SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-1
Amendment No. 12
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
Rental Service Corporation
(Name of Subject Company)
UR Acquisition Corporation
United Rentals, Inc.
(Bidders)
Common Stock, par value $.01 per share
(Title of Class of Securities)
76009V 10 2
(CUSIP Number of Class of Securities)
United Rentals, Inc.
Four Greenwich Office Park
Greenwich, CT 06830
Attn.: Bradley S. Jacobs
Chairman of the Board and
Chief Executive Officer
Telephone:(203) 622-3131
Facsimile:(203) 622-6080
(Name, Address and Telephone Number of Person authorized to
Receive Notices and Communications on Behalf of Bidders)
Copy to:
Milton G. Strom, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
UR Acquisition Corporation, a Delaware corporation (the "Purchaser")
and a wholly owned subsidiary of United Rentals, Inc., a Delaware
corporation ("Parent"), and Parent hereby amend and supplement their Tender
Offer Statement on Schedule 14D-1 (as amended from time to time, the
"Schedule 14D-1"), filed with the Securities and Exchange Commission (the
"Commission") on April 5, 1999, with respect to the Purchaser's offer to
purchase all of the shares of common stock, par value $0.01 per share
(collectively with the associated preferred stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of April 16,
1999 (the "Rights Agreement"), between Rental Service Corporation and
ChaseMellon Shareholder Services, L.L.C., the "Shares"), of Rental Service
Corporation, a Delaware corporation (the "Company"), at a price of $22.75
per Share, net to the seller in cash (such price, or such higher price per
Share as may be paid in the Offer, the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the
related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer"). Unless otherwise indicated herein, each
capitalized term used but not defined herein shall have the meaning
ascribed to such term in the Schedule 14D-1 or in the Offer to Purchase
referred to therein.
Item 10. Additional Information.
The information set forth in Item 10(e) of the Schedule 14D-1 is
hereby amended and supplemented by the following information:
On May 10, 1999, Parent and Purchaser filed their first amended and
supplemental complaint (the "First Amended Complaint") with respect to the
litigation initiated by Parent and Purchaser in the Chancery Court of the
State of Delaware on April 5, 1999. Parent, in the First Amended Complaint,
alleges, among other things, breaches of fiduciary duties by the Company
Board in connection with the NationsRent Merger Agreement, breach of the
duty of candor by the Company and the Company Board, breach of fiduciary
duties by the Company Board in connection with Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), and that NationsRent has
aided and abetted the Company Board in their breaches of fiduciary duty.
Parent and Purchaser seek an order, among other things, (i) invalidating
the NationsRent Option and the NationsRent Termination Fee, (ii) declaring
that the adoption of the Rights Agreement and the failure to redeem the
Rights, each constitute breaches of the fiduciary duties of the Company
Board and (iii) compelling the Company Board to approve the Offer and the
Proposed Merger for purposes of Section 203 of the Delaware Law.
The foregoing is qualified in its entirety by reference to the
complete text of the First Amended Complaint, a copy of which is filed as
Exhibit (g)(12) hereto, which is incorporated by reference herein.
The information set forth in Item 10(f) of the Schedule 14D-1 is
hereby amended and supplemented by the following information:
On May 10, 1999, Parent sent a letter (the "May 10 Letter") to John
M. Sullivan and Britton H. Murdoch, members of the Executive Committee of
the Company Board. Copies of the May 10 Letter were also provided to the
other members of the Company Board, Douglas A. Waugaman (Chief Operating
Officer of the Company) and Robert M. Wilson (Executive Vice President,
Chief Financial Officer, Secretary and Treasurer of the Company). A copy of
the May 10 Letter is filed as Exhibit (a)(19) hereto and is incorporated by
reference herein.
On May 11, 1999, Parent issued a press release regarding the May 10
Letter. The full text of the press release is filed as Exhibit (a)(20)
hereto and is incorporated by reference herein.
Section 16 of the Offer to Purchase is hereby amended to undo the
change incorrectly made to its third paragraph by Amendment No. 10 to the
Schedule 14D-1. Such change was intended to be made to the first paragraph
of Section 16 of the Offer to Purchase. Accordingly, the first paragraph of
Section 16 of the Offer to Purchase is hereby amended to delete the third
sentence of such paragraph and replace it with the following four
sentences:
"If Parent or an affiliate of Parent acquires less than 50% of the
Shares or the Company's assets (based on the book value thereof),
Parent will pay Goldman Sachs a mutually acceptable transaction fee.
While Parent expects that any such fee would be commensurate with
transactions of this nature and size, no fee has yet been agreed upon
and the determination of such fee will be based upon arm's length
negotiations between Parent and Goldman Sachs. Accordingly, the
amount of the fee, if any, which would be payable to Goldman Sachs in
the event that Parent acquired less than 50% of the Shares or the
Company's assets (based upon the book value thereof) is not presently
capable of being predicted. However, Parent does not expect that a
fee based on the acquisition of less than 50% of the Shares would
ever need to be negotiated with Goldman Sachs because (i) Parent
believes that it is unlikely that it would waive the Minimum
Condition (which requires that more than 50% of the Shares be
tendered), (ii) Parent does not intend to waive the Section 203
Condition, and (iii) Parent does not intend to waive the Defensive
Action Condition (which is presently not satisfied due to the
Company's implementation of its Stockholder Rights Plan)."
