<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
---------------------
RENTAL SERVICE CORPORATION
(Name of Subject Company)
PANDION ACQUISITION CORP.
ATLAS COPCO NORTH AMERICA INC.
(Bidders)
------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
------------------------
76009V102
(CUSIP Number of Class of Securities)
------------------------
ATLAS COPCO NORTH AMERICA INC.
1211 HAMBURG TURNPIKE, SUITE 214
WAYNE, NEW JERSEY 07470
ATTN: Mark Cohen
TELEPHONE: (973) 633-8600
FACSIMILE: (973) 633-9722
(Name, Address and Telephone Number of Person authorized to
Receive Notices and Communications on Behalf of Bidders)
COPY TO:
STEPHEN R. RUSMISEL, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
TELEPHONE: (212) 858-1000
FACSIMILE: (212) 858-1500
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 76009V102 Page 2 of 8 Pages
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1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Pandion Acquisition Corp.
I.R.S. Employer Identification Number--Application Pending
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (7)
0%
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10 TYPE OF REPORTING PERSON
CO
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 76009V102 Page 3 of 8 Pages
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1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Atlas Copco North America Inc.
I.R.S. Employer Identification Number--22-1669012
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (7)
0%
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10 TYPE OF REPORTING PERSON
CO
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<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Pandion Acquisition Corp., a Delaware corporation ("Purchaser"),
and a wholly owned subsidiary of Atlas Copco North America Inc., a Delaware
corporation ("Parent"), to purchase all of the outstanding shares of common
stock, par value $.01 (together with the associated preferred share purchase
rights, the "Shares"), of Rental Service Corporation, a Delaware corporation
(the "Company"), at a purchase price of $29.00 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated June 29, 1999 (the "Offer to Purchase"), a
copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which, as may
be amended or supplemented from time to time, together constitute the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Rental Service Corporation and the
address of its principal executive offices is 6929 East Greenway Parkway, Suite
200, Scottsdale, Arizona 85254.
(b) The information set forth in the "INTRODUCTION" of the Offer to Purchase
is incorporated herein by reference.
(c) The information set forth in "Section 6--Price Range of the Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Purchaser and Parent. The
information set forth in the "INTRODUCTION" and "Section 9--Certain Information
Concerning Parent and the Purchaser" of the Offer to Purchase and Annex I
thereto is incorporated herein by reference.
(e)-(f) During the last five years neither Purchaser nor Parent nor, to the
best knowledge of Purchaser and Parent, any of the persons listed in Annex I of
the Offer to Purchase has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below, neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of
the persons listed in Annex I of the Offer to Purchase has entered into any
transaction with the Company, or any of the Company's affiliates which are
corporations, since the commencement of the Company's third full fiscal year
preceding the date of this Statement, the aggregate amount of which was equal to
or greater than one percent of the consolidated revenues of the Company for (i)
the fiscal year in which such transaction occurred or (ii) the portion of the
current fiscal year which has occurred if the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of
the persons listed in Annex I to the Offer to Purchase has entered into any
transaction since the commencement of the Company's third full fiscal year
preceding the date of this Statement, with the executive officers, directors or
affiliates of the Company which are not corporations, in which the aggregate
amount involved in such transaction or in a series of similar transactions,
including all periodic installments in the case of any lease or other agreement
providing for periodic payments or installments, exceeded $40,000.
1
<PAGE>
(b) The information set forth in the "INTRODUCTION," "Section 9--Certain
Information Concerning Parent and Purchaser," "Section 11--Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company", "Section
12--Purpose of the Offer and the Merger; Plans for the Company" and "Section
13-- The Transaction Documents" of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS.
(a)-(b) The information set forth in "Section 10--Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "INTRODUCTION," "Section
11--Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company", "Section 12--Purpose of the Offer and the Merger; Plans for the
Company" and "Section 13--The Transaction Documents" of the Offer to Purchase is
incorporated herein by reference.
(f)-(g) The information set forth in "Section 7--Certain Effects of the
Transaction" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Section 9--Certain Information
Concerning Parent and the Purchaser" and "Section 11--Background of the Offer;
Past Contacts, Transactions or Negotiations with the Company" of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION," "Section 10--Source and
Amount of Funds," "Section 11--Background of the Offer; Past Contacts,
Transactions or Negotiations with the Company," "Section 12--Purpose of the
Offer and the Merger; Plans for the Company" and "Section 17--Fees and Expenses"
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Section 17--Fees and Expenses" of the Offer to
Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "Section 9--Certain Information Concerning
Parent and Purchaser" of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Purchaser or Parent, or to the best knowledge of Purchaser and Parent,
any of the persons listed in Annex I of the Offer to Purchase, and the Company,
or any of its executive officers, directors, controlling persons or
subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION," "Section
15--Certain Conditions to the Purchaser's Obligations" and "Section 16--Certain
Legal Matters" of the Offer to Purchase is incorporated herein by reference.
2
<PAGE>
(d) The information set forth in "Section 7--Certain Effects of the
Transaction" and "Section 16--Certain Legal Matters" of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated June 29, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement dated June 29, 1999.
(a)(8) Press Release of Parent dated June 28, 1999.
(b)(1) Commitment Letter from Credit Suisse First Boston dated June 25,
1999.
(c)(1) Agreement and Plan of Merger, dated as of June 28, 1999, by and
among Parent, the Purchaser and the Company.
(c)(2) Guaranty of Atlas Copco AB dated June 28, 1999.
(c)(3) Letter agreement between the Company and Atlas Copco AB dated June
14, 1999.
(d) None.
(e) Not applicable.
(f) None.
(g) Atlas Copco North America Inc. Consolidated Financial Statements as
of and for the years ended December 31, 1998 and 1997.
3
<PAGE>
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.
<TABLE>
<S> <C> <C>
PANDION ACQUISITION CORP.
By: /s/ MARK COHEN
-----------------------------------------
Name: Mark Cohen
Title: President
ATLAS COPCO NORTH AMERICA INC.
By: /s/ MARK COHEN
-----------------------------------------
Name: Mark Cohen
Title: Executive Vice President
</TABLE>
Date: June 29, 1999
4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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<S> <C>
(a)(1) Offer to Purchase dated June 29, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Summary Advertisement dated June 29, 1999.
(a)(8) Press Release of Parent dated June 28, 1999.
(b)(1) Commitment Letter from Credit Suisse First Boston dated June 25, 1999.
(c)(1) Agreement and Plan of Merger, dated as of June 28, 1999, by and among Parent, the Purchaser and the
Company.
(c)(2) Guaranty of Atlas Copco AB dated June 28, 1999.
(c)(3) Letter agreement between the Company and Atlas Copco AB dated June 14, 1999.
(d) None.
(e) Not applicable.
(f) None.
(g) Atlas Copco North America Inc. Consolidated Financial Statements as of and for the years ended December
31, 1998 and 1997.
</TABLE>
5
<PAGE>
OFFER TO PURCHASE FOR CASH
All Outstanding Shares of Common Stock
of
RENTAL SERVICE CORPORATION
at
$29.00 Net Per Share
by
PANDION ACQUISITION CORP.
a wholly owned subsidiary of
ATLAS COPCO NORTH AMERICA INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 27, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS, INCLUDING (1) THERE BEING AT LEAST THAT NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE (TOGETHER WITH THE ASSOCIATED
PREFERRED SHARE PURCHASE RIGHTS, THE "SHARES") OF RENTAL SERVICE CORPORATION
(THE "COMPANY") REPRESENTING A MAJORITY OF THE TOTAL ISSUED AND OUTSTANDING
SHARES ON A FULLY DILUTED BASIS ON THE DATE SUCH SHARES ARE PURCHASED PURSUANT
TO THE OFFER, VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER (THE "MINIMUM CONDITION") AND (2) RECEIPT BY THE PURCHASER AND THE COMPANY
OF CERTAIN GOVERNMENTAL AND REGULATORY APPROVALS. SEE SECTION 15.
THIS OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF JUNE 28, 1999 (THE "MERGER AGREEMENT"), AMONG ATLAS COPCO
NORTH AMERICA INC., PANDION ACQUISITION CORP. AND THE COMPANY. THE BOARD OF
DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED HEREIN),
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S STOCKHOLDERS, HAS DECLARED THAT THE MERGER AGREEMENT
IS ADVISABLE, AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder of the Company desiring to tender Shares should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in accordance
with the instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary
(as defined herein) or follow the procedure for book entry transfer set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any stockholder of the Company who desires to tender Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary, in each case prior
to the expiration of the Offer, must tender such Shares pursuant to the
guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to Credit Suisse First
Boston Corporation, the Dealer Manager, or to Beacon Hill Partners, Inc., the
Information Agent, at their respective addresses and telephone numbers set forth
on the back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be obtained from the Information Agent, the Dealer
Manager, or from brokers, dealers, commercial banks and trust companies.
The Dealer Manager for the Offer is:
Credit Suisse First Boston Corporation Logo
June 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
1. Terms of the Offer..................................................................................... 2
2. Acceptance for Payment and Payment for Shares.......................................................... 4
3. Procedure for Tendering Shares......................................................................... 5
4. Withdrawal Rights...................................................................................... 8
5. Certain Federal Income Tax Consequences................................................................ 8
6. Price Range of Shares; Dividends....................................................................... 9
7. Certain Effects of the Transaction..................................................................... 10
8. Certain Information Concerning the Company............................................................. 11
9. Certain Information Concerning Parent and the Purchaser................................................ 15
10. Source and Amount of Funds............................................................................. 17
11. Background of the Offer; Past Contacts, Transactions or Negotiations with the Company.................. 18
12. Purpose of the Offer and the Merger; Plans for the Company............................................. 22
13. The Transaction Documents.............................................................................. 23
14. Dividends and Distributions............................................................................ 33
15. Certain Conditions to the Purchaser's Obligations...................................................... 33
16. Certain Legal Matters.................................................................................. 34
17. Fees and Expenses...................................................................................... 35
18. Miscellaneous.......................................................................................... 36
</TABLE>
Annex I. Certain Information Concerning the Directors and Executive
Officers of Parent and the Purchaser
ii
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF RENTAL SERVICE CORPORATION:
INTRODUCTION
Pandion Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Atlas Copco North America Inc., a Delaware
corporation ("Atlas Copco" or "Parent"), hereby offers to purchase all
outstanding shares of common stock, $.01 par value per share (together with the
associated preferred share purchase rights, the "Shares"), of Rental Service
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$29.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as may be amended or supplemented from
time to time, together with the Offer to Purchase, constitute the "Offer").
Tendering holders of Shares who have Shares registered in their own names and
who tender directly to the Depositary will not be obligated to pay brokerage
fees or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the sale of Shares to the Purchaser pursuant to the Offer.
Holders of Shares who hold their Shares through their broker or bank should
consult with such institution as to whether there are any fees applicable to a
tender of the Shares. The Purchaser will pay all charges and expenses of Credit
Suisse First Boston Corporation, which is acting as Dealer Manager (in such
capacity, the "Dealer Manager"), ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") and Beacon Hill Partners, Inc. (the "Information Agent") in
connection with the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT (AS
DEFINED BELOW) AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER (AS DEFINED HEREIN), HAS DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, HAS
DECLARED THAT THE MERGER AGREEMENT IS ADVISABLE, AND RECOMMENDS THAT HOLDERS OF
SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Company has advised the Purchaser that Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and Morgan Stanley & Co. Incorporated
("Morgan Stanley"), the Company's co-financial advisors, have delivered to the
Company's Board of Directors (the "Company Board") their respective written
opinions, dated as of the date of the Merger Agreement, to the effect that the
consideration to be received by the Company's stockholders pursuant to the
Merger Agreement is fair, from a financial point of view, to such stockholders.
Copies of such opinions are set forth in full in the Company's Solicitation/
Recommendation Statement on Schedule 14D-9 which is being mailed to the
Company's stockholders with this Offer to Purchase, and such stockholders are
urged to read the opinions in their entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS, INCLUDING (1) THERE BEING AT LEAST THAT NUMBER OF
SHARES REPRESENTING A MAJORITY OF THE TOTAL ISSUED AND OUSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE SUCH SHARES ARE PURCHASED PURSUANT TO THE OFFER,
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, AND (2)
RECEIPT BY THE PURCHASER AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY
APPROVALS. SEE SECTION 15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 28, 1999 (the "Merger Agreement"), among Parent, the Purchaser and
the Company. The Merger Agreement provides that, among other things, upon the
terms and subject to the conditions set forth therein, and in accordance with
the relevant provisions of the General Corporation Law of the State of Delaware,
as amended (the "DGCL"), as soon as practicable following completion of the
Offer, the Purchaser will be merged with and into the Company (the "Merger"). If
the Purchaser acquires at least 90% of the outstanding Shares pursuant to the
Offer, the Purchaser would be able to effect the Merger pursuant to the "short
form" merger provisions of Section 253 of the DGCL, without prior notice to, or
any action by, any other stockholder of the Company. See Section 12. Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned subsidiary
of Parent. At the effective time of the Merger (the "Effective Time"), each
issued and outstanding Share (other than Shares owned by
<PAGE>
the Company, any wholly owned subsidiary of the Company or by Parent, the
Purchaser or any other wholly owned subsidiary of Parent and by stockholders, if
any, who are entitled to and who properly exercise appraisal rights under the
DGCL) will be converted into the right to receive $29.00 per share (or any
higher price that may be paid for each Share pursuant to the Offer) in cash,
without interest (the "Offer Price"). See Section 5 for a description of certain
tax consequences of the Offer and the Merger.
The Merger Agreement provides that, promptly after the acquisition by the
Purchaser of not less than a majority of the total issued and outstanding Shares
on a fully diluted basis pursuant to the Offer, Parent will be entitled, to the
fullest extent permitted by law, to designate at its option a majority of the
members of the Company Board. The Company has agreed, at the option of Parent,
either to increase the size of the Company Board and/or obtain the resignation
of such number of directors as is necessary to enable Parent's designees to be
elected or appointed to the Company Board. The Merger Agreement is more fully
described in Section 13.
