote
- ---- ----------- ------------------ --------
<S> <C> <C> <C>
William M. Barnum....................... 06/04/97 (2,495,770) (1)
04/21/98 23,953 (2)
04/21/98 (617,953) (3)
12/03/98 (200,000) (3)
12/03/98 7,767 (2)
Martin R. Reid.......................... 12/23/97 (44,407) (4)
01/22/98 (50,278) (5)
01/28/98 431 (6)
02/05/98 (9,393) (5)
07/13/98 497 (6)
01/28/99 731 (6)
Christopher L. Laurence................. 04/21/98 1,236 (2)
12/03/98 400 (2)
Britton H. Murdoch...................... 05/22/98 1,000 (7)
Robert M. Wilson........................ 05/15/98 75 (7)
12/15/98 1,000 (7)
01/28/99 828 (6)
</TABLE>
- --------
(1) Sale of stock in public offering by Brentwood RSC Partners, L.P. Mr.
Barnum disclaims beneficial ownership of such Shares.
(2) Receipt of Shares from Brentwood RSC Partners, L.P.
(3) Distribution of Shares by Brentwood RSC Partners, L.P. Mr. Barnum
disclaims beneficial ownership of such Shares.
(4) Sale of stock in public offering.
(5) Transfer pursuant to divorce settlement.
(6) Issued under the QSP Plan.
(7) Purchase of stock in open market.
B-2
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated
Certain employees of Merrill Lynch and Morgan Stanley & Co. Incorporated
("Morgan Stanley") may also assist in the solicitation of proxies, including
by communicating in person, by telephone or otherwise with a limited number of
institutions, brokers or other persons who are stockholders of RSC. Neither
Merrill Lynch nor Morgan Stanley will receive any separate fee for its
solicitation activities. Merrill Lynch and Morgan Stanley are investment
banking firms that provide a full range of financial services for
institutional and individual clients. Although neither Merrill Lynch nor
Morgan Stanley admit that they or any of their respective directors, officers,
employees or affiliates are a "participant," as defined in Schedule 14A
promulgated under the Exchange Act, or that such Schedule 14A requires the
disclosure of certain information concerning Merrill Lynch and Morgan Stanley,
each of Merrill Lynch and Morgan Stanley may assist RSC in such a
solicitation. In the normal course of business, each of Merrill Lynch and
Morgan Stanley may trade securities of RSC for its own account and the account
of its customers and, accordingly, may at any time hold a long or short
position in such securities. As of April 29, 1999, Merrill Lynch held a net
long position of 436 Shares. As of April 29, 1999, Morgan Stanley held a net
long position of 63,600 Shares. In addition, in the normal course of business,
Merrill Lynch and Morgan Stanley may finance their respective securities
positions by bank and other borrowings and repurchase and securities borrowing
transactions.
Information with respect to the employees of Merrill Lynch who may be
deemed "participants" is set forth below. None of the individuals named below
owns any Shares or has engaged in any transaction involving the Shares during
the past two years. The principal business address of Merrill Lynch and each
of the persons listed below is Merrill Lynch, Pierce, Fenner & Smith
Incorporated, World Financial Center, 250 Vesey Street, North Tower, New York,
New York 10281.
<TABLE>
<CAPTION>
Principal
Name Occupation
---- ----------
<S> <C>
Paul A. Stefanick Managing Director
James H. Caldwell Vice President
Jack C. MacDonald Vice President
</TABLE>
Information with respect to the employees of Morgan Stanley who may be
deemed "participants" is set forth below. None of the individuals named below
owns any Shares or has engaged in any transaction involving the Shares during
the past two years. The principal business address of Morgan Stanley and each
of the persons listed below is Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York 10036.
<TABLE>
<CAPTION>
Principal
Name Occupation
---- ----------
<S> <C>
R. Bradford Evans Managing Director
Paul J. Taubman Managing Director
Glenn R. Robson Principal
Neil B. Morganbesser Principal
Pietro Cinquegrana Vice President
</TABLE>
Merrill Lynch serves as RSC's financial advisor in connection with the
proposed NationsRent Merger. In connection with the commencement of the United
Rentals Offer, RSC supplemented and modified its engagement of Merrill Lynch
such that 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
B-3
<PAGE>
RSC, including the United Rentals Offer (but excluding the NationsRent
Merger), 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 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);
(3) a fee equal to $6 million (against which the fee paid in clause (1)
above will not be credited) will be payable if the NationsRent Merger is
consummated; and
(4) 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) or (3) above by April 5, 2000, which fee will be payable in cash
on April 5, 2000.
RSC has also engaged Morgan Stanley as its co-financial advisor in
connection with the United Rentals Offer. 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 (including the NationsRent Merger) or any acquisition of a
majority of the voting stock of RSC or all or substantially all of its assets.
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.
In addition, Merrill Lynch Capital Corporation ("MLCC"), along with three
other lending institutions, has entered into a commitment letter with RSC and
NationsRent relating to financing activity in connection with the proposed
merger of RSC and NationsRent pursuant to which MLCC may receive customary
fees as well as reimbursement of reasonable out-of-pocket expenses. The
financing contemplated by the commitment letter will, upon consummation of the
proposed merger, among other things, refinance the existing credit facilities
of RSC and NationsRent, respectively, and provide for a consolidated credit
facility for the combined entity.