The "INTRODUCTION" Section of the Offer to Purchase is hereby amended
to undo the change incorrectly made to the second sentence of its third
paragraph by Amendment No. 7 to the Schedule 14D-1. Such change was
intended to be made to the third sentence of the third paragraph of the
"INTRODUCTION" Section. Accordingly, third sentence of the third paragraph
of the "INTRODUCTION" Section of the Offer to Purchase is hereby amended
and supplemented to read as follows:
"Parent is seeking to negotiate a merger with the Company (the
"Proposed Merger") pursuant to which, as soon as practicable after
consummation of the Offer, Purchaser or another direct or indirect
subsidiary of Parent would be merged with and into the Company."
Unless otherwise indicated herein, each capitalized term used but not
defined herein shall have the meaning ascribed to such term in the Schedule
14D-1 or in the Offer to Purchase referred to therein.
Item 11. Materials to be Filed as Exhibits.
(a)(19) Letter dated May 10, 1999 from Parent to John M. Sullivan
and Britton H. Murdoch, the members of the Executive
Committee of the Company Board.
(a)(20) Press Release of Parent dated May 11, 1999.
(g)(12) Plaintiff's First Amended and Supplemental Complaint,
dated May 10, 1999, filed by Parent and Purchaser in the
Court of Chancery of the State of Delaware (confidential
portions redacted).
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
UR ACQUISITION CORPORATION
By: /S/ JOHN N. MILNE
-------------------------
Name: John N. Milne
Title: President
UNITED RENTALS, INC.
By: /S/ BRADLEY S. JACOBS
----------------------------
Name: Bradley S. Jacobs
Title: Chairman and Chief Executive
Officer
Date: May 11, 1999
INDEX TO EXHIBITS
Exhibit
Number Exhibit
(a)(19) Letter dated May 10, 1999 from Parent to John M. Sullivan
and Britton H. Murdoch, the members of the Executive
Committee of the Company Board.
(a)(20) Press Release of Parent dated May 11, 1999.
(g)(12) Plaintiff's First Amended and Supplemental Complaint,
dated May 10, 1999, filed by Parent and Purchaser in the
Court of Chancery of the State of Delaware (confidential
portions redacted).
[UNITED RENTALS LETTERHEAD]
May 10, 1999
Mr. John M. Sullivan
Mr. Britton H. Murdoch
Executive Committee of the Board of Directors
Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, AZ 85254
Gentlemen:
I am writing to you in your capacities as the members of the Rental
Service Executive Committee. We have read with great interest the recent
amendment to Rental Service's Schedule 14D-9 stating that Rental Service
and NationsRent are renegotiating the terms of your proposed transaction.
Presumably, the Rental Service Board now recognizes that the terms of this
transaction are not in the best interests of your stockholders.
Back in January we attempted to discuss a transaction with Rental
Service's management. We were rebuffed. Naturally, we were quite surprised
to read only a few days later that Rental Service had agreed to transfer
control to NationsRent in a transaction which it incorrectly characterized
as a "merger of equals."
We believe our $22.75 all cash premium proposal is superior to the
NationsRent merger based upon, among other things, price, timing and
certainty. We can only assume that you are talking with NationsRent to
improve the terms of your proposed transaction. However, the Rental Service
Board cannot cure its past failure to consider alternatives or to conduct a
fair process if it continues to negotiate and share information with only
one bidder. We believe it is contrary to the best interests of your
stockholders for you to continue to refuse to talk with us.
It is appropriate, and in the best interests of Rental Service
stockholders, that the Rental Service Board establish a level playing
field. We urge you not to continue this flawed process of playing favorites
with NationsRent.
We urge you not to sign an agreement without first talking with us.
We trust that you will give prompt and serious consideration to our request
for a meeting.
Sincerely,
Bradley Jacobs
Chairman and Chief Executive Officer
cc: Board of Directors, Rental Service Corporation
Douglas A. Waugaman, Chief Operating Officer,
Rental Service Corporation
Robert M. Wilson, Executive Vice President and Chief Financial
Officer, Rental Service Corporation
FOR IMMEDIATE RELEASE
UNITED RENTALS RESPONDS TO REPORTED RENEGOTIATION OF
NATIONSRENT-RENTAL SERVICE PROPOSED TRANSACTION
GREENWICH, CT, MAY 11, 1999 -- United Rentals, Inc. (NYSE: URI) sent
the following letter to the board of directors of Rental Service Corp.