The Company has advised the Purchaser that as of June 28, 1999, there were
24,271,458 Shares issued and outstanding, and as of the date of the Merger
Agreement there were outstanding stock options and rights to purchase not in
excess of 2,188,535 Shares. As of the date hereof, (i) neither the Purchaser nor
Parent beneficially owns any Shares. Based on the foregoing, if the Purchaser
acquires at least 13,229,997 Shares in the Offer, it will control a majority of
the outstanding Shares on a fully diluted basis (assuming the exercise of all
options to purchase Shares outstanding at the Expiration Date of the Offer) and
will satisfy the Minimum Condition. Accordingly, the Purchaser would have
sufficient voting power to approve the Merger without the affirmative vote of
any other stockholder of the Company.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Tuesday, July 27, 1999, unless the Purchaser shall have
extended the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
If the Purchaser shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of 10
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday and consists of the time period
from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, ANY
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ACT OF 1976, AS AMENDED, APPLICABLE
TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR HAVING BEEN
TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER AND CERTAIN OTHER TERMS AND
CONDITIONS. SEE SECTION 15. THE MERGER AGREEMENT AND THE OFFER MAY BE TERMINATED
BY THE PURCHASER AND PARENT IF CERTAIN EVENTS OCCUR. The Purchaser reserves the
right (but shall not be obligated), in accordance with applicable rules and
regulations of the United States Securities and Exchange Commission (the "SEC"),
subject to the limitations set forth in the Merger Agreement and described
below, to waive or reduce the Minimum Condition or to waive any other condition
to the Offer. If the Minimum Condition or any condition described in Section 15
has not been satisfied by 12:00 Midnight, New York City time, on Tuesday, July
27, 1999 (or any other time then set as the Expiration Date), the Purchaser may,
subject to the
2
<PAGE>
terms of the Merger Agreement as described below, elect to (1) extend the Offer
and, subject to applicable withdrawal rights, retain all tendered Shares until
the expiration of the Offer, as extended, (2) subject to complying with
applicable rules and regulations of the SEC, accept for payment all Shares so
tendered and not extend the Offer or (3) terminate the Offer and not accept for
payment any Shares and return all tendered Shares to tendering stockholders.
Under the terms of the Merger Agreement, the Purchaser may not (except as
described in the next sentence), without the consent of the Company, decrease
the Offer Price, decrease the number of Shares sought pursuant to the Offer,
change the form of consideration payable in the Offer, change or amend the
conditions to the Offer or impose any additional conditions to the Offer, change
the Expiration Date of the Offer, or otherwise amend, add or waive any other
term or condition of the Offer in any manner adverse to the holders of Shares;
PROVIDED, HOWEVER, that if on any scheduled Expiration Date of the Offer any
conditions to the Offer have not been satisfied or waived, Purchaser may, and at
the request of the Company shall, from time to time, extend the Expiration Date
of the Offer for up to 5 additional business days (but in no event shall
Purchaser be required to extend the Expiration Date of the Offer beyond the
120th day following commencement of the Offer unless the Offer is on or after
such date being extended due to the occurrence of certain events as described in
Annex A to the Merger Agreement, in which case the Offer may be required by the
Company to be extended to the 180th day following commencement of the Offer).
Notwithstanding the foregoing, Purchaser may, (i) without the consent of the
Company, extend the Offer for any period required by any applicable law,
including without limitation, any rule, regulation, interpretation or position
of the Commission applicable to the Offer and (ii) make a one-time extension of
the Offer if the conditions to the Offer shall have been satisfied or waived and
the number of Shares that have been validly tendered and not withdrawn represent
more than 50% but less than 90% of the total issued and outstanding Shares on a
fully diluted basis; PROVIDED, HOWEVER, that in no event shall the extension
permitted under the foregoing clause (ii) exceed, in the aggregate, 10 business
days. Notwithstanding anything to the contrary in the Merger Agreement, Parent
may extend the Offer during (but only to the end of) the period in which the
Company is attempting to cure a breach pursuant to the terms of the Merger
Agreement. Parent and Purchaser agree, subject to the terms and conditions of
the Merger Agreement, to use their best efforts to consummate the Offer.
Subject to the limitations set forth in this Offer and the Merger Agreement,
the Purchaser reserves the right (but will not be obligated), at any time or
from time to time in its sole discretion, to extend the period during which the
Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. Except to the
extent required by the Merger Agreement, there can be no assurance that the
Purchaser will exercise its right to extend the Offer. See Section 13.
Subject to the applicable rules and regulations of the SEC and subject to
the limitations set forth in the Merger Agreement, the Purchaser expressly
reserves the right, at any time and from time to time, in its sole discretion,
(i) to delay payment for any Shares regardless of whether such Shares were
theretofore accepted for payment, or to terminate the Offer and not to accept
for payment or pay for any Shares not theretofore accepted for payment or paid
for, upon the occurrence of any of the conditions described in Section 15, by
giving oral or written notice of such delay or termination to the Depositary,
and (ii) at any time or from time to time, to amend the Offer in any respect
(subject to the provisions of the Merger Agreement). The Purchaser's right to
delay payment for any Shares or not to pay for any Shares theretofore accepted
for payment is subject to the applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), relating to the Purchaser's obligation to pay for or
return tendered Shares promptly after the termination or withdrawal of the
Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rules
14d-4(c) and 14e-1(d) under the Exchange Act. Without
3
<PAGE>
limiting the obligation of the Purchaser under such rule or the manner in which
the Purchaser may choose to make any public announcement, the Purchaser
currently intends to make announcements by issuing a press release to the Dow
Jones News Service and making any appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Purchaser makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer (including a waiver of
the Minimum Condition), the Purchaser will disseminate additional tender offer
materials and extend the Offer if and to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act or otherwise. The minimum period
during which a tender offer must remain open following material changes in the
terms of the Offer or the information concerning the Offer, other than a change
in price or a change in percentage of securities sought, will depend upon the
facts and circumstances, including the relative materiality of the terms or
information changes. With respect to a change in price or a change in percentage
of securities sought, a minimum 10 business day period is generally required to
allow for adequate dissemination to stockholders and investor response.
The Company has provided the Purchaser with the Company's list of
stockholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on the
Company's stockholder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 promptly after the later to occur of (a) the
Expiration Date and (b) the satisfaction or waiver of the conditions set forth
in Section 15 related to regulatory matters. Subject to compliance with Rule
14e-1(c) under the Exchange Act and any other applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment and payment for Shares in order to comply in whole or in part with any
applicable law. See Sections 1 and 16. In all cases, payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book Entry Confirmation") of a book entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the "Book
Entry Transfer Facility"), pursuant to the procedures set forth in Section 3,
(ii) a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with all required signature guarantees or, in the case
of a book entry transfer, an Agent's Message (as defined below) and (iii) any
other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book Entry Confirmation, which states that the Book Entry Transfer Facility has
received an express acknowledgment from the participant in the Book Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment pursuant to
the Offer. In all cases, payment for Shares purchased pursuant to the Offer will
be made by deposit of the purchase price with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting such payment to tendering stockholders. If, for any
reason whatsoever, acceptance for payment of any Shares tendered pursuant to the
Offer is delayed, or the
4
<PAGE>
Purchaser is unable to accept for payment Shares tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 1, the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn, except to the extent that the
tendering stockholders are entitled to withdrawal rights as described in Section
4 below and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER
NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER BECAUSE OF ANY DELAY IN
MAKING ANY PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book entry transfer to the Book Entry Transfer
Facility, such Shares will be credited to an account maintained with the Book
Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Purchaser increases the price being
paid for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDERS. For Shares to be validly tendered pursuant to the Offer,
either a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), with any required signature guarantees, or,
in the case of a book entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date or the
tendering stockholder must comply with the guaranteed delivery procedure set
forth below. In addition, either (i) certificates representing such Shares must
be received by the Depositary along with the Letter of Transmittal or such
Shares must be tendered pursuant to the procedure for book entry transfer set
forth below, and a Book Entry Confirmation must be received by the Depositary,
in each case prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with. No alternative, conditional or
contingent tenders will be accepted. DELIVERY OF DOCUMENTS TO THE BOOK ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
BOOK ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at the Book Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the Book Entry
Transfer Facility's system may make book entry delivery of Shares by causing the
Book Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book Entry Transfer Facility in accordance with the Book Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book entry at the Book Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase or (ii) the guaranteed delivery procedures described below
must be complied with.
5
<PAGE>
SIGNATURE GUARANTEE. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program, the Stock Exchange Medallion Program, or by any other bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act (each of the foregoing being referred to as an "Eligible
Institution" and, collectively, as "Eligible Institutions"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Delivery Instructions" or the box
labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for
the account of any Eligible Institution. If the certificates evidencing Shares
are registered in the name of a person or persons other than the signer of the
Letter of Transmittal, or if payment is to be made, or delivered to, or
certificates for unpurchased Shares are to be issued or returned to, a person
other than the registered owner or owners, then the tendered certificates must
be endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book
entry transfer, an Agent's Message, and any other documents required by
the Letter of Transmittal are received by the Depositary within three
trading days after the date of such Notice of Guaranteed Delivery. The term
"trading day" is any day on which the New York Stock Exchange ("NYSE") is
open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK ENTRY TRANSFER, BY BOOK ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature guarantees
or, in the case of a book entry transfer, an Agent's Message, and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO
6
<PAGE>
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING ANY PAYMENT.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT 31% "BACKUP" FEDERAL
INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST, SUBJECT TO CERTAIN
EXCEPTIONS, PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT
TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN HOLDERS MUST GENERALLY SUBMIT A
COMPLETED FORM W-8 TO AVOID 31% BACKUP WITHHOLDING. THIS FORM MAY BE OBTAINED
FROM THE DEPOSITARY. SEE INSTRUCTIONS 8 AND 9 SET FORTH IN THE LETTER OF
TRANSMITTAL.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Purchaser, in its sole
discretion, and its determination will be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Purchaser, be unlawful. The
Purchaser also reserves the absolute right to waive any of the conditions of the
Offer, subject to the limitations set forth in the Merger Agreement, or any
defect or irregularity in the tender of any Shares. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions to the Letter of Transmittal) will be final and
binding on all parties. No tender of Shares will be deemed to have been validly
made until all defects and irregularities have been cured or waived. None of the
Purchaser, Parent, the Dealer Manager, the Depositary, the Information Agent or
any other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of the Purchaser as such
stockholder's attorneys in fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's right with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and any and all other
Shares or other securities issued or issuable in respect of such Shares). All
such powers of attorney and proxies shall be considered coupled with an interest
in the tendered Shares. This appointment is effective when, and only to the
extent that, the Purchaser accepts for payment the Shares deposited with the
Depositary. Upon acceptance for payment, all prior powers of attorney and
proxies given by the stockholder with respect to such Shares or other securities
or rights will, without further action, be revoked and no subsequent proxies may
be given or written consent executed (and, if given or executed, will not be
deemed effective). The designees of the Purchaser will, with respect to the
Shares and other securities or rights, be empowered to exercise all voting and
other rights of such stockholder as they in their sole judgment deem proper in
respect of any annual or special meeting of the Company's stockholders, or any
adjournment or postponement thereof, any actions by written consent in lieu of
any such meeting or otherwise. The Purchaser reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's payment for such Shares, the Purchaser must be able to exercise full
voting and other rights with respect to such Shares and the other securities or
rights issued or issuable in respect of such Shares, including voting at any
meeting of stockholders (whether annual or special or whether or not adjourned)
in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares), and
(ii) when the same are accepted for payment by the Purchaser, the Purchaser will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The Purchaser's acceptance for payment of Shares
7
<PAGE>
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after August 27, 1999. If purchase of or payment for Shares is delayed for any
reason or if the Purchaser is unable to purchase or pay for Shares for any
reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of the Purchaser and
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as set forth in this Section 4, subject to Rule
14e-1(c) under the Exchange Act, which provides that no person who makes a
tender offer shall fail to pay the consideration offered or return the
securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase. Any notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name in which the certificates representing such Shares
are registered, if different from that of the person who tendered the Shares. If
certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book entry transfer set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the Book Entry Transfer
Facility to be credited with the withdrawn Shares and must otherwise comply with
the Book Entry Transfer Facility's procedures. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Purchaser, in its sole discretion, and its determination will be final
and binding on all parties. None of the Purchaser, Parent, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be re-tendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The summary of federal income tax consequences set forth below is for
general information only and is based on the Purchaser's understanding of the
law as currently in effect. The tax consequences to each stockholder will depend
in part upon such stockholder's particular situation. Special tax consequences
not described herein may be applicable to particular classes of taxpayers, such
as financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, tax exempt organizations, persons who acquired
their shares as part of a straddle, hedge or other integrated instrument, and
stockholders who acquired their Shares through the exercise of an employee stock
option or otherwise as compensation. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE
MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE
MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND OF
CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares pursuant to the Offer (or the Merger) will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax
8
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laws. Generally, a stockholder who receives cash for Shares pursuant to the
Offer (or the Merger) will recognize gain or loss for federal income tax
purposes equal to the difference between the amount of a cash received in
exchange for the Shares sold and such stockholder's adjusted tax basis in such
Shares. Provided that the Shares constitute capital assets in the hands of the
stockholder, such gain or loss will be capital gain or loss, and will be
long-term capital gain or loss if the holder has held the Shares for more than
one year at the time of sale. Gain or loss will be calculated and characterized
separately for each block of Shares (i.e., a group of Shares with the same tax
basis and holding period) tendered pursuant to the Offer. The maximum federal
income tax rate applicable to non-corporate taxpayers on long-term capital gain
is 20%, and the use of capital losses to offset other income is subject to
limitations.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to 31% backup withholding unless the stockholder
provides its TIN and certifies that such number is correct or properly certifies
that it is awaiting a TIN, or unless an exemption applies. A stockholder that
does not furnish its TIN may be subject to a penalty imposed by the Internal
Revenue Service (the "IRS").