Miscellaneous Information Concerning Participants
Except as described in this Annex B or in the Consent Revocation Statement
or in Annex A thereto, none of the participants nor any of their respective
affiliates or associates (together, the "Participant Affiliates"), (1)
directly or indirectly beneficially own any Shares or any securities of any
subsidiary of RSC or (2) has had any relationship with RSC in any capacity
other than as a stockholder, employee, officer and director. Furthermore,
except as described in this Annex A or in the Consent Revocation Statement, no
Participant Affiliate is either a party to any transaction or series of
transactions since January 1, 1998, or has knowledge of any currently proposed
transaction or series of transactions, (1) to which RSC or any of its
subsidiaries was or is to be a party, (2) in which the amount involved exceeds
$60,000, and (3) in which any Participant Affiliate had, or will have, a
direct or indirect material interest.
Except for the employment agreements described in the Consent Revocation
Statement, no Participant Affiliate has entered into any agreement or
understanding with any person respecting any future employment by RSC or its
affiliates or any future transactions to which RSC or any of its affiliates
will or may be a party. Except as described in this Annex B or in the Consent
Revocation Statement or in Annex A thereto, there are no contracts,
arrangements or understandings by any Participant Affiliate within the past
year with any person with respect to RSC's securities.
B-4
<PAGE>
[FORM OF CONSENT REVOCATION CARD]
REVISED PRELIMINARY COPY--SUBJECT TO COMPLETION, DATED MAY , 1999
WHITE CONSENT REVOCATION CARD
THIS REVOCATION OF CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RENTAL SERVICE CORPORATION IN OPPOSITION TO THE UNITED RENTALS' CONSENT
SOLICITATION.
Revocation of any and all consents heretofore executed with respect to the
matters set forth herein, as described in the statement enclosed herewith.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "REVOKE CONSENT" ON EACH
PROPOSAL SET FORTH BELOW.
YOUR REVOCATION OF CONSENT IS IMPORTANT. PLEASE INDICATE YOUR OPPOSITION TO
THE UNITED RENTALS PROPOSALS BY MARKING, SIGNING, DATING AND MAILING THIS CARD
TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF NOT OTHERWISE MARKED, THIS
REVOCATION OF CONSENT REVOKES ALL PREVIOUS CONSENTS.
1. Remove all eight existing members of the RSC Board and any person(s)
elected or designated by any of such directors to fill any vacancy or
newly created directorship.
[_] REVOKE CONSENT[_] DO NOT REVOKE CONSENT
2. Elect William E. Aaron, David A. Bronner, Richard N. Daniel, Peter Gold,
Stephanie R. Joseph, David C. Katz, Elliot H. Levine, Jeffrey M. Parker
and Raymond S. Troubh (collectively, the "Nominees") as the directors of
RSC; provided, that, in the event that the RSC Board continues to be
fixed at eight (or fewer) directors, the Nominees who receive the
greatest number of votes shall fill all available seats on the RSC Board.
[_] REVOKE CONSENT[_] DO NOT REVOKE CONSENT
3. Repeal each provision of RSC's Bylaws or amendment thereto adopted
subsequent to January 20, 1999 and prior to the effectiveness of any of
the Proposals.
[_] REVOKE CONSENT[_] DO NOT REVOKE CONSENT
(continued and to be dated and signed on reverse side)
INSTRUCTION: TO REVOKE CONSENT OR WITHHOLD REVOCATION OF CONSENT FOR THE
ELECTION OF ALL THE PERSONS NAMED ON THE REVERSE, CHECK THE
APPROPRIATE BOX ON THE REVERSE. IF YOU WISH TO REVOKE THE CONSENT TO
THE ELECTION OF CERTAIN OF THE PERSONS NAMED ON THE REVERSE, BUT NOT
ALL OF THEM, CHECK THE "REVOKE CONSENT" BOX ON THE REVERSE AND WRITE
THE NAME OF EACH SUCH PERSON AS TO WHOM YOU DO NOT WISH TO REVOKE
CONSENT IN THE FOLLOWING SPACE:
-----------------------------------------------------------------------
IN THE ABSENCE OF DISSENT BEING INDICATED ON THE REVERSE, THE UNDERSIGNED
HEREBY REVOKES CONSENT TO EACH ACTION LISTED ON THE REVERSE.
None of the Proposals is subject to, or conditioned upon, the adoption of any
of the other Proposals; however, Proposal No. 2 cannot be effected unless
Proposal No. 1 is adopted.
Please sign exactly as name appears on stock certificates or on label affixed
hereto. When shares are held by joint tenants, both should sign. In case of
joint owners, EACH joint owner should sign. When signing as attorney, executor,
administrator, trustee, guardian, corporate officer, etc., give full title as
such.
Dated:
-------------------
---------------------------------
Signature
---------------------------------
Signature, if held jointly
---------------------------------
Title of Authority
IN ORDER FOR YOUR REVOCATION OF CONSENT TO BE VALID, IT MUST BE DATED. PLEASE
MARK, SIGN, DATE AND MAIL YOUR REVOCATION OF CONSENT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