(NYSE: RSV), in response to the reported renegotiation of NationsRent-
Rental Service proposed transaction:
May 10, 1999
Mr. John M. Sullivan
Mr. Britton H. Murdoch
Executive Committee of the Board of Directors
Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, AZ 85254
Gentlemen:
I am writing to you in your capacities as the members of the Rental
Service Executive Committee. We have read with great interest the recent
amendment to Rental Service's Schedule 14D-9 stating that Rental Service
and NationsRent are renegotiating the terms of your proposed transaction.
Presumably, the Rental Service Board now recognizes that the terms of this
transaction is not in the best interests of your stockholders.
Back in January we attempted to discuss a transaction with Rental
Service's management. We were rebuffed. Naturally, we were quite
surprised to read only a few days later that Rental Service had agreed to
transfer control to NationsRent in a transaction which it incorrectly
characterized as a "merger of equals."
We believe our $22.75 all cash premium proposal is superior to the
NationsRent merger, based upon, among other things, price, timing and
certainty. We can only assume that you are talking with NationsRent to
improve the terms of your proposed transaction. However, the Rental
Service Board cannot cure its past failure to consider alternatives or to
conduct a fair process if it continues to negotiate and share information
with only one bidder. We believe it is contrary to the best interests of
your stockholders for you to continue to refuse to talk with us.
It is appropriate, and in the best interests of Rental Service
stockholders, that the Rental Service Board establish a level playing
field. We urge you not to continue this flawed process of playing
favorites with NationsRent.
We urge you not to sign an agreement without first talking with us. We
trust that you will give prompt and serious consideration to our request
for a meeting.
Sincerely,
/s/
Bradley Jacobs
Chairman and Chief Executive Officer
cc: Board of Directors, Rental Service Corporation
Douglas Waugaman, Chief Operating Officer,
Rental Service Corporation
Robert Wilson, Executive Vice President and Chief Financial
Officer, Rental Service Corporation
###
United Rentals, Inc. is the largest equipment rental company in North
America and serves over 900,000 customers through its network of 482
locations in 41 states, Canada and Mexico.
###
CERTAIN INFORMATION CONCERNING PARTICIPANTS
United Rentals, Inc. ("United Rentals"), UR Acquisition Corporation
("UR Acquisition") and the following persons named below may be deemed to
be "participants" in the solicitation of consents and/or proxies from
stockholders of Rental Service Corporation ("Rental Service"): the
directors of United Rentals (Bradley Jacobs (Chairman of the Board and
Chief Executive Officer), Wayland Hicks (Vice Chairman and Chief Operating
Officer), John Milne (Vice Chairman, Chief Acquisition Officer and
Secretary), William Berry (President), John McKinney (Vice President,
Finance), Leon Black, Richard Colburn, Ronald DeFeo, Michael Gross, Richard
Heckmann, Gerald Tsai, Jr. and Christian Weyer); the following executive
officers and employees of United Rentals: Michael Nolan (Chief Financial
Officer) and Robert Miner (Vice President, Strategic Planning); and the
nominees of United Rentals (the "Nominees") to stand for election to the
Board of Directors of Rental Service (Messrs. Richard Daniel, Raymond
Troubh, William Aaron, David Bronner, Peter Gold, David Katz, Elliot Levine
and Jeffrey Parker and Ms. Stephanie Joseph).
As of the date hereof, United Rentals is the beneficial owner of 100
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Rental Service. Other than set forth herein, as of the date hereof,
neither United Rentals, UR Acquisition nor any of the persons listed above,
has any interest, direct or indirect, by security holding or otherwise, in
Rental Service.
United Rentals has retained Goldman, Sachs & Co. ("Goldman Sachs") to
act as its financial advisor and the Dealer Managers in connection with the
tender offer (the "Offer") by United Rentals and UR Acquisition to purchase
the shares of Common Stock of Rental Service for $22.75 per share in cash,
for which Goldman Sachs may receive substantial fees, as well as
reimbursement of reasonable out-of-pocket expenses. In addition, United
Rentals has agreed to indemnify Goldman Sachs and certain related persons
against certain liabilities, including certain liabilities under the
federal securities laws, arising out of its engagement. United Rentals has
also entered into a commitment letter with Goldman Sachs Credit Partners
L.P. ("GSCP") relating to the financing of the Offer pursuant to which GSCP
may receive substantial fees, as well as reimbursement of reasonable out-
of-pocket expenses. Goldman Sachs does not admit that it or any of its
partners, directors, officers, employees, affiliates or controlling
persons, if any, is a "participant" as defined in Schedule 14A promulgated
under the Securities Exchange Act of 1934, as amended, in the solicitation
of consents and/or proxies, or that Schedule 14A requires the disclosure of
certain information concerning Goldman Sachs. In connection with Goldman
Sachs' role as financial advisor to United Rentals, the following
investment banking employees of Goldman Sachs may communicate in person, by
telephone or otherwise with a limited number of institutions, brokers or
other persons who are stockholders of Rental Service and may solicit
consents and/or proxies from these institutions, brokers or other persons:
Bruce Evans, Robert Lipman, Jeffrey Moslow and Cody Smith. Goldman Sachs
engages in a full range of investment banking, securities trading,
market-making and brokerage services for institutional and individual
clients. In the normal course of its business Goldman Sachs may trade
securities of Rental Service for its own account and the accounts of its
customers, and accordingly, may at any time hold a long or short position
in such securities. Goldman Sachs has informed United Rentals that, as of
the date hereof, Goldman Sachs holds no shares of the Common Stock of
Rental Service for its own account. Goldman Sachs and certain of its
affiliates may have voting and dispositive power with respect to certain
shares of Rental Service Common Stock held in asset management, brokerage
and other accounts. Goldman Sachs and such affiliates disclaim beneficial
ownership of such shares of Rental Service Common Stock.