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS on a
timely basis. If backup withholding results in an overpayment of tax, a refund
can be obtained by the stockholder upon filing an appropriate income tax return
on a timely basis.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (the "1998 Form 10-K"), the Shares are traded on the
NYSE. The following table sets forth, for the periods indicated, the high and
low sales prices per Share as reported on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
----------- ------------
<S> <C> <C>
Fiscal Year Ended December 31, 1997
First Quarter.......................................................... 28 18
Second Quarter......................................................... 261/2 171/2
Third Quarter.......................................................... 281/16 2111/16
Fourth Quarter......................................................... 283/16 221/4
Fiscal Year Ended December 31, 1998
First Quarter.......................................................... 247/8 195/16
Second Quarter......................................................... 335/8 233/16
Third Quarter.......................................................... 377/16 173/4
Fourth Quarter......................................................... 261/16 101/8
Fiscal Year Ended December 31, 1999
First Quarter.......................................................... 251/8 15
Second Quarter (through June 28, 1999)................................. 285/8 171/16
</TABLE>
On June 25, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing price per
Share as reported on the NYSE was 24 1/16. On June 28, 1999, the last full day
of trading prior to the commencement of the Offer, the closing price per Share
as reported on the NYSE was 28 1/2. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
Since its inception, the Company has not paid cash dividends on its Shares.
The Company's 1998 Form 10-K indicates that the Company is effectively
restricted by the terms of its credit facilities from paying cash dividends on
the Shares.
9
<PAGE>
7. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of the Shares by the Purchaser pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and will reduce
the number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than the
Purchaser. The Company has advised the Purchaser that, as of June 28, 1999,
there were approximately 66 holders of record and as of June 28, 1999 there were
approximately 4,200 beneficial owners of the Shares.
MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the standards for continued
inclusion on the NYSE. According to the NYSE's published guidelines, the NYSE
would consider delisting such Shares if, among other things, the number of
public holders of 100 Shares or more should fall below 1,200, the number of
publicly held Shares (exclusive of holdings of officers, directors, their
immediate families and other concentrated holdings of 10% or more ("NYSE
Excluded Holdings")) should fall below 600,000 or the aggregate market value of
publicly held Shares (exclusive of NYSE Excluded Holdings) should fall below
$5,000,000. If as a result of the purchase of the Shares pursuant to the Offer
or otherwise, the Shares no longer meet the requirements of the NYSE for
continued listing and the Shares are no longer listed, the market for the Shares
would be adversely affected.
In the event that the Shares should no longer be listed or traded on the
NYSE, it is possible that such Shares would continue to trade in the
over-the-counter market and that price quotations would be reported by other
sources. The extent of the public market for such Shares and the availability of
such quotations would, however, depend upon the number of holders of such Shares
remaining at such time, the interest in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of such
Shares under the Exchange Act, as described below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if there are fewer than 300 record holders of such
Shares. It is the intention of the Purchaser to seek to cause an application for
such termination to be made as soon after consummation of the Offer as the
requirements for termination of registration of such Shares are met.
Notwithstanding the termination of registration of the Shares, the Company will
continue to make public disclosure of financial and certain other information in
annual, quarterly and other reports to be filed with the SEC under the Exchange
Act in connection with the Company's 9% senior subordinated notes due 2008 for
so long as such notes remain outstanding.
If registration of the Shares is terminated, the Company would no longer
legally be required to disclose publicly in proxy materials distributed to
stockholders the information which it now must provide under the Exchange Act;
the Company would no longer be subject to Rule 13e-3 under the Exchange Act
relating to "going private" transactions; and the officers, directors and 10%
stockholders of the Company would no longer be subject to the "short swing"
insider trading reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 or Rule 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act").
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending upon
factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and therefore could no longer be used as collateral for
loans made by brokers. If
10
<PAGE>
registration of Shares under the Exchange Act were terminated, such Shares would
no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
Although neither the Purchaser nor Parent has any knowledge that would indicate
that statements contained herein based upon such documents are untrue, none of
the Purchaser, Parent and the Dealer Manager assume any responsibility for the
accuracy or completeness of the information concerning the Company or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
the Purchaser, Parent or the Dealer Manager.
The Company is a Delaware corporation with its principal executive offices
located at 6929 East Greenway Parkway, Suite 200, Scottsdale, Arizona. The
Company participates in the equipment rental industry, serving a variety of
industrial, manufacturing, construction, government and homeowner markets
through a network of 272 rental locations throughout the United States and
Canada. The Company rents a broad selection of equipment ranging from small
items such as pumps, generators, welders and electric hand tools to larger
equipment such as backhoes, forklifts, air compressors, scissor lifts, booms,
aerial manlifts and skid-steer loaders. The Company also sells maintenance,
repair and operations supplies, small tools, contractor supplies, parts and used
rental equipment, and acts as a distributor for new equipment on behalf of
certain national equipment manufacturers.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been taken from or based upon the Company
1998 Form 10-K and other publicly available documents and records on file with
the SEC and other public sources. None of Parent, Purchaser, the Dealer Manager,
the Depositary or the Information Agent assumes responsibility for the accuracy
or completeness of the information concerning the Company contained in such
documents and records or for any failure by the Company to disclose events which
may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent or Purchaser.
RENTAL SERVICE CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THREE
MONTHS
ENDED MARCH
1994 1995 1996 1997 1998 31, 1999
--------- --------- --------- --------- --------- -----------
STATEMENT OF OPERATIONS DATA (1):
REVENUES:
Equipment rentals................................ $ 27,775 $ 47,170 $ 94,218 $ 170,704 $ 404,185 $ 115,707
Sales of parts, supplies and new equipment....... 10,800 14,621 21,919 70,957 130,823 34,132
Sales of used equipment.......................... 3,240 4,126 12,217 19,602 43,466 24,913
--------- --------- --------- --------- --------- -----------
Total revenues............................... 41,815 65,917 128,354 261,263 578,474 174,752
COST OF REVENUES:
Cost of equipment rentals, excluding rental
equipment depreciation......................... 16,284 27,854 55,202 87,552 199,773 58,802
Depreciation, rental equipment................... 4,020 7,691 17,840 37,413 87,260 26,985
Cost of sales of parts, supplies and new
equipment...................................... 7,978 10,439 15,582 54,739 100,875 25,873
Cost of sales of used equipment.................. 2,320 2,178 8,488 12,927 31,259 16,449
--------- --------- --------- --------- --------- -----------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
THREE
MONTHS
ENDED MARCH
1994 1995 1996 1997 1998 31, 1999
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total cost of revenues....................... 30,602 48,162 97,112 192,631 419,167 128,109
--------- --------- --------- --------- --------- -----------
Gross profit....................................... 11,213 17,755 31,242 68,632 159,307 46,643
Selling, general and administrative expense........ 4,747 6,421 12,254 20,996 37,230 9,929
Depreciation and amortization, excluding rental
equipment depreciation........................... 504 1,186 2,835 5,373 10,244 3,324
Amortization of intangibles........................ 2,078 718 2,379 3,907 10,333 3,274
--------- --------- --------- --------- --------- -----------
Operating income................................... 3,884 9,430 13,774 38,356 101,500 30,116
Interest expense, net.............................. 731 3,314 7,063 14,877 50,375 16,500
--------- --------- --------- --------- --------- -----------
Income before income taxes and extraordinary
items............................................ 3,153 6,116 6,711 23,479 51,125 13,616
Provision for income taxes......................... 1,177 2,401 2,722 10,330 21,933 5,852
--------- --------- --------- --------- --------- -----------
Income before extraordinary items.................. 1,976 3,715 3,989 13,149 29,192 7,764
Extraordinary items (2)............................ -- 478 1,269 534 -- --
--------- --------- --------- --------- --------- -----------
Redeemable preferred stock accretion............... 1,646 1,717 1,643 -- -- --
--------- --------- --------- --------- --------- -----------
Net income available to common stockholders........ $ 330 $ 1,520 $ 1,077 $ 12,615 $ 29,192 $ 7,764
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Income before extraordinary items per common
share............................................ $ 0.08 $ 0.50 $ 0.34 $ 0.96 $ 1.33 $ 0.32
Income before extraordinary items per common share,
assuming dilution................................ $ 0.08 $ 0.49 $ 0.33 $ 0.94 $ 1.32 $ 0.32
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
1994 1995 1996 1997 1998 MARCH 31, 1999
--------- --------- --------- --------- ----------- --------------------
SELECTED OPERATING DATA:
Locations at end of period..... 25 50 94 165 241 248
Number of acquisitions
completed during period...... 1 5 11 22 24 2
BALANCE SHEET DATA:
Net book value of rental
equipment.................... $ 24,138 $ 52,818 $ 116,921 $ 314,696 $ 656,207 665,436
Total assets................... 48,098 137,832 218,933 699,326 1,352,576 1,370,412
Total debt..................... 12,752 68,555 68,594 306,975 808,712 944,505
Redeemable preferred stock (net
of treasury stock)........... 26,684 28,401 -- -- -- --
Common stockholders' equity
(deficit).................... (1,474) 46 95,072 290,781 417,485 425,907
</TABLE>
- --------------------------
(1) According to the Company 1998 Form 10-K, the Company's acquisitions have
been accounted for as purchases and, accordingly, the operations of the
acquired businesses are included in the statements of operations data from
the date of effective control of each acquisition.
(2) According to the Company 1998 Form 10-K, the extraordinary items represent
the losses on extinguishment of debt related to various amendments to, or
repayments of, the Company's revolving bank credit facility.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the SEC relating to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interests of such persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549. The SEC also maintains a World Wide Web site on
the internet at http://www.sec.gov that contains reports and other information
regarding registrants that file electronically with the SEC. Such material may
also be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
FIVE YEAR BUSINESS FORECAST OF THE COMPANY
To the knowledge of Parent and the Purchaser, the Company does not as a
matter of course make public forecasts as to its future financial performance.
However, in connection with the preliminary discussions concerning the
feasibility of the Offer and the Merger, the Company furnished Parent with its
five-year business forecast presented in the table below.
13
<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 herein
should not be regarded as an indication that any of Parent, the Purchaser, the
Company or any of their respective representatives considered or considers
forecasted financial results to be achievable.
None of Parent, the Purchaser or their respective financial advisors assumes
any responsibility for the validity, reasonableness, accuracy and completeness
of the five-year business forecast. None of Parent, the Purchaser or any of
their financial advisors has made, or makes, any representation to any person
regarding
14
<PAGE>
the information contained in the five-year business forecast and none of them
intends to update or otherwise revise the five-year business forecast to reflect
circumstances existing after the date when made or to reflect the occurrence of
future events even in the event that any or all of the assumptions underlying
the five-year business forecast are shown to be in error.
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 the Company as
an independent publicly-traded company, without taking into account any
acquisition or merger involving the Company. The five-year business
forecast does not reflect non-recurring charges incurred in connection
with the Agreement and Plan of Merger, dated as of January 20, 1999,
between the Company and NationsRent, Inc. and the termination thereof or
non-recurring charges incurred in connection with the terminated tender
offer of United Rentals Inc., which charges, in the aggregate, are
expected to be material to the results of operations and financial
condition of the Company.
- The five-year business forecast assumes that, during all relevant time
periods, (1) the Company does not raise capital in the equity or debt
markets, (2) there is sufficient availability under the Company's
revolving credit facility for working capital and other purposes and that
interest rates under the Company's revolving credit facility remain at
current levels, and (3) the lenders under the Company's revolving credit
facility will increase the aggregate permitted borrowings under such
facility consistent with the forecasted increases in the asset borrowing
base of the Company.
- Revenues are assumed to grow at a rate of approximately 25% annually.
- The five-year business forecast assumes that the Company 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 assumes 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 the Company. 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. The
Company 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.
15
<PAGE>
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
The Purchaser is a newly incorporated Delaware corporation. To date, the
Purchaser has not conducted any business other than that incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer. Accordingly, no meaningful financial information with
respect to the Purchaser is available. The Purchaser is a wholly owned
subsidiary of Parent. The principal executive office of the Purchaser is located
at 1211 Hamburg Turnpike, Suite 214, Wayne, New Jersey 07470.
Parent, a Delaware corporation, has its principal executive office at 1211
Hamburg Turnpike, Suite 214, Wayne, New Jersey 07470. Parent is owned by Atlas
Copco AB ("Atlas Copco") and Atlas Copco Airpower n.v., a wholly owned
subsidiary of Atlas Copco. Atlas Copco is an international industrial group of
companies, with its head office in Stockholm, Sweden. With revenues of
U.S.$4.176 billion in 1998, it has approximately 24,000 employees of which more
than 7,000 are in North America. Atlas Copco, founded in 1873, is listed on the
Stockholm Stock Exchange and is also quoted on the London, Frankfurt, Dusseldorf
and Hamburg stock exchanges.
Parent, through its subsidiaries, is engaged primarily in the manufacture,
sale and rental of a diversified line of equipment, geographically disbursed,
principally in the United States.
Set forth below are certain summary consolidated financial data with respect
to Parent excerpted or derived from financial information contained in Parent's
audited Consolidated Financial Statements ("Parent Financial Statements") as of
and for the years ended December 31, 1998 and 1997. The Parent Financial
Statements, a copy of which has been filed with the Commission as an exhibit to
Schedule 14D-1, is incorporated herein by reference. The Parent Financial
Statements may be examined and copies may be obtained at the places and in the
manner set forth in Section 8 of this Offer to Purchase.
ATLAS COPCO NORTH AMERICA INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997
------------ ------------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales & equipment rentals......................................................... $ 1,619,020 $ 1,373,805
Net income............................................................................ 5,134 10,089
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Total current assets.................................................................. $ 524,151 $ 543,282
Total assets.......................................................................... 2,595,410 2,536,318
Total current liabilities............................................................. 1,098,923 1,014,647
Total debt............................................................................
Stockholders' equity.................................................................. 2,595,410 2,536,318
</TABLE>
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors and
executive officers of Parent and the Purchaser are set forth in Annex I to this
Offer to Purchase.