###
United Rentals, Inc.
Investor contact: Media contact:
Robert Miner Fred Bratman or Tracy Williams
United Rentals Sard Verbinnen & Co.
Phone: 203-622-3131 Phone: 212-687-8080
Fax: 203-622-6080 Fax: 212-687-8344
E-mail: [email protected] E-Mail: [email protected]
or [email protected]
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
UR ACQUISITION CORPORATION, a Delaware :
corporation, and UNITED RENTALS, INC., a :
Delaware corporation, :
:
Plaintiffs, :
: Civil Action No. 17090 NC
v. :
:
MARTIN R. REID, WILLIAM M. BARNUM, JR., :
JAMES R. BUCH, DAVID P. LANOHA, :
CHRISTOPHER A. LAURENCE, ERIC L. MATTSON, : PUBLIC VERSION PURSUANT TO
BRITTON H. MURDOCH, JOHN M. SULLIVAN, : RULE 5(g)(4)(b)
RENTAL SERVICE CORPORATION, a Delaware :
corporation, and NATIONSRENT, INC., a :
Delaware corporation, :
:
Defendants. :
FIRST AMENDED AND SUPPLEMENTAL COMPLAINT
Plaintiffs UR Acquisition Corporation ("UR Acquisition") and
United Rentals, Inc. ("URI"), as and for their First Amended and
Supplemental Complaint herein, by and through their undersigned attorneys,
allege, upon knowledge as to themselves and their own acts and upon
information and belief as to all other matters, as follows:
NATURE OF THIS ACTION
1. On April 5, 1999, Plaintiff UR Acquisition, a wholly owned
subsidiary of plaintiff URI, commenced a tender offer (the "Tender Offer"
or the "URI Tender Offer") for all of the outstanding shares of defendant
Rental Services Corporation ("RSC") at $22.75 per share in cash. This
represented sented a 32% premium over the market price for URI's shares
(as of the close of trading on the New York Stock Exchange on April 1,
1999, the last trading day prior to the opening of the Tender Offer).
2. In an agreement dated as of January 20, 1999 (the "Merger
Agreement"), RSC and defendant NationsRent, Inc. ("NationsRent") agreed to
merge in a stock-for-stock exchange. The RSC board approved the Merger
Agreement less than one week after RSC's Chief Executive Officer rebuffed
an offer from URI to discuss a possible acquisition by URI, stating in
substance that RSC was not for sale.
3. Unlike RSC, the shares of which are owned by a large number
of unaffiliated stockholders, approximately 48% of the outstanding common
stock of NationsRent is controlled by its three founding stockholders (the
"NationsRent Founding Stockholders"). Two of the NationsRent Founding
Stockholders, H. Family Investments, Inc. and James L. Kirk (NationsRent's
chairman and chief executive officer), collectively own approximately
46.1% of NationsRent's common stock and have entered into a voting
agreement with RSC in which they have agreed to vote their shares together
in favor of the NationsRent merger. The effect of the proposed
NationsRent/RSC merger would thus be to transfer control of RSC from a
disparate unaffiliated group of stockholders to an entity effectively
controlled by the NationsRent Founding Stockholders.
4. RSC and NationsRent agreed in their Merger Agreement to a
breakup fee of more than 11% of the value of the merger consideration
(calculated as a percentage of the market capitalization of equity in the
proposed transaction contemplated by the Merger Agreement) (the "Breakup
Fee"), as well as a "lock-up" cross-stock option (the "Lockup Option")
which permits NationsRent and RSC to purchase approximately 19.9% of each
other's common stock. The Lockup Option becomes exercisable upon the
occurrence of any event that would result in NationsRent becoming entitled
to the Breakup Fee.
5. The Breakup Fee and Lock Up were granted not to seal in a
superior proposal but to preclude an active bidding process for control of
RSC. Prior to entering into the Merger Agreement, RSC's Chairman and Chief
Executive Officer had been told of URI's interest in acquiring RSC. RSC
responded by almost immediately agreeing to the Merger Agreement on terms
which, because they preclude alternative proposals and coerce stockholders
into supporting the Merger, are highly unfavorable to RSC and its
stockholders.
6. On April 16, 1999, RSC announced that its directors had
voted to reject URI's offer and to declare a dividend distribution of one
Preferred Share Purchase Right on each outstanding share of RSC common
stock (the "Rights Plan"). The Rights Plan is specifically designed to
thwart URI's Tender Offer unless the Individual Defendants vote to redeem
it in favor of URI.
7. Despite the Individual Defendants' fiduciary duty to act to
maximize the value obtained for all RSC stockholders, the Breakup Fee,
Lockup Option and other actions alleged more fully herein are designed to
preclude, and have the effect of precluding, among other things, a
superior offer for RSC from URI.
8. Plaintiffs' Tender Offer is non-discriminatory,
non-coercive and provides a substantial premium to the stockholders of RSC
in exchange for their RSC shares. Through the Tender Offer and a proposed
second-step merger, plaintiffs intend to acquire control of, and
ultimately the entire equity interest in, RSC. However, the Tender Offer
is conditioned upon, among other things, the setting aside of the Breakup
Fee contained in RSC's Merger Agreement with NationsRent and the attendant
Lockup Option.
9. In an April 16, 1999 press release and SEC filing on
Schedule 14D-9, RSC disclosed, for the first time, that its Chief
Executive Officer, Martin Reid ("Reid"), had been granted a "medical leave
of absence due to a heart condition." RSC and the Individual Defendants
however, failed to disclose to RSC stockholders, among other things,
[REDACTED] RSC's April 16 press release and Schedule 14D-9 filed that same
day contain other materially false and misleading statements in violation
of the fiduciary duties of candor owed by the Individual Defendants to RSC
and its shareholders.
10. Accordingly, plaintiffs seek declaratory, injunctive and
other relief as set forth herein to remedy the violations alleged herein.
THE PARTIES
11. Plaintiff URI is a Delaware corporation with its principal
executive offices in Connecticut. URI, an owner of RSC stock, is primarily
engaged in the equipment rental business, as are RSC and NationsRent.
12. Plaintiff UR Acquisition is a Delaware corporation with its
principal executive offices in Connecticut. UR Acquisition is a wholly
owned subsidiary of URI.
13. Defendant RSC is a Delaware corporation with its principal
place of business in Scottsdale, Arizona.
14. Based upon RSC's public disclosures, defendant Reid is the
Chairman and Chief Executive Officer of RSC. In a press release dated as
of April 16, 1999, RSC announced to its stockholders for the first time
that Reid had taken a medical leave of absence due to a heart condition.
According to RSC, "Mr. Reid's leave is based upon the advice of his
physicians and will last until evaluation and comprehensive treatment of
his medical condition have been completed." [REDACTED]
15. Defendant Daniel P. Lanoha is Senior Vice President of
Operations and a director of RSC.
16. Defendants William M. Barnum, Jr., James R. Buch,
Christopher A. Laurence, Eric L. Mattson, Britton H. Murdoch and John M.
Sullivan are directors of RSC. According to RSC's filing on Form 10-K for
the year ended December 31, 1998, its board of directors "presently
consists of eight members, including four independent directors." Thus, by
RSC's own admission, its board lacks a majority of independent directors.
17. On April 16, 1999, RSC announced that in light of Mr.
Reid's medical condition, it had established an Executive Committee of the
Board comprised of directors Sullivan and Murdoch "to work with and
supervise the executive management of the Company."
18. Defendant NationsRent is a Delaware corporation with its
principal executive offices in Ft. Lauderdale, Florida.
THE MERGER AGREEMENT
19. In December 1998, a representative of URI's financial
advisor telephoned defendant Reid to arrange a meeting between them. While
Reid stated he did not believe it was a good time to sell RSC, he agreed
to meet in January 1999.
20. On January 15, 1999, such a meeting took place with Reid
and Robert M. Wilson, RSC's Executive Vice President, Secretary and
Treasurer. At the meeting, Reid was asked whether RSC was interested in
discussing a business combination with URI, and Reid stated that his
company was not for sale.
21. Six days later, NationsRent and RSC announced that they had
entered into the Merger Agreement, pursuant to which RSC would merge with
NationsRent in a stock-for-stock transaction valued at approximately $360
million when the agreement was announced. That agreement was approved by
the Individual Defendants at a meeting on January 20. The Merger Agreement
further contemplated that James L. Kirk, NationsRent's Chairman and Chief
Executive Officer, would become CEO of the combined entity and defendant
Reid would become Chairman.
22. Pursuant to the Merger Agreement, each share of NationsRent
would be converted into 0.355 share of RSC common stock. Also pursuant to
the Merger Agreement, NationsRent would have the right to nominate five of
the nine directors of the combined companies.
23. Under the circumstances presented here, the aggregate effect
of the structural barriers to an alternative transaction created by the
NationsRent transaction is both preclusive and coercive. Pursuant to the
Merger Agreement, a termination by either party under certain specified
circumstances requires the terminating party to pay the other party $35
million as a Breakup Fee, and an additional $5 million in expenses. As of
the date of the Merger Agreement, the $40 million total Breakup Fee
(including expenses) represented approximately 11% of the market
capitalization of the equity of the NationsRent transaction.