Except as described in this Offer to Purchase, none of the Purchaser,
Parent, or to the best knowledge of the Purchaser or Parent, any of the persons
listed in Annex I hereto, owns or has any right to acquire any Shares and none
of them has effected any transaction in the Shares during the past 60 days.
16
<PAGE>
Except as set forth in this Section 9 or elsewhere in this Offer to
Purchase, none of the Purchaser, the Parent or, to the best knowledge of the
Purchaser or the Parent, any of the persons listed in Annex I hereto, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, there
have been no contacts, negotiations or transactions between the Purchaser or the
Parent, or, to the best of their knowledge, any of the persons listed in Annex I
hereto, on the one hand, and the Company or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets. Except as described in this Offer to Purchase,
none of the Purchaser, the Parent or, to the best knowledge of the Parent or the
Purchaser, any of the persons listed in Annex I hereto, has had any transaction
with the Company or any of its executive officers, directors or affiliates that
would require disclosure under the rules and regulations of the Commission
applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to consummate the Offer
and the Merger is expected to be approximately $730 million, which amount
excludes related fees and expenses.
Parent and the Purchaser plan to obtain the necessary funds through capital
contributions or advances made by Atlas Copco. Atlas Copco plans to obtain the
funds for such capital contributions or advances from its available cash and
working capital, or through the issuance of long- or short-term debt securities
(including, without limitations, commercial paper notes), or through a
combination of the foregoing.
Atlas Copco does not expect to require funds other than as may be obtained
in the manner described above, but, in support of its long- or short-term debt
security programs, Atlas Copco has obtained from Credit Suisse First Boston,
London Branch, an affiliate of the Dealer Manager ("CSFB"), a written financing
commitment to underwrite and arrange a 364 day revolving credit facility in a
maximum principal amount of US $2 billion (the "Credit Facility"). The terms of
the definitive agreement providing for the Credit Facility (the "Loan
Agreement") have not yet been finalized. The following is a summary of the
anticipated principal terms of the Credit Facility based upon the Commitment
Letter, dated June 25, 1999, between Atlas Copco and CSFB (the "Commitment
Letter"). This summary is subject to finalizing the Loan Agreement, and is
qualified in its entirety by reference to the Commitment Letter, which is filed
as an Exhibit to the Schedule 14D-1 and is incorporated herein by reference.
The Credit Facility will mature 364 days after signing of legal
documentation for the facility. Atlas Copco may, by giving 30 days' prior
notice, cancel the unutilized portion of the facility in whole or in part in
minimum amounts of US $10,000,000. The Credit Facility is unsecured.
The Credit Facility is a multi-currency revolving credit facility providing
for drawing in short term advances and incorporating a sub-limit of US
$250,000,000 for swingline advances. Borrowings under the Credit Facility will
bear interest at a rate equal to the London Inter-bank Offered Rate for the
period plus an applicable margin.
Atlas Copco also will pay to CSFB commitment, arranger and administration
fees, reimburse CSFB for certain expenses and provide certain indemnities all of
which the Parent believes to be customary for commitments of this type.
With regard to the Credit Facility, the Commitment Letter contains, and the
Loan Agreement will contain, conditions precedent, representations and
warranties, covenants, events of default and other provisions customary for such
financings.
17
<PAGE>
In addition to the use by Atlas Copco of funds to provide financing to the
Parent and the Purchaser in connection with the Offer and the Merger, Atlas
Copco may utilize portions of the funds available under the Credit Facility to
restructure the indebtedness of Atlas Copco, the Parent and/or the Company.
Atlas Copco's commercial paper program involves the private placement of
unsecured, commercial paper notes with maturities of up to 360 days. The
commercial paper generally has an effective interest rate approximating the then
market rate of interest for commercial paper of similar rating, currently
approximately 5%.
It is anticipated that any indebtedness incurred by the Parent in connection
with the transactions contemplated by the Merger Agreement will be repaid from
funds generated internally by the Parent and its subsidiaries (including, after
the Merger, if consummated, dividends paid by the Surviving Corporation and its
subsidiaries), through additional borrowings, through application of proceeds of
dispositions or through a combination of two or more such sources. No final
decisions have been made concerning the method the Parent will employ to repay
any such indebtedness. Such decisions, when made, will be based on the Parent's
review from time to time of the advisability of particular actions, as well as
on prevailing interest rates and financial and other economic conditions.
The Offer is not conditioned on the obtaining of financing. The obligations
and agreements of each of Parent and the Purchaser under the Merger Agreement
are unconditionally guaranteed by Atlas Copco pursuant to a guaranty dated June
28, 1999 (the "Guaranty").
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
On January 20, 1999, the Company and NationsRent, Inc. ("NationsRent")
entered into an Agreement and Plan of Merger, dated as of January 20, 1999 (the
"NationsRent Merger Agreement"), pursuant to which the Company and NationsRent
would merge in a stock-for-stock transaction (the "NationsRent Merger").
While the NationsRent Merger was pending, UR Acquisition Corporation ("UR
Acquisition"), a wholly owned subsidiary of United Rentals, Inc. ("United
Rentals"), and United Rentals commenced a tender offer (the "United Rentals
Offer") on April 5, 1999 to purchase all outstanding Shares at a purchase price
of $22.75 per Share, net to the seller in cash, without interest, subject to the
terms and conditions described in the Tender Offer Statement on Schedule 14D-1
filed by United Rentals and UR Acquisition with the Commission on April 5, 1999,
as amended. On April 13, 1999, United Rentals filed preliminary consent
solicitation materials with the Commission to solicit the consent of the
Company's stockholders to, among other things, remove the members of the
Company's Board of Directors and replace them with United Rentals' nominees.
United Rentals later withdrew six nominees who were executive officers and/or
directors of United Rentals from its proposed slate and substituted six new
nominees.
On April 6, 1999, Lennart Johansson, Senior Vice President of Atlas Copco,
contacted a representative of Merrill Lynch, to discuss recent developments in
the equipment rental industry. During the conversation, Mr. Johansson made an
unsolicited comment to the effect that Atlas Copco had no interest in the
Company at that time.
From April 8 through April 15, 1999, the Company Board held four meetings to
discuss the United Rentals Offer and related matters, including the status of
the NationsRent Merger and the adoption of the Rights Agreement. On April 16,
1999, the Company filed a Solicitation/Recommendation Statement on Schedule
14D-9 with the Commission announcing the Company Board's determination that the
United Rentals Offer was inadequate and not in the best interests of the Company
or its stockholders, and recommending that the Company's stockholders reject the
United Rentals Offer and not tender their Shares pursuant to the United Rentals
Offer. Also on April 16, 1999, Merrill Lynch delivered to the Company Board its
written opinion dated such date as to the inadequacy of the consideration being
offered in the United Rentals Offer to the Company's stockholders (other than
United Rentals and its affiliates), from a financial point of view. On April 19,
1999, the Company filed preliminary consent revocation materials with the
Commission to solicit against the consent solicitation of United Rentals.
18
<PAGE>
On May 20, 1999, the Company and NationsRent mutually terminated the
NationsRent Merger Agreement. In light of the termination of the NationsRent
Merger Agreement, the Company Board directed Merrill Lynch and Morgan Stanley,
co-financial advisors to the Company, to review the strategic alternatives
available to the Company, including remaining an independent public company, and
to promptly report the results of their review to the Company Board. The Company
Board also determined that, until the completion of the review and evaluation
process, the Company Board was maintaining its recommendation against the United
Rentals Offer.
On May 24, 1999, a representative of Goldman, Sachs & Co. ("Goldman,
Sachs"), financial advisor to United Rentals, attempted to contact Morgan
Stanley by telephone on behalf of United Rentals. On May 25, 1999, a
representative of Morgan Stanley responded to such contact and was informed by
the representative of Goldman, Sachs that United Rentals would be interested in
participating in any process that the Company might conduct as a result of the
review and evaluation of the Company's strategic alternatives.
On June 2, 1999, Mr. Johansson of Atlas Copco contacted Merrill Lynch.
During this conversation, Mr. Johansson indicated to Merrill Lynch that, in
light of the termination of the NationsRent Merger Agreement and the process
being conducted by the Company Board, Atlas Copco was reevaluating its position
with respect to the Company.
At a meeting of the Company Board on June 8, 1999 in Scottsdale, Arizona
(the "June 8 Meeting"), Merrill Lynch and Morgan Stanley made a joint
presentation to the Company Board with respect to their ongoing review and
analysis of strategic alternatives available to the Company. During the
presentation, Merrill Lynch informed the Company Board that it had not changed
its written opinion, dated April 16, 1999, as to the inadequacy, from a
financial point of view, of the consideration being offered by United Rentals to
the Company's stockholders (other than United Rentals and its affiliates) in the
United Rentals Offer. Based on the joint presentation of Merrill Lynch and
Morgan Stanley, the Company Board confirmed its previous determination that the
United Rentals Offer was inadequate and not in the best interests of the Company
or its stockholders. The Company Board also determined to continue to recommend
that the Company's stockholders reject the United Rentals Offer and not tender
their Shares pursuant to the United Rentals Offer and to continue to urge the
Company's stockholders not to deliver consents to United Rentals to remove and
replace the members of the Company Board.
At the June 8 Meeting, Merrill Lynch and Morgan Stanley informed the Company
Board of a contact received from a third party inquiring about the possibility
of the Company acquiring such third party in a stock-for-stock transaction that
would be accounted for as a purchase. After considering the matter, the Company
Board determined, with the advice of Merrill Lynch and Morgan Stanley, not to
pursue discussions at that time.
Following the joint presentation of Merrill Lynch and Morgan Stanley at the
June 8 Meeting, the Company Board discussed the matters presented and determined
to further explore the strategic alternatives available to the Company. As part
of the Company Board determination, the Company Board authorized its financial
and legal advisors to provide forms of confidentiality/standstill agreements to
third parties, including United Rentals, interested in obtaining access to the
Company's senior management and reviewing confidential business and financial
information of the Company.
At the June 8 Meeting, the Company Board determined that the process of
exploring the Company's strategic alternatives could result in the Company
requesting and receiving formal proposals from one or more third parties to
engage in a strategic transaction with the Company; could result in an agreement
for a strategic transaction between the Company and a third party; could result
in an auction of the Company involving multiple parties that have communicated
expressions of interest in the Company; could result in a recapitalization or an
investment in the Company by a third party; or could result in the Company
remaining an independent public company.
Merrill Lynch and Morgan Stanley contacted 36 potential strategic acquirors
and financial investors regarding a potential acquisition of the Company, a
leveraged buyout of the Company or a minority
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investment in the Company. A form of confidentiality/standstill agreement was
distributed to third parties expressing an interest in participating in the
Company's process, including United Rentals and Atlas Copco. Merrill Lynch and
Morgan Stanley also continued to consider other strategic alternatives,
including the Company remaining an independent public company and certain
recapitalization transactions involving the Company. From June 9 through June
24, 1999, nine third parties executed confidentiality/standstill agreements with
the Company. Subsequent to June 11, 1999, counsel to the Company negotiated the
terms of a confidentiality/standstill agreement with counsel to United Rentals.
The Company attempted to negotiate a confidentiality/standstill agreement with
United Rentals which took into account the Company's process, United Rentals'
participation in the process and United Rentals' pending tender offer and
consent solicitation. These negotiations did not result in any agreement.
On June 9, 1999, a representative of Merrill Lynch discussed the Atlas Copco
confidentiality/standstill agreement with Mr. Johansson. Mr. Johansson indicated
to Merrill Lynch that representatives of Atlas Copco would be traveling to the
United States from Sweden during the week of June 14, 1999 and were available to
conduct due diligence and meet with the Company's senior management during that
week. Mr. Johansson further indicated that Atlas Copco desired to move quickly
and was unwilling to participate in an auction involving the Company.
On June 10, 11, 14 and 16, 1999, the Company's senior management and
representatives of Merrill Lynch and Morgan Stanley met with financial investors
which had expressed an interest in making a minority investment in the Company
and which had executed a confidentiality/standstill agreement. One of these
financial investors indicated an interest in reviewing due diligence materials
and, on June 21 and 22, 1999, conducted its due diligence review and engaged in
further discussions with the Company's senior management in Scottsdale, Arizona.
From June 11 through June 13, 1999, counsel to Atlas Copco and counsel to
the Company negotiated the terms of a confidentiality/standstill agreement. On
June 14, 1999, Atlas Copco executed the Confidentiality/
Standstill Agreement. From June 14 through June 16, 1999, Atlas Copco, its legal
counsel and its financial advisor, Credit Suisse First Boston Corporation,
conducted a due diligence review of the Company in Scottsdale, Arizona and met
with the Company's senior management.
In connection with the process of reviewing and evaluating strategic
alternatives, the Company received preliminary communications during the week of
June 14, 1999 from third parties expressing an interest in making an investment
in or acquiring the Company at a price per Share in excess of the $22.75 per
Share being offered by United Rentals.
During the week of June 21, 1999, three third parties, each of which was a
party to a confidentiality/ standstill agreement with the Company, were
furnished access to due diligence materials and the Company's senior management
in Scottsdale, Arizona.
On June 18, 1999, Merrill Lynch and Mr. Johansson engaged in a conversation
regarding follow-up due diligence and related matters. Following a meeting of
the Atlas Copco board of directors on June 22, 1999, Mr. Johansson contacted
Merrill Lynch. During the conversation, Mr. Johansson emphasized that it was the
view of the Atlas Copco board of directors that Atlas Copco would not
participate in an auction, that it would not make a proposal without assurances
that the Company would not shop such proposal and that it would withdraw any
proposal that it made if the Company sought to shop such proposal. The
possibility of Atlas Copco submitting a proposal to the Company was the subject
of further discussions on June 23 and June 24, 1999 between Mr. Johansson and
Merrill Lynch and between counsel for the Company and counsel for Atlas Copco.