24. RSC and NationsRent have also each granted to the other the
Lockup Option to purchase approximately 19.9% of the stock of their
respective corporations pursuant to a "stock option agreement" dated on or
about January 20, 1999. The Lockup Option becomes exercisable upon the
occurrence of any event that would result in the holder of the option being
entitled to receive payment of the Breakup Fee under the Merger Agreement.
Among other things, the Lockup Option is designed (i) to ensure that the
only transaction that RSC stockholders are permitted to consider is between
RSC and NationsRent; (ii) to deter URI from seeking to acquire RSC upon
terms that are economically superior to the NationsRent/RSC Merger
Agreement; and (iii) to penalize either party to the Merger Agreement
should it attempt to secure a better transaction for its stockholders.
Thus, should RSC decide to accept an offer for a different business
combination transaction from URI or should RSI shareholders fail to approve
the NationsRent/RSC Merger Agreement -- no matter how advantageous to RSC's
stockholders -- RSC would be forced to allow NationsRent to purchase
approximately 19.9% of the common equity of RSC at an undisclosed price, as
well as being forced to pay NationsRent $40 million.
URI TAKES ITS CASE DIRECTLY TO RSC'S STOCKHOLDERS
25. On April 5, 1999, plaintiffs announced the commencement of a
tender offer to purchase all of the outstanding common stock of RSC at
$22.75 per share in cash -- a 32% premium over RSC's closing price prior to
the tender offer.
26. Among other things, consummation of the offer is conditioned
upon the Breakup Fee and the Lockup Option's having been terminated or
invalidated without any funds having been paid or stock having been issued
thereunder. The cost to plaintiffs of their Tender Offer if NationsRent
were to exercise the Lockup Option and then to tender its shares into
plaintiffs' Tender Offer would be increased significantly. Moreover, the
mere existence of the Lockup Option prevents transactions other than the
NationsRent/RSC Merger from occurring.
27. On April 5, 1999, URI's Chairman and Chief Executive Officer
sent a letter to Mr. Reid of RSC advising him of the Tender Offer and the
benefits of a combination between URI and RSC, and offering to meet with
him and RSC directors to discuss the URI proposal and answer relevant
questions.
28. On April 13, 1999, URI filed with the United States
Securities and Exchange Commission preliminary proxy materials to solicit
proxies from RSC shareholders against the RSC/NationsRent merger and a
preliminary consent solicitation soliciting written consents from RSC
stockholders to, among other things, remove the members of the RSC Board.
THE RSC BOARD'S RESPONSE
29. At meetings held during the week ending on April 16, 1999,
RSC's board voted to reject URI's offer; to stand by the URI/NationsRent
transaction; and to adopt a shareholder Rights Plan for the stated purpose
of impeding the URI Tender Offer. Specifically, the URI Board declared a
dividend of one Preferred Share Purchase Right ("Right") on each
outstanding share of RSC common stock. As outlined in RSC's Form 8-K filed
on April 16, 1999, the Rights Plan contains both "flip-in" and "flip-over"
provisions. The flip-in provision allows the holder of a Right to acquire
additional shares of RSC voting stock at a substantially reduced price.
30. The flip-over provision gives the holder the ability to
exercise the Right in exchange for shares of any acquiring company, with
the holder receiving a certain number of shares of the acquiror with a
market value twice that of the existing purchase price of one Right. In
other words, if URI were to acquire RSC without the RSC Board having first
redeemed the Rights, current RSC stockholders would be able to double the
value of their Preferred Purchase Share Rights overnight by exchanging them
for URI stock. URI's capitalization, in turn, would be impaired.
THE MISLEADING RSC SCHEDULE 14D-9
31. In a press release and filing on Schedule 14D-9 both dated
April 16, 1999, RSC announced its decision, and actions taken, with respect
to the URI Tender Offer. That announcement was preceded earlier in the day
by an earnings release that failed fully to disclose all material
information, including that it was based on certain extraordinary non-
recurring items. The press release and Schedule 14D-9 also disclosed, for
the first time, that RSC's Chairman and chief Executor Officer, had taken a
"medical leave of absence." For example, a "Dear Stockholder" letter, is
signed by defendant Sullivan, states in the next to last paragraph:
You should be aware of a separate development. The Company has
established an Executive Committee of the Board, of which I will
serve as Chairman and which includes my fellow director, Britton
H. Murdoch. The Committee will work with and supervise the
executive management of the Company, including Robert M. Wilson,
Executive Vice President and Chief Financial Officer, and Douglas
A. Waugaman, newly appointed Chief Operating Officer, during the
absence of Martin R. Reid, our Chairman and Chief Executive
Officer. Mr. Reid, upon the advice of his physicians, has
requested and been granted a medical leave to complete evaluation
and pursue treatment of a heart condition.