On June 24, 1999, the Company Board held a telephonic meeting at which
outside legal counsel to the Company advised the Company Board of its fiduciary
duties and updated the Company Board on the status of negotiations with United
Rentals concerning the confidentiality/standstill agreement. Merrill Lynch,
Morgan Stanley and the Company's senior management updated the Company Board on
the status of the review of
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strategic alternatives, including the status of third parties participating in
the process. Merrill Lynch related to the Company Board its conversations with
Mr. Johansson.
On June 25, 1999, at the invitation of the Company, Parent submitted a
written proposal (as supplemented on June 26, 1999, the "Proposal"). Under the
Proposal, Parent offered to acquire the Company at a price of $29.00 per Share
in a transaction structured as a cash tender offer followed by a second-step
merger. The Proposal was not conditioned upon additional due diligence or the
receipt of financing for the transaction.
From June 26 through June 27, 1999, the Company and Atlas Copco and their
respective advisors negotiated the terms of the Merger Agreement and related
documents. On June 27, 1999, the Company Board held a meeting in Los Angeles,
California (the "June 27 Meeting") with all members except Martin R. Reid
attending to discuss the Proposal. At the June 27 Meeting, outside legal counsel
to the Company reviewed with the Company Board its fiduciary duties. Merrill
Lynch and Morgan Stanley reviewed the results of the process of exploring the
Company's strategic alternatives. Merrill Lynch and Morgan Stanley made a joint
presentation to the Company Board with respect to the Proposal, including the
Offer and the Merger, and Merrill Lynch and Morgan Stanley delivered their
respective oral opinions to the effect that the consideration to be received by
the Company's stockholders pursuant to the Merger Agreement was fair to such
stockholders from a financial point of view.
During the joint presentation, Merrill Lynch and Morgan Stanley advised the
Company Board that, while United Rentals was not likely to increase its $22.75
per Share offer price to a price in excess of $29.00 per Share in the absence of
the Offer and the Merger. Merrill Lynch and Morgan Stanley also advised the
Company Board that there could be no assurance that United Rentals would offer a
price in excess of $29.00 per Share in light of the financial implications of
such a price per Share to United Rentals. Merrill Lynch further advised the
Company Board of its conversations with Mr. Johansson to the effect that Atlas
Copco was unwilling to participate in an auction and would withdraw the Proposal
if the Company sought to shop such proposal to any third party. Merrill Lynch
and Morgan Stanley advised the Company Board that, in their view, the provisions
of the Merger Agreement concerning the amounts payable to Parent in the event of
a termination would not preclude United Rentals or other third parties from
submitting a proposal to acquire the Company.
Following the joint presentation of Merrill Lynch and Morgan Stanley and the
discussions of the Company Board with respect thereto, outside legal counsel to
the Company reviewed with the Company Board the terms of the Merger Agreement,
including the provisions of the Merger Agreement (1) permitting the Company to
furnish non-public information concerning the Company and its business,
properties or assets to, and to engage in discussions or negotiations with, any
third party which has indicated an interest in making a bona fide acquisition
proposal, if the Company Board concludes in good faith after consulting with its
outside legal counsel and financial advisors that such action is consistent with
the discharge of its fiduciary duties to the Company's stockholders under
applicable law and (2) the termination provisions and the circumstances in which
a termination fee would be payable to Parent.
After discussing these matters, the Company Board, by the unanimous vote of
all members attending, determined to approve the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and to
authorize the Company to execute and deliver the Merger Agreement. The Company
Board further determined that the Offer and the Merger were fair to and in the
best interests of the Company's stockholders and that the Merger Agreement was
advisable and to recommend that the Company's stockholders accept the Offer and
tender their Shares pursuant to the Offer.
On June 28, 1999, Merrill Lynch and Morgan Stanley delivered to the Company
Board their respective written opinions dated such date to the effect that the
consideration to be received by the Company's stockholders pursuant to the
Merger Agreement was fair to such stockholders from a financial point of view.
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On June 28, 1999, the Company, Parent and the Purchaser entered into the
Merger Agreement. After the Company announced that it had entered into the
Merger Agreement, United Rentals issued a press release on June 28, 1999 stating
that it was terminating the United Rentals Offer and its consent solicitation.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby, is to enable the Parent to acquire control
of, and the entire equity interest in, the Company.
Pursuant to the DGCL and the Certificate of Incorporation (the "Charter") of
the Company, adoption by the Company Board and the affirmative vote of the
holders of a majority of the outstanding shares of the Company entitled to vote
thereon and, if a class or series is entitled to vote as a class, the
affirmative vote of the holders of a majority of the outstanding shares of the
class or series, is required to approve the Merger Agreement. If the Minimum
Condition is satisfied, the Purchaser will have sufficient voting power to cause
the approval of the Merger Agreement without the affirmative vote of any other
stockholder.
In the Merger Agreement, the Company has agreed that, if approval of the
Merger by stockholders of the Company is required by the DGCL or the Company's
Charter and By-laws, the Company shall, as soon as practicable following the
acquisition by the Purchaser of the Shares pursuant to the Offer, duly call,
give notice of, convene and hold a meeting of its stockholders for the purpose
of obtaining the stockholders' approval. Parent has agreed that all Shares owned
by the Purchaser or any other subsidiary of Parent will be voted in favor of
approval of the Merger Agreement.
SHORT FORM MERGER. Under Section 253 of the DGCL, if the Purchaser acquires
at least 90% of the outstanding Shares, the Purchaser will be able to approve
the Merger without a vote of the Company's stockholders. In such event, the
Purchaser anticipates that it will take all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably practicable after
such acquisition without a meeting of the Company's stockholders. If the
conditions to the Purchaser's obligation to purchase Shares in the Offer are
satisfied prior to the tender of 90% of the outstanding Shares being tendered in
the Offer, the Purchaser may, subject to certain limitations set forth in the
Merger Agreement, delay its purchase of the Shares tendered to it in the Offer.
See Section 1. If the Purchaser does not acquire at least 90% of the outstanding
Shares pursuant to the Offer or otherwise, a significantly longer period of time
may be required to effect the Merger, because a vote of the Company's
stockholders would be required under the DGCL. Pursuant to the Merger Agreement,
the Company has agreed to take all action necessary under the DGCL and its
Charter and Bylaws to convene a meeting of its stockholders promptly following
consummation of the Offer to consider and vote on the Merger, if a stockholders'
vote is required. If the Purchaser owns a majority of the outstanding Shares,
approval of the Merger can be obtained without the affirmative vote of any other
stockholder of the Company.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company will
have certain rights under the Section 262 of DGCL to dissent and demand
appraisal of and to receive payment in cash for the fair value of their Shares.
Such rights to dissent, if the statutory procedures are complied with, could
lead to a judicial determination of the fair value of the Shares (excluding any
element of value arising from the accomplishment or expectation of the Merger)
required to be paid in cash to such dissenting holders of their Shares. In
addition, such dissenting stockholders may be entitled to receive payment of a
fair rate of interest from the date of consummation of the Merger on the amount
determined to be the fair value of their Shares. In determining the fair value
of the Shares, a Delaware court would be required to take into account all
relevant factors. Accordingly, such determination could be based upon
considerations other than, or in addition to, the market value of the Shares,
including, among other things, asset values and earning capacity. In Weinberger
v. UPO, Inc., the Delaware Supreme Court stated, among other things, that "proof
of value by any techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court" should be
considered in an appraisal proceedings. Therefore, the value so determined in
any appraisal could
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be more or less than the purchase price per Share pursuant to the Offer or the
consideration per share to be paid in the Merger.
In addition, several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders which requires that the merger be fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of consideration to be received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court stated in Weinberger
and Rablin v. Philip A. Hunt Chemical Corp. that although the remedy ordinarily
available to minority stockholders in a cash out merger is the right to
appraisal described above, a damages remedy or injunctive relief may be
available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may, under
certain circumstances, be applicable to the Merger or another business
combination in which the Purchaser seeks to acquire the remaining Shares not
held by it following the purchase of Shares pursuant to the Offer. The Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger if the
Merger is consummated within one year after the termination of the Offer at the
same per Share price as paid in the Offer. If applicable, Rule 13e-3 requires,
among other things, that certain financial information concerning the Company
and certain information relating to the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction be filed
with the Commission and disclosed to stockholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger. Thereafter, Parent intends to review
such information as part of a comprehensive review of the Company's business,
operations, capitalization and management with a view to optimizing the
Company's potential contribution to Parent's business.
Except as indicated in this Offer to Purchase, Parent does not have any
current plans or proposals which relate to or would result in any of the
following: an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries;
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries; any change in the present Board of Directors or management of the
Company; any material change in the Company's present capitalization or dividend
policy; or any other material change in the Company's corporate structure or
business. Notwithstanding the foregoing, following the acquisition of Shares
pursuant to the Offer, the Purchaser may designate a majority of the members of
the Board of Directors of the Company. In addition, assuming the designation of
directors as aforesaid and so long as there are holders of Shares other than
Parent or any of its subsidiaries, Parent expects that the Board of Directors
would not declare dividends on the Shares.
13. THE TRANSACTION DOCUMENTS.
The following summaries of certain provisions of the Merger Agreement, the
Guaranty (as defined herein) and the Confidentiality/Standstill Agreement (as
defined herein), copies of which are filed as exhibits to the Schedule 14D-1,
are qualified in their entirety by reference to the text of such documents.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement and
is qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which is filed as an Exhibit hereto and is incorporated
by reference herein.
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and conditions of the Merger Agreement and
subject to the prior satisfaction or waiver of the conditions to the Offer (as
set forth in Annex A to the Merger Agreement), the Purchaser will, and Parent
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will cause the Purchaser to, accept for payment and pay for all Shares validly
tendered and not withdrawn pursuant to the Offer as soon as permitted under
applicable law. The Merger Agreement provides that, without the prior written
consent of the Company, neither Parent nor the Purchaser will (i) decrease the
Offer Price, (ii) decrease the number of Shares sought pursuant to the Offer or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer or impose additional conditions to the Offer, (iv)
change the expiration date of the Offer, or (v) otherwise amend, add or waive
any term or condition of the Atlas Offer in any manner adverse to the holders of
Shares; PROVIDED, HOWEVER, that if on any scheduled expiration date of the Offer
any conditions to the Offer have not been satisfied or waived, the Purchaser
may, and at the request of the Company shall, from time to time, extend the
expiration date of the Offer for up to 5 additional business days (but in no
event shall the Purchaser be required to extend the expiration date of the Offer
beyond the 120th day following commencement of the Offer unless the Offer is on
or after such date being extended due to the occurrence of certain events as
described in Annex A to the Merger Agreement, in which case the Offer may be
required by the Company to be extended to the 180th day following commencement
of the Offer). Notwithstanding the foregoing, the Purchaser may, (i) without the
consent of the Company, extend the Offer for any period required by any
applicable law, including without limitation, any rule, regulation,
interpretation or position of the Commission applicable to the Offer and (ii)
make a one-time extension of the Offer if the conditions to the Offer shall have
been satisfied or waived and the number of Shares that have been validly
tendered and not withdrawn represent more than 50% but less than 90% of the
total issued and outstanding Shares on a fully diluted basis; PROVIDED, HOWEVER,
that in no event shall the extension permitted under the foregoing clause (ii)
exceed, in the aggregate, 10 business days. Notwithstanding anything to the
contrary in the Merger Agreement, Parent may extend the Offer during (but only
to the end of) the period in which the Company is attempting to cure a breach
pursuant to the terms of the Merger Agreement. Parent and the Purchaser agree,
subject to the terms and conditions of the Merger Agreement, to use their best
efforts to consummate the Offer.
COMPOSITION OF THE COMPANY BOARD. The Merger Agreement provides that,
promptly upon the acceptance for payment of, and payment by the Purchaser in
accordance with the Offer for, not less than a majority of the total issued and
outstanding Shares on a fully diluted basis pursuant to the Offer, the Purchaser
shall be entitled to designate such number of members of the Company Board
rounded up to the next whole number, equal to that number of directors which
equals the product of the total number of directors on the Company Board (giving
effect, if applicable, to (i) the number of newly created directorships if the
size of the Company Board is increased and (ii) the number of vacancies if the
resignation of any directors is secured pursuant to the Merger Agreement)
multiplied by the percentage that such number of Shares then owned beneficially
or of record in the aggregate by the Purchaser or Parent of the total issued and
outstanding Shares on a fully diluted basis; PROVIDED, HOWEVER, that until the
Effective Time there shall be at least two members of the Company Board who are
directors of the Company as of the date of the Merger Agreement ("Continuing
Directors") and Parent and the Purchaser shall use their best efforts to ensure
that at least two Continuing Directors serve as directors of the Company until
the Effective Time. Upon the written request of the Purchaser, the Company
shall, on the date of such request, either increase the size of the Company
Board or use its reasonable efforts to secure the resignations of such number of
its incumbent directors as is necessary to enable the Purchaser's designees to
be so elected to the Company Board.
Following the time that the Purchaser's designees to the Company Board as
described above constitute at least a majority of the Company Board and until
the Effective Time, any (i) amendment or termination of the Merger Agreement,
(ii) amendment to the certificate of incorporation or the bylaws of the Company,
(iii) extension of time for the performance or waiver of the obligations or
other acts of Parent or the Purchaser or waiver of the Company's rights
hereunder, or (iv) action by the Company with respect to the Merger Agreement
and the transactions contemplated thereby which materially and adversely affects
the interests of the stockholders of the Company, shall require, in addition to
any other affirmative vote required under DGCL, the affirmative vote of not less
than a majority of (i) the entire the Company Board, which majority shall
include the concurrence of a majority of the Continuing Directors or (ii) to the
extent permitted under the DGCL, a committee of the Company Board consisting of
only Continuing Directors; PROVIDED,
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HOWEVER, that if the foregoing provisions relating to the concurrence of a
majority of Continuing Directors or approval by a committee consisting of
Continuing Directors are invalid or incapable of being enforced under applicable
law, then neither Parent nor the Purchaser shall approve (either in its capacity
as a stockholder or as a party to the Merger Agreement, as applicable), and
Parent and the Purchaser shall use their reasonable efforts to prevent the
occurrence of, any of the actions referred to above unless such actions shall
have received the unanimous approval of the entire the Company Board.
An Information Statement containing the information required by Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder is attached as
SCHEDULE I to the Company's Schedule 14D-9.
THE MERGER. Pursuant to the Merger Agreement, upon the terms and subject to
the conditions set forth therein, and in accordance with the DGCL, as soon as
practicable following completion of the Offer, the Purchaser will be merged with
and into the Company. Following the Merger, the separate corporate existence of
the Purchaser shall cease and the Company shall continue as the Surviving
Corporation and as a wholly-owned subsidiary of Parent. At the Effective Time,
by virtue of the Merger and without any action on the part of the Company,
Parent, the Purchaser or the holder of any Shares or any shares of capital stock
of the Purchaser, each issued and outstanding Share (other than (i) Shares owned
by the Company or by a wholly owned subsidiary of the Company or by Parent, the
Purchaser or any other wholly owned subsidiary of Parent and (ii) Shares held by
stockholders of the Company who have properly demanded appraisal of such
holder's Shares in accordance with the DGCL) will be converted into the right to
receive the Offer Price, without interest (the "Merger Consideration"). As of
the Effective Time, all such Shares shall no longer be outstanding and shall
automatically be retired and shall cease to be outstanding, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive upon the surrender of such
certificate, the Merger Consideration. At the Effective Time, each issued and
outstanding share of capital stock of the Purchaser shall be converted into and
become one fully paid and nonassessable share of common stock, par value $.01
per share, of the Surviving Corporation.
The Merger Agreement provides that, at the Effective Time and without any
further action on the part of the Company or the Purchaser, the certificate of
incorporation and bylaws of the Company shall be amended in its entirety to read
as the certificate of incorporation and bylaws, respectively, of the Purchaser
read as in effect immediately prior to the Effective Time and, as so amended,
shall be the certificate of incorporation and bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, provided that the certificate of incorporation shall be amended
to reflect "Rental Service Corporation" as the name of the Surviving
Corporation.
In addition, pursuant to the Merger Agreement, the directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, until the earlier of their resignation or removal
or otherwise ceasing to be a director or until their respective successors are
duly elected and qualified, as the case may be. The officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be an officer or until their respective successors are duly
elected and qualified, as the case may be.
The Company has also agreed pursuant to the Merger Agreement that, if
required by the DGCL or the Company's certificate of incorporation or bylaws in
order to consummate the Merger, the Company shall, as soon as practicable
following the acquisition by the Purchaser of Shares pursuant to the Offer, duly
call, give notice of, convene and hold a meeting of its stockholders for the
purpose of voting on the Merger Agreement and the Merger (the "Stockholders
Meeting"). If required by applicable law, as soon as practicable following
Parent's request, the Company and Parent shall prepare and file with the
Commission a proxy statement with respect to the Stockholders Meeting.
Notwithstanding the foregoing, in the event Parent, the Purchaser and/or any
other subsidiary of Parent beneficially owns, in the aggregate, at least 90% of
the outstanding Shares, the Company shall not be required to call the
Stockholders Meeting or to file or mail such proxy statement, and the Company,
Parent and the Purchaser shall, at the request of Parent or the Company and
subject to the terms and conditions of the Merger Agreement, take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Shares by the
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Purchaser pursuant to the Offer without a meeting of stockholders of the Company
in accordance with Section 253 of the DGCL.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made various customary representations and warranties to Parent and
the Purchaser with respect to, among other matters, corporate organization and
good standing, its subsidiaries, capital structure, authority and no conflicts,
consents and approvals, reports and financial statements, information supplied,
compliance with law, litigation, tax matters, absence of certain changes or
events, material contracts, employee benefit and labor matters, environmental
matters, intellectual property, no brokers or finders, opinions of financial
advisors, the Company Board recommendation, insurance, its rental fleet, certain
business practices, properties and compliance with Arizona statutes. The Parent
and the Purchaser have made various customary representations and warranties to
the Company with respect to, among other matters, corporate organization and
good standing, capital structure, authority and no conflicts, consents and
approvals, reports and financial statements, information supplied, no brokers or
finders and financing.
COVENANTS AND OTHER AGREEMENTS. Except as permitted by the Merger Agreement
or to the extent consented to in writing by Parent, which consent shall not be
unreasonably withheld or delayed, the Merger Agreement obligates the Company
(and its subsidiaries under certain circumstances) during the period from the
date of the Merger Agreement to the Effective Time, among other things, (i) to
carry on its businesses in the usual, regular and ordinary course in all
material respects, and use all reasonable efforts to preserve intact its present
business organizations and preserve their relationships with customers,
suppliers and others having business dealings with the Company, (ii) not to
declare or pay any dividends on or make other distributions in respect of any of
its capital stock, (iii) not to split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock, (iv)
not to repurchase, redeem or otherwise acquire any shares of its capital stock
or any securities convertible into or exercisable or exchangeable for any shares
of its capital stock except as otherwise permitted under certain option
agreements to effect cashless option exercises, (v) not to issue, deliver, sell,
pledge or otherwise encumber (except as pledged on the date hereof and disclosed
by the Company to Parent in connection with the Merger Agreement or in its
Commission reports), or authorize or propose the issuance, delivery or sale of,
any shares of its capital stock of any class, any voting debt or any securities
convertible into or exercisable or exchangeable for, or any rights, warrants or
options to acquire, any such shares or voting debt, or enter into any agreement
with respect to any of the foregoing (other than the issuance of Shares upon the
exercise of stock options or stock appreciation rights outstanding on the date
of the Merger Agreement), (vi) not to amend or propose to amend its certificate
of incorporation or bylaws, (vii) not to incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or guarantee
any debt securities of other persons other than intercompany debt or in the
ordinary course of business, including, without limitation, indebtedness for
acquisitions made in the ordinary course of business, consistent with past
practices and involving an aggregate purchase price not exceeding $10 million,
(viii) not to make any loans, advances or capital contributions to, or
investments in, any other person, other than intercompany loans or in the
ordinary course of business, (ix) not to pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than in the ordinary course of business, and (x)
not to increase the compensation payable or to become payable to any of its
executive officers or employees or take any action with respect to the grant of
any severance or termination pay, or stay, bonus or other incentive arrangement
(other than pursuant to benefit plans and policies in effect on the date of the
Merger Agreement), except, among other things, any such increases or grants made
in the ordinary course of business.
In addition to the foregoing, the Company shall not (i) revalue any of its
assets in any material respect other than in the ordinary course of business or
as required by generally accepted accounting principles; (ii) sell, lease or
otherwise encumber any of its properties or assets other than any such property
or assets the value of which does not exceed $250,000 individually or $2,000,000
in the aggregate; (iii) make any capital
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expenditures except capital expenditures which do not exceed $100 million (of
which $85 million is for capital expenditures committed for which the properties
have not yet been received) in the aggregate; (iv) adopt a plan of complete or
partial liquidation or dissolution; (v) change any material accounting
principle; or (vi) settle or compromise any litigation or contractual dispute
other than settlements or compromises where amounts paid by the Company do not
exceed $250,000 or, in the aggregate, $1,000,000.
Each of the Company and Parent shall cooperate with each other and use (and
shall cause their respective subsidiaries to use) its reasonable efforts to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on their part under the Merger Agreement and
applicable laws to consummate the Offer and consummate and make effective the
Merger and the other transactions contemplated by the Merger Agreement as soon
as practicable.
TRANSACTION PROPOSALS. The Merger Agreement provides that, prior to the
termination of the Merger Agreement, the Company will not (whether directly or
indirectly through advisors, agents or other intermediaries), and will not
authorize or permit any of its officers, directors, agents, representatives or
advisors to:
(i) solicit, initiate or knowingly encourage or facilitate the submission
of inquiries, proposals or offers from any person (other than the
Purchaser or Parent) relating to (A) any acquisition or purchase of over
20% of the consolidated assets of the Company or of over 20% of any class
of equity securities of the Company, (B) any tender offer (including a
self tender offer) or exchange offer that if consummated would result in
any third party beneficially owning over 20% of any class of equity
securities of the Company, or (C) any merger, consolidation, business
combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company
other than the transactions contemplated by the Merger Agreement
(collectively, "Transaction Proposals");
(ii) agree to or recommend to its stockholders any Transaction Proposal; or
(iii) enter into or participate in any discussions or negotiations regarding
a Transaction Proposal, or furnish to any person (other than Parent, the
Purchaser or any of their representatives) any information with respect
to its business, properties or assets in connection with a Transaction
Proposal;
PROVIDED, HOWEVER, that nothing in the Merger Agreement prohibits the Company
(either directly or indirectly through advisors, agents or other intermediaries)
from (A) furnishing information pursuant to appropriate terms of confidentiality
concerning the Company and its business, properties or assets to a third party
who has indicated an interest in making a bona fide Transaction Proposal
(provided, that if such confidentiality terms are less favorable to the Company
in any material respect than the terms of the Confidentiality/ Standstill
Agreement (as defined below), that the Confidentiality/Standstill Agreement
shall be deemed amended to provide for such more favorable confidentiality
terms), (B) engaging in discussions or negotiations with such third party, (C)
following receipt of a bona fide Transaction Proposal, taking and disclosing to
its stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
or otherwise making disclosure to its stockholders, (D) following receipt of a
bona fide Transaction Proposal, failing to make or withdrawing or modifying its
recommendation and/or declaration of advisability of the Offer and/or adoption
of the Merger Agreement, and to the extent it does so, the Company may refrain
from calling, providing notice of and holding the Company Stockholders Meeting
to adopt the Merger Agreement and from soliciting proxies or consents to secure
the vote or written consent of its stockholders to adopt the Merger Agreement,
(E) waiving the provisions of any confidentiality and/or standstill agreement to
which the Company is a party (provided, that the Company shall be deemed to
simultaneously waive any such provisions of the Confidentiality/Standstill
Agreement), (F) taking any non-appealable, final action ordered to be taken by
the Company by any court of competent jurisdiction and/or (G) making any
disclosure or filing required by law (including, without limitation, Delaware
state law and the rules and regulations promulgated under the federal securities
laws), stock exchange rules or the rules, regulations, order or request of any
governmental entity (including the Commission), but in each case referred to in
the foregoing clauses
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(A) through (E) only to the extent that the Company Board shall have concluded
in good faith after consulting with its outside legal counsel and financial
advisor that such action is consistent with the discharge of its fiduciary
duties to the stockholders of the Company under applicable law; PROVIDED,
FURTHER, that the Company Board shall not take any of the foregoing actions
referred to in clauses (A) through (D) above, until after 24 hours notice to
Parent with respect to such action. The Company Board shall, to the extent that
it has concluded in good faith after consulting with its outside legal counsel
and financial advisors that such action is consistent with the discharge of its
fiduciary duties to the stockholders of the Company under applicable law,
promptly inform Parent of the initial material terms and conditions of such
Transaction Proposal and the identity of the person making it.
The Merger Agreement further provides that, upon execution of the Merger
Agreement, the Company shall immediately cease and cause its advisors, agents
and other intermediaries to cease any and all existing activities, discussions
or negotiations conducted prior to the date of the Merger Agreement with respect
to any Transaction Proposal with any party other than Parent, the Purchaser or
their representatives, and shall, upon consummation of the Offer, use its
reasonable best efforts to cause any such other party in possession of
confidential information about the Company that was furnished by or on behalf of
the Company to return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of such party.
Notwithstanding anything to the contrary contained in the Merger Agreement,
prior to the Effective Time, the Company may, in connection with a possible
Transaction Proposal, refer any third party to such sections of the Merger
Agreement which discuss the foregoing and to make a copy of such sections
available to them.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the Merger
Agreement, Parent and the Surviving Corporation shall cause to be maintained in
effect (i) for a period of six years after the Effective Time, the current
provisions regarding indemnification of current or former officers and directors
(each an "Indemnified Party") contained in the certificate of incorporation or
the bylaws of the Company or its subsidiaries and in any agreements between an
Indemnified Party and the Company or its subsidiaries, provided that in the
event any claim or claims are asserted or made within such six year period, all
rights to indemnification in respect of any claim or claims shall continue until
final disposition of any and all such claims, and (ii) for a period of six
years, policies of directors' and officers' liability insurance and fiduciary
liability insurance equivalent to the current policies maintained by the Company
(the "D&O Insurance") and which are, in the aggregate, no less advantageous to
the insured and (provided that any substitution of policies shall not result in
any gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time) with respect to claims arising from facts or events that
occurred on or before the Effective Time, provided, that (A) the Company
following the Merger shall not be required to spend in excess of 200% of the
amount spent on current annual premiums for the D&O Insurance (the "Premium
Limit") per year therefor; PROVIDED, FURTHER that if the Company following the
Merger would be required to spend in excess of the Premium Limit per year to
obtain insurance having the maximum available coverage under such D&O Insurance
policies, the Company will be required to spend up to such amount to maintain or
procure insurance coverage pursuant hereto, subject to availability of such (or
similar) coverage and (B) such policies may in the sole discretion of the
Company be one or more "tail" policies for all or any portion of the full six
year period, provided that such "tail" policies, contain terms and conditions
and provide coverage no less advantageous to the insureds than the terms,
conditions and coverage in the D&O Insurance. the Company agrees that in the
event it would be required to spend in excess of the Premium Limit per year to
obtain insurance having the maximum available coverage under D&O Insurance
policies, the Company will notify the officers and directors who are the
beneficiaries thereof and permit such officers and directors to pay any excess
amount over the Premium Limit which may be necessary to maintain such policies.
In addition, for a period of six years after the Effective Time (provided
that in the event any claim or claims are asserted or made within such six year
period, all rights to indemnification in respect of any claim or claims shall
continue until final disposition of any and all such claims), Parent shall
indemnify the Indemnified Parties to the same extent as such Indemnified Parties
are entitled to indemnification under the instruments described and to the
extent set forth in clause (i) above. The Merger Agreement also provides
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that Parent will pay as incurred the reasonable fees and expenses of counsel
selected by the Indemnified Party and reasonably acceptable to Parent (including
the cost of any investigation and preparation and the cost of any appeal)
incurred in connection therewith in the event any such Indemnified Party is or
becomes involved in any action, proceeding or investigation in connection with
any matter occurring prior to or on the Effective Time.