[REDACTED]. Letters to suppliers and customers, which are included in the
Schedule 14D-9 as exhibits, misleadingly state:
Marty's tremendous energy has always been a force of excitement
and vitality throughout our Company. Please join us in wishing
him a speedy recovery and return."
[REDACTED]
32. [REDACTED]
33. In other publicly filed documents, RSC has stated that its
business depends to a significant extent on the contributions of executive
officers and directors, and that the loss of the services of key employees
or directors could have an adverse effect on RSC's business. [REDACTED]
34. [REDACTED]
35. In addition, the Schedule 14D-9 disclosed that the RSC Board
continued to believe "that the NationsRent Merger represents an attractive
transaction for RSC's stockholders, consistent with the RSC Board's long-
term growth strategy . . . ." The Schedule 14D-9 also discussed that the
RSC Board received a letter from NationsRent dated April 12 in which
NationsRent "reconfirm[ed]" its "strong commitment" to the merger
transaction and that "[i]n response to this letter, RSC has engaged in
discussions with NationsRent and its financial and legal advisors with
respect to the NationsRent Merger in light of the commencement of the
Tender Offer and anticipates engaging in such discussions in the future."
However, RSC has failed to disclose to its shareholders and the investing
public the nature of these discussions.
IRREPARABLE INJURY
36. Defendants' conduct has irreparably harmed and, unless
enjoined, will continue to irreparably harm plaintiffs by depriving them of
the unique opportunity to acquire RSC. The actions of the Individual
Defendants constitute a breach of the fiduciary duties owed by the
Individual Defendants to RSC's stockholders. Plaintiffs' resulting injury
is not compensable in monetary damages and they, therefore, have no
adequate remedy at law.
COUNT I: BREACH OF FIDUCIARY DUTY
37. Plaintiffs repeat and reallege each of the foregoing
allegations as if fully set forth herein.
38. By virtue of their positions as directors of RSC, the
Individual Defendants owe fiduciary duties to RSC and its stockholders.
These duties include, but are not limited to, the obligation to consider
and fairly evaluate all offers for RSC, the obligation to act reasonably to
seek a transaction offering the highest value reasonably available to RSC's
stockholders in the sale or merger of RSC, and the obligation not to put
self-interests and personal considerations, or any other considerations,
ahead of the interests of RSC's stockholders. The Individual Defendants
are also obligated to conduct the affairs of RSC with due care.
39. The conduct of the Individual Defendants in, among other
things, agreeing and then failing to rescind the Breakup Fee and Lockup
Option and in failing to redeem or otherwise render inapplicable to URI the
Rights Plan demonstrates a lack of good faith, could not have been based
upon a reasonable inquiry, and unreasonably precludes any possibly superior
offer for RSC such as the Tender Offer.
40. In engaging in the foregoing conduct, the RSC directors
breached their fiduciary duties by, among other things, failing to act in a
manner that was entirely fair to all RSC stockholders. The Individual
Defendants have also failed to obtain a transaction offering the best value
available to all RSC stockholders. Further, the conduct of the Individual
Defendants was wholly unreasonable in relation to any "threat" posed by URI
and was not undertaken in good faith and after reasonable investigation.
41. Unless enjoined by this Court, the Individual Defendants
will continue to breach their fiduciary duties, to the detriment of RSC and
its stockholders, including URI.
42. Plaintiffs have no adequate remedy at law.
COUNT II: BREACH OF THE DUTY OF CANDOR
43. Plaintiffs repeat and reallege each of the foregoing
allegations as if fully set forth herein.
44. Defendants RSC and the Individual Defendants have failed to
disclose material facts and have made materially false and misleading
statements and alleged more fully above.
45. The foregoing unlawful activities constitute violations of
the duty of complete forthrightness and candor owed to shareholders of
Delaware corporations.
46. Plaintiffs have no adequate remedy at law.
COUNT III: BREACH OF FIDUCIARY DUTY
IN CONNECTION WITH 8 DEL. C. section 203
47. Plaintiffs repeat and reallege each of the foregoing
allegations as if fully set forth in this paragraph.
48. The Tender Offer is non-coercive and non-discriminatory. It
is fair to RSC stockholders, poses no threat to RSC's corporate policy and
effectiveness, and represents a substantial premium over both the market
price of RSC common stock prior to the announcement of the Tender Offer and
the implied value of RSC's proposed Merger Agreement with NationsRent.
49. Section 203 of the Delaware General Corporation Law, 8 Del.
C. section 203, entitled "Business Combinations with Interested
Stockholders", applies to any Delaware corporation, including RSC, that has
not opted out of such statute's coverage.