TREATMENT OF OPTIONS AND CERTAIN OTHER STOCK INTERESTS IN THE MERGER;
EMPLOYEE BENEFITS. At the Effective Time, each unexpired and unexercised
outstanding option, whether or not then vested or exercisable in accordance with
its terms, to purchase Shares (the "Options") previously granted by the Company
or its subsidiaries under any plan, agreement or arrangement (collectively, the
"the Company Equity Plans") shall be automatically converted into the right to
receive from Parent, at the Effective Time, cash in an amount equal to the
product of (i) the Merger Consideration minus the exercise price per share under
such Option, multiplied by (ii) the number of Shares which may be purchased upon
exercise of such Option (whether or not then exercisable or vested), less any
required withholding, and thereupon each Option shall terminate and each holder
thereof shall have no further rights to any Shares. Prior to the Effective Time,
the Company will take all action necessary to (i) shorten the offering period
under the Company's Employee Qualified Stock Purchase Plan (as described in
SCHEDULE I to the Company's Schedule 14D-9) in which the Effective Time occurs
so that such offering period terminates on the day prior to the Effective Time,
and (ii) terminate the Employee Qualified Stock Purchase Plan effective as of
the Effective Time. Immediately prior to the Effective Time, the restrictions on
all shares of restricted stock shall lapse and each such share of restricted
stock shall be fully vested and, at the Effective Time, shall be subject to
conversion pursuant to the Merger Agreement into the right to receive the Merger
Consideration, less any applicable withholding thereon. Similarly, at the
Effective Time, each right of a person to be issued Shares, whether or not then
vested or otherwise matured previously granted by the Company in connection with
an acquisition (an "Issue Right"), shall be automatically converted into the
right to receive from Parent, at the Effective Time, cash in an amount equal to
the product of (i) the Merger Consideration, multiplied by (ii) the number of
Shares issuable pursuant to such Issue Right.
In addition, Parent agrees that, and shall take all necessary action to
ensure that, during the period commencing at the Effective Time and ending on
the first anniversary thereof, the employees of the Company will continue to be
provided with (whether by Parent, the Surviving Corporation or otherwise)
employee benefit plans (other than stock option or other plans involving the
potential issuance of securities of the Company and other incentive or
performance based programs or arrangements) which in the aggregate are not
materially less favorable to those currently provided by the Company to such
employees, to the extent permitted under laws and regulations in force from time
to time; PROVIDED, HOWEVER, that subject to compliance with this paragraph,
Parent reserves the right to review all employee benefits after the Effective
Time and to make such changes as it deems appropriate. Parent intends to cause
the Surviving Corporation to provide or enter into incentive and performance
based compensation plans or arrangements with management employees of the
Company, the purpose of which will be to provide such management employees with
incentive and performance based compensation at levels of benefits and
performance targets which are to replace the incentive and performance based
compensation that such management employees are eligible to participate in and
receive from the Company on the date hereof (excluding any equity based
incentive plans). For purposes of determining eligibility to participate,
waiting periods, vesting and accrual or entitlement to benefits where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Corporation or any of their respective subsidiaries, employees of
the Company and its subsidiaries as of the Effective Time shall receive service
credit for service with the Company and its subsidiaries to the same extent such
service credit was granted under the Company's employee benefit plans, programs,
arrangements or contracts, subject to offsets for previously accrued benefits
and no duplication of benefits. Parent shall cause the Surviving Corporation to
assume and honor in accordance with their terms all written employment,
severance and termination plans and agreements (including change in control
provisions) of employees of the Company and its subsidiaries as in effect on the
closing date of the Merger, subject to all rights to amend or terminate as set
forth in the Merger Agreement and certain other agreements, plans and
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policies disclosed by the Company to Parent in connection with the Merger
Agreement but excluding any obligations regarding compensation plans linked to
equity performance or earnings per Share.
CONDITIONS TO THE CONSUMMATION OF THE MERGER. Pursuant to the Merger
Agreement, the respective obligations of Parent, the Purchaser and the Company
to consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) the Company shall have
obtained all approvals of holders of shares of capital stock of the Company
necessary to approve the Merger Agreement and all the transactions contemplated
thereby (including the Merger) to the extent required by law, (ii) the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall have been terminated or shall have expired, (iii) no temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other governmental entity of competent jurisdiction shall be in effect and have
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger, (iv) all required consents and all other authorizations, consents,
orders and approvals of, and declarations and filings with, and all expirations
of waiting periods imposed by, any governmental entity which, if not obtained in
connection with the consummation of the transactions contemplated thereby, could
reasonably be expected to have a material adverse effect on the Company or
materially impair or delay the ability of the Company, Parent or the Purchaser
to consummate the transactions contemplated hereby shall have been obtained,
waived, declared or filed or have occurred, as the case may be, and all such
approvals shall be in full force and effect, and (v) the Purchaser shall have
commenced the Offer and shall have purchased, pursuant to the terms and
conditions of the Atlas Offer, all Shares duly tendered and not withdrawn.
TERMINATION. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time, by action taken by the board of directors of
the terminating party, whether before or after approval of the Merger Agreement
and the transactions contemplated thereby by the Company's stockholders:
(a) by mutual written consent of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have been
consummated by the date which is six months from the date of the Merger
Agreement, provided that such date shall be extended to the date which is nine
months from the date of the Merger Agreement in the event the conditions to the
Merger have been or are capable of being satisfied at the time of such extension
other than certain conditions which have been or are reasonably capable of being
satisfied on or prior to the date which is nine months from the date of the
Merger Agreement (such date, as it may be so extended, shall be referred to
herein as the "Outside Date"); provided further that the right to terminate the
Merger Agreement under this paragraph shall not be available to any party whose
failure to fulfill any obligation or condition under the Merger Agreement has
been the cause of, or resulted in, the failure of the Merger to occur on or
before such date and shall not be available to Parent if it has purchased Shares
pursuant to the Offer;
(c) By the Company or Parent if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased thereunder; provided
that Parent may terminate the Merger Agreement pursuant to this paragraph only
if Parent's or the Purchaser's termination or withdrawal of the Offer is not in
violation of the terms of the Merger Agreement or the Offer;
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(d) By either the Company or Parent if any governmental entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall have used their reasonable
efforts to resist, resolve or lift, as applicable, subject to the provisions of
the Merger Agreement) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement, and such
order, decree, ruling or other action shall have become final and nonappealable;
(e) By either Parent or the Company if any approval by the Company's
stockholders required for the consummation of the Merger or the other
transactions contemplated by the Merger Agreement shall not have been obtained
at the Stockholders Meeting or any adjournment thereof by reason of the failure
to obtain the required vote at a duly held meeting of the Company's stockholders
or at any adjournment thereof;
(f) By Parent, prior to the payment by the Purchaser for Shares pursuant to
the Offer, if (1) the Company Board shall have withdrawn or materially and
adversely modified its recommendation of the Offer or the adoption of the Merger
Agreement (it being understood, however, that for all purposes of the Merger
Agreement, the fact that the Company has supplied any person with information
regarding the Company or has entered into discussions or negotiations with such
person as permitted by the Merger Agreement, or the disclosure of such facts,
shall not be deemed a withdrawal or modification of the Company Board
recommendation of the Offer or the adoption of the Merger Agreement); (2) the
Company Board shall have recommended to the stockholders of the Company that
they approve a Transaction Proposal other than transactions contemplated by the
Merger Agreement and at least two business days have elapsed since the
recommendation; or (3) a tender offer or exchange offer that, if successful,
would result in any person or "group" becoming a "beneficial owner" (such terms
having the meaning ascribed under Regulation 13D under the Exchange Act) of 50%
or more of the outstanding Shares is commenced (other than by Parent or an
affiliate of Parent) and the Company Board recommends that the stockholders of
the Company tender their shares in such tender or exchange offer;
(g) By the Company, prior to the payment by the Purchaser for Shares
pursuant to the Offer, if the Company, following receipt of a bona fide
Transaction Proposal, fails to make or withdraw or modify its recommendation
and/or declaration of advisability of the Atlas Offer and/or adoption of the
Merger Agreement;
(h) By Parent, prior to the payment by the Purchaser for Shares pursuant to
the Offer, upon a material breach of any covenant or agreement on the part of
the Company set forth in the Merger Agreement, or if (1) any representation or
warranty of the Company that is qualified as to materiality shall have become
untrue, or (2) any representation or warranty of the Company that is not so
qualified shall have become untrue in any material respect; PROVIDED, HOWEVER,
that if such breach is capable of being cured by the Company prior to the 21st
day following written notice of such breach by the Parent to the Company through
the exercise of its best efforts, so long as the Company continues to exercise
such best efforts, Parent may not terminate the Merger Agreement pursuant to
this paragraph prior to such 21st day; or
(i) By the Company, upon a material breach of any covenant or agreement on
the part of Parent or Purchaser set forth in the Merger Agreement, or if (1) any
representation or warranty of Parent or the Purchaser that is qualified as to
materiality shall have become untrue or (2) any representation or warranty of
Parent or the Purchaser that is not so qualified shall have become untrue in any
material respect; PROVIDED, HOWEVER, that, if such breach is capable of being
cured by Parent prior to the 21st day following written notice of such breach by
Parent to the Company through the exercise of best efforts, so long as Parent
continues to exercise such best efforts, the Company may not terminate the
Merger Agreement pursuant to this paragraph prior to such 21st day;
(j) By the Company, if the Purchaser shall have failed to commence the
Offer within the five business day period specified in the Merger Agreement or
the Purchaser fails to pay for validly tendered Shares in violation of the terms
of the Offer or the Merger Agreement; or
(k) By Parent or the Company, if the Offer terminates or expires on account
of the failure of any condition specified in the Merger Agreement without the
Purchaser having purchased any Shares thereunder (provided that the right to
terminate the Merger Agreement pursuant to this paragraph shall not be available
to any party whose failure to fulfill any obligation under the Merger Agreement
has been the cause of, or resulted in, the failure of any such condition).
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TERMINATION FEES AND EXPENSES. The Merger Agreement provides that in the
event that the Merger Agreement is terminated pursuant to paragraph (f) or (g)
described under the heading "Termination" in the response to this Item 13 above,
the Company shall pay Parent a cash fee of $20,000,000, which amount shall be
payable by wire transfer of immediately available funds no later than two
business days after such termination.
AMENDMENTS; WAIVER. The Merger Agreement may be amended by the parties
thereto, by action taken or authorized by their respective boards of directors,
at any time before or after approval of the matters presented in connection with
the Merger by the Company's stockholders, but, after any such approval, no
amendment shall be made which by law or in accordance with the rules of the New
York Stock Exchange, Inc. (the "NYSE") requires further approval by such
stockholders without such further approval. The Merger Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. At any time prior to the Effective Time, the parties to the
Merger Agreement, by action taken or authorized by their respective boards of
directors, may, to the extent legally allowed, (1) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, (2) waive any inaccuracies in the representations and warranties
contained therein or in any document delivered pursuant thereto, and (3) waive
compliance with any of the agreements or conditions contained therein. Any
agreement on the part of a party to the Merger Agreement to any such extension
or waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. No delay on the part of any party to the Merger Agreement
in exercising any right, power or privilege thereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party thereto of any right,
power or privilege thereunder operate as a waiver of any other right, power or
privilege thereunder, nor shall any single or partial exercise of any right,
power or privilege thereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege thereunder. The failure of
any party to the Merger Agreement to assert any of its rights thereunder or
otherwise shall not constitute a waiver of those rights.
GUARANTY
In connection with the execution of the Merger Agreement, Atlas Copco
executed a guaranty, dated as of June 28, 1999 (the "Guaranty"), pursuant to
which Atlas Copco unconditionally guarantees to RSC the prompt payment and
performance of the obligations and agreements of the Parent and the Purchaser
under the Merger Agreement. The guaranty obligation terminates immediately
following the earlier of (1) the Effective Time, and (2) the termination of the
Merger Agreement.
CONFIDENTIALITY/STANDSTILL AGREEMENT
Pursuant to the terms, of a confidentiality/standstill letter agreement,
dated as of June 14, 1999, between the Company and Atlas Copco (the
"Confidentiality/Standstill Agreement"), Atlas Copco agreed, on its behalf and
on behalf of its affiliates, including the Parent and the Purchaser, and
representatives, to, among other things, (i) keep confidential certain business
and financial information concerning the Company and its subsidiaries and (ii)
for a period of one year not to, without the prior written consent of the
Company or the Company Board, among other things; (A) acquire directly or
indirectly, by purchase or otherwise, of any securities (or beneficial ownership
thereof), or rights to acquire any securities, of the Company or any subsidiary
thereof; (B) effect, cause or participate in, directly or indirectly, any tender
or exchange offer, merger, consolidation or other business combination involving
the Company; (C) solicit proxies or written consents as to any voting securities
of the Company (or seek to advise or influence any person with respect to the
voting of any voting securities of the Company); (D) act, alone or in concurrent
with others, to seek to control or influence the Company's management, the
Company Board or the Company's policies or propose any matter for submission to
a vote of the Company's stockholders; or (E) enter into any discussions or
arrangements with any third party with respect to any of the foregoing or
advise, assist, encourage, finance or seek to persuade others to take any action
with respect to the foregoing. In addition, Atlas Copco agreed, on its behalf
and on behalf of its affiliates, including Parent and the Purchaser, that for a
period of one year it would not, directly or indirectly, solicit for employment
or employ certain employees of the Company and its subsidiaries without
obtaining the prior written consent of the Company, subject to certain
exceptions as described in the Confidentiality/Standstill Agreement.