50. Among other things, Section 203, which was designed to
impede coercive and inadequate tender and exchange offers, provides that if
a person acquires 15% or more of a corporation's stock (thereby becoming an
"interested stockholder"), such interested stockholder may not engage in a
"business combination" with the corporation (defined to include a merger or
consolidation) for three years after the person becomes an interested
stockholder, unless (i) prior to the 15% acquisition, the board of
directors has approved either the acquisition or the business combination;
(ii) the interested stockholder acquires 85% of the corporation's voting
stock in the transaction in which it crosses the 15% threshold; or (iii) on
or subsequent to the date of the 15% acquisition, the business combination
is approved by the board of directors and authorized at an annual or
special meeting of stockholders (and not by written consent) by the
affirmative vote of at least 66-2/3% of the outstanding voting stock which
is not owned by the interested stockholder.
51. Section 203 may not properly be used by the RSC Board to
obstruct RSC's stockholders from considering URI's non-coercive, non-
discriminatory, all cash offer, which offer is superior to that implied in
the Merger Agreement with NationsRent, nor may it be used to prevent
substantive negotiations between URI and RSC that could lead to an even
more advantageous deal between URI and RSC. Section 203 was designed to
allow a board of directors to ensure that their stockholders received the
highest possible value for their shares, not to allow the board to refuse
to consider all possible alternatives to their chosen deal or to deny
stockholders the right to vote on any other deal.
52. Pursuant to Section 203, the Individual Defendants can
render the statute inapplicable to the URI Tender Offer by approving it.
The Individual Defendants' presumptive failure to approve the URI Tender
Offer for purposes of Section 203 and to take any other steps necessary to
render Section 203 inapplicable (presumed based upon the conduct of RSC and
the Individual Defendants towards URI to this point) constitutes a breach
of the fiduciary duty owed by the Board to RSC's stockholders.
53. Plaintiffs have no adequate remedy at law.
COUNT IV: AIDING AND ABETTING LIABILITY
54. Plaintiffs repeat and reallege each of the foregoing
allegations as if fully set forth herein.
55. The Individual Defendants have breached their fiduciary
duties to RSC and its stockholders.
56. NationsRent has aided and abetted the Individual Defendants
in their breaches of fiduciary duty. As a direct participant in the Merger
Agreement between NationsRent and RSC, NationsRent knew of the breaches of
fiduciary duty set forth herein, and in fact actively encouraged and
participated in said breaches of fiduciary duty. NationsRent induced the
Individual Defendants' breaches in order to obtain the substantial
financial benefits that the Merger Agreement between NationsRent and RSC
would provide it at the expense of RSC's stockholders.
57. Plaintiffs have no adequate remedy at law.
WHEREFORE, Plaintiffs UR Acquisition and URI respectfully request
that this Court:
A. Declare and decree that (i) the Breakup Fee provisions of
the Merger Agreement, and (ii) the Lockup Option were approved (and not
rescinded) in breach of the fiduciary duties of the Individual Defendants
and that each of them is unlawful and invalid, null and void and of no
further effect;
B. Temporarily, preliminarily and permanently enjoin
NationsRent, RSC, and their respective employees, agents and all persons
acting on their behalf from taking further steps or any actions with
respect to (i) the Lockup Option and/or (ii) the Breakup Fee and/or (iii)
any other unlawful provisions of the Merger Agreement;
C. Temporarily, preliminarily and permanently enjoin RSC and
the Individual Defendants to render Section 203 inapplicable to the URI
Tender Offer by approving the URI Tender Offer for purposes of Section 203;
D. Declare and decree that the adoption of and failure to
redeem the Rights Plan constitutes a breach of the fiduciary duties of the
Individual Defendants;
E. Temporarily, preliminarily and permanently enjoin the
adoption or exercise of any other measures by RSC or the Individual
Defendants which have the effect of impeding, thwarting, frustrating or
interfering with the URI Tender Offer;
F. Require RSC and the Individual Defendants to take all steps
necessary to provide plaintiffs with a fair and equal opportunity to
acquire RSC, including furnishing to URI the same information and access to
information as was provided to NationsRent;
G. Declaring that the Individual Defendants have violated their
fiduciary duties of candor and ordering RSC to make all appropriate
disclosures and correct all false or misleading statements and omissions of
material fact regarding the NationsRent merger and/or the URI Tender Offer;
H. Temporarily, preliminarily and permanently enjoin
NationsRent, and its employees, agents and all persons acting on its
behalf, from aiding and abetting the Individual Defendants' breach of their
fiduciary duties to RSC and its stockholders, including with respect to the
Merger Agreement, the Breakup Fee, the Lockup Option, the Rights Plan, or
the Tender Offer Commenced by plaintiffs; and
I. Grant such other and further relief as the Court may deem
just and proper, including the costs and disbursements of this action and
reasonable plaintiffs' attorneys' fees.
/s/ Edward P. Welch
---------------------------------
Edward P. Welch
Stephen D. Dargitz
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
David J. Margules
WOLF, BLOCK, SCHORR &
SOLIS-COHEN LLP
One Rodney Square, Suite 300
Wilmington, DE 19899
Attorneys for Plaintiffs,
UR Acquisition Corporation and
United Rentals, Inc.
OF COUNSEL:
Jay B. Kasner
Steven J. Kolleeny
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
Dated: May 10, 1999