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14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that the Company will not, among other things,
from the date of the Merger Agreement until the Effective Time, (a) (x) declare
or pay any dividends on, or make other distributions in respect of, any of its
capital stock, (y) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (z)
purchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable or exchangeable for any shares of its
capital stock except as otherwise permitted under certain option agreements to
effect cashless option exercises; or (b) issue, deliver, sell, pledge or
otherwise encumber (except as pledged on June 28, 1999 and disclosed pursuant to
the Merger Agreement or the Company's filings with the Commission) or authorize
or propose the issuance, delivery or sale of any shares of its capital stock,
any other voting securities, or any securities convertible into or exercisable
or exchangeable for, or any rights, warrants or options to acquire, any such
shares or voting securities, or enter into any agreement with respect to the
foregoing, other than the issuance of shares upon the exercise of stock options
or stock appreciation rights outstanding on June 28, 1999.
15. CERTAIN CONDITIONS TO THE PURCHASER'S OBLIGATIONS.
Notwithstanding any other provision of the Offer, and subject to the terms
and conditions of the Merger Agreement, the Purchaser shall not be obligated to
accept for payment any Shares until expiration of all applicable waiting periods
(and extensions thereof) under the HSR Act, and the Purchaser shall not be
required to accept for payment, purchase or pay for, and may delay the
acceptance for payment of or payment for, any Shares tendered in the Offer, or
if the Minimum Condition shall not have been satisfied, may terminate or amend
the Offer, subject to the terms and conditions of the Merger Agreement and the
Purchaser's obligation to extend the Offer pursuant to the Merger Agreement if,
prior to the time of acceptance for payment of any such Shares (whether or not
any other Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any of the following shall occur and remain in effect:
(a) an order shall have been entered in any action or proceeding before
any United States federal or state governmental entity (an "Order"), or a
preliminary or permanent injunction by a United States federal or state
court of competent jurisdiction shall have been issued and remain in effect
(an "Injunction"), which, in either case, would have the effect of (i)
making the purchase of, or payment for, some or all of the Shares pursuant
to the Offer or the Merger Agreement illegal, (ii) otherwise preventing
consummation of the Offer or Merger, or (iii) imposing material limitations
on the ability of the Purchaser or the Parent effectively to exercise full
rights of ownership of the Shares, including the right to vote the Shares
purchased by it on all matters properly presented to the shareholders of the
Company; provided, however, that in order to invoke this condition, Parent
and the Purchaser shall have used their commercially reasonable efforts to
prevent such Order or Injunction or ameliorate the effects thereof; and
provided, further, that, if the Order or Injunction is a temporary
restraining order or preliminary injunction of a court of competent
jurisdiction, the Purchaser may not, by virtue of this condition alone amend
or terminate the Offer, but may only extend the Offer and thereby postpone
acceptance for payment or purchase of Shares;
(b) there shall have been any United States or foreign federal or state
statute, rule or regulation enacted or promulgated after the date of the
Offer that would reasonably be expected to result in any of the material
adverse consequences referred to in paragraph (a) above;
(c) the Merger Agreement shall have been terminated by the Company or
the Parent pursuant to its terms; or
(d) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a
national securities exchange in the United States (excluding any coordinated
trading halt triggered solely as a result of a specified increase or
decrease in a market index or similar "circuit breaker" process) which
materially and adversely affects the extension of credit in the
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United States or the European Union generally by banks or other leading
institutions (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the European Union
generally which materially and adversely affects the extension of credit in
the United States or the European Union generally by banks or other lending
institutions, (iii) any newly initiated material limitation (whether or not
mandatory) by any governmental entity on, or other similar event that
materially and adversely affects, the extension of credit in the United
States or the European Union generally by banks or other lending
institutions, or (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States or the European Union generally which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be asserted by Parent and the Purchaser regardless of the
circumstances giving rise to such condition or, except for the Minimum
Condition, may be waived by the Parent and the Purchaser in whole or in parts at
any time and from time to time. The failure by Parent or the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other facts
and circumstances, and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering stockholders.
16. CERTAIN LEGAL MATTERS.
Except as set forth in this Section 16, the Purchaser is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Purchaser as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Purchaser has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such matter,
subject, however, to the Purchaser's right to decline to purchase Shares if any
of the conditions specified in Section 15 shall have occurred. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions, or that adverse
consequences might not result to the Company's business or that certain parts of
the Company's business might not have to be disposed of if any such approvals
were not obtained or other action taken.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15 day waiting period following the filing by of a Premerger
Notification and Report Form with respect to the Offer, unless Parent receives a
request for additional information or documentary material from the Department
of Justice, Antitrust Division (the "Antitrust Division") or the Federal Trade
Commission ("FTC") or unless early termination of the waiting period is granted.
Parent anticipates making its filing on or about June 30, 1999 and, accordingly,
the initial waiting period will expire on July 15, 1999. If, within the initial
15 day waiting period, either the Antitrust Division or the FTC requests
additional information or documentary material concerning the Offer, the waiting
period will be extended through the tenth day after the date of substantial
compliance by all parties receiving such requests. Complying with a request for
additional information or documentary material can take a significant amount of
time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as either deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant to
the Offer or the consummation of the Merger, or seeking the divestiture of
Shares acquired by the Purchaser or the divestiture of substantial assets of the
Company or its
34
<PAGE>
subsidiaries or Parent or its subsidiaries. Private parties may also bring legal
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the Offer or the consummation of the Merger on
antitrust grounds will not be made, or, if such a challenge is made, of the
result thereof.
If any applicable waiting period under the HSR Act applicable to the Offer
has not expired or been terminated prior to the Expiration Date, the Purchaser
will not be obligated to proceed with the Offer or the purchase of any Shares
not theretofore purchased pursuant to the Offer. See Section 15.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL ("Section 203") prevents
an "interested stockholder" (including a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" (defined to include mergers and certain other
actions) with a Delaware corporation for a period of three years following the
date such person became an interested stockholder unless, among other things,
the "business combination" is approved by the Board of Directors of such
corporation prior to such date. The Company's Board of Directors has approved
the Offer and the Merger. Accordingly, Section 203 is inapplicable to the Offer
and the Merger. A number of other states have adopted laws and regulations
applicable to attempts to acquire securities of corporations which are
incorporated, or have substantial assets, stockholders, principal executive
offices or principal places of business or whose business operations otherwise
have substantial economic effects in such states. In Edgar v. MITE Corp., in
1982, the Supreme Court of the United States (the "U.S. Supreme Court")
invalidated on constitutional grounds the Illinois Business Takeover statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However in 1987, in CTS Corp. v.
Dynamics Corp. of America, the U.S. Supreme Court held that the State of Indiana
may, as a matter of corporate law and, in particular, with respect to those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the U.S. Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Purchaser does not know whether any of these laws will, by their
terms, apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, the Purchaser will take
such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
In the event it is asserted that one or more state takeover laws is applicable
to the Offer or the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such event,
the Purchaser may not be obligated to accept for payment any Shares tendered.
See Section 15.
17. FEES AND EXPENSES.
Neither the Purchaser nor Parent, nor any officer, director, stockholder,
agent or other representative of the Purchaser or Parent will pay any fees or
commissions to any broker, dealer or other person (other than the Dealer
Manager, the Information Agent and the Depositary) for soliciting tenders of
Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by the Purchaser
for customary mailing and handling expenses incurred by them in forwarding
materials to their customers.
Credit Suisse First Boston Corporation is acting as Dealer Manager in
connection with the Offer and as financial advisor to Parent in connection with
Parent's proposed acquisition of the Company, for which financial advisory
services Credit Suisse First Boston Corporation will receive customary
compensation. CSFB will be arranging the financing of the Offer and the Merger
(see Section 10), for which services CSFB
35
<PAGE>
will receive compensation. Parent also has agreed to reimburse Credit Suisse
First Boston Corporation for its
out-of-pocket expenses, including the fees and expenses of legal counsel and
other advisors, incurred in connection with its engagement, and to indemnify
Credit Suisse First Boston Corporation and certain related persons against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws. In the ordinary course of
business, Credit Suisse First Boston Corporation and its affiliates may actively
trade the debt and equity securities of the Company for their own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
The Purchaser has retained Beacon Hill Partners, Inc. as Information Agent
and ChaseMellon Shareholder Services L.L.C. as Depositary in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services hereunder and reimbursement for their
reasonable out of pocket expenses. The Depositary will also be indemnified by
the Purchaser against certain liabilities in connection with the Offer. The
Information Agent may contact holders of Shares by mail, telex, telegraph and
personal interviews and may request brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners of
Shares.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser other than as contained in this Offer
to Purchase or in the Letter of Transmittal and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Purchaser or Parent.
The Purchaser and Parent have filed with the Commission the Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer. The
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
June 29, 1999
PANDION ACQUISITION CORP.
36
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below are the
name, current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of Parent. Unless otherwise
indicated, each such person's business address is 1211 Hamburg Turnpike, Suite
214, Wayne, New Jersey 07470. All persons listed below are citizens of the
United States of America, except Bengt Kvarnback, Lennart Johansson and Anders
Orbom, who are citizens of Sweden and Freek Nijdam, who is a citizen of the
Netherlands and Giulia Mazzalupi, who is a citizen of Italy.
<TABLE>
<S> <C>
DIRECTORS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
--------------------------------------------------------------------------
Mr. Lennart Johansson................ Senior Vice President of Atlas Copco AB, SE-105 23 Stockholm, Sweden and
President of Atlas Copco North America Inc., 1211 Hamburg Turnpike, Wayne,
NJ 07470. Employed since January 1, 1987.
Mr. Charles Long..................... Retired. Formerly Executive Vice President and Secretary of Citicorp., 153
E. 53rd Street, 23rd Floor, New York, NY 10043 for five years prior to
retirement on March 1, 1999
Mr. Bengt Kvarnback.................. Senior Executive Vice President of Atlas Copco AB, SE-105 23 Stockholm,
Sweden. Employed since October 15, 1992.
Mr. Giulia Mazzalupi................. President and CEO of Atlas Copco AB, SE-105 23 Stockholm, Sweden since
April 22, 1997. Previously Senior Executive Vice President of Atlas Copco
Airpower n.v. Belgium. Employed since 1972.
Mr. Freek Nijdam..................... Senior Executive Vice President of Atlas Copco AB, SE-105 23 Stockholm,
Sweden. Employed since June 1, 1970.
Mr. Donald Pratt..................... Chairman of Butler Manufacturing Company, P.O. Box 419917, Kansas City, MO
64141-0971 for the past two months. For the five years prior to his
appointment as Chairman Mr. Pratt served as President of Butler
Manufacturing Company
EXECUTIVE OFFICERS
Mr. William Calore................... General Counsel of Atlas Copco North America Inc., 1211 Hamburg Turnpike,
Wayne, NJ 07470 since August 17, 1998. Mr. Calore was employed by Volvo
Penta North America, Inc. since prior to 1994 through August 1998.
Mr. Mark Cohen....................... Executive Vice President of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470. Employed since January 28, 1974.
Mr. William Garofalo................. Corporate Controller of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470 since October 19, 1998. Mr. Garofalo was
employed by Amelia Family Trust Company during the period January 1997
through October 1998; C.R. Bard Inc. during the period October 1995
through January 1997; and Grant Thorton LLP since prior to 1994 through
October 1995.
Mr. Lennart Johansson................ Senior Vice President of Atlas Copco AB, S-10523 Stockholm, Sweden and
President of Atlas Copco North America Inc., 1211 Hamburg Turnpike, Wayne,
NJ 07470. Employed since January 1, 1987.
Mr. Anders Orbom..................... Treasurer of Atlas Copco North America Inc., 1211 Hamburg Turnpike Wayne,
NJ 07470 since November 1, 1996. Employed since April 1987.
Mr. Greg Taylor...................... Vice President Taxes of Atlas Copco North America Inc. since September 1,
1997. Mr. Taylor was employed by Sequa Corp. since prior to 1994 through
August 1997.
William M. Thomas.................... Corporate Counsel of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470 since January 1, 1996 and Chicago Pneumatic Tool
Company for the five years prior to January 1, 1996.
</TABLE>
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Set forth below are the
name, current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of the Purchaser. Unless otherwise
indicated, each such person's business address is 1211 Hamburg Turnpike, Suite
214, Wayne, New Jersey 07470. All persons listed below are citizens of the
United States of America.
<TABLE>
<S> <C>
DIRECTORS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
--------------------------------------------------------
Mr. Mark Cohen.......................................... President of Pandion Acquisition Corp. since its
inception and Executive Vice President of Atlas Copco
North America Inc., 1211 Hamburg Turnpike, Wayne, NJ
07470. Employed since January 28, 1974.
Mr. William Calore...................................... Secretary of Pandion Acquisition Corp. since its
inception and General Counsel of Atlas Copco North
America Inc., 1211 Hamburg Turnpike, Wayne, NJ 07470
since September 1, 1998. Mr. Calore was employed by
Volvo Penta North America, Inc. prior to 1994.
EXECUTIVE OFFICERS
Mr. Mark Cohen.......................................... President of Pandion Acquistion Corp. since its
inception and Executive Vice President of Atlas Copco
North America Inc., 1211 Hamburg Turnpike, Wayne, NJ
07470. Employed since January 28, 1974.
Mr. William Calore...................................... Secretary of Pandion Acquisition Corp. since its
inception and General Counsel of Atlas Copco North
America Inc., 1211 Hamburg Turnpike, Wayne, NJ 07470
since September 1, 1998. Mr. Calore was employed by
Volvo Penta North America, Inc. since prior to 1994.
</TABLE>
I-2
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. The Letter of Transmittal,
certificates for Shares and any other required documents should be sent or
delivered by each stockholder of the Company or such stockholder's broker,
dealer, commercial bank, trust company or other nominee to the Depositary at one
of the addresses set forth below:
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Stop-Reorg New York, NY 10271
Ridgefield Park, NJ 07660
</TABLE>
<TABLE>
<S> <C>
FACSIMILE TRANSMISSION: FOR CONFIRMATION BY TELEPHONE:
(for Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses or telephone numbers
and locations set forth below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from
the Information Agent or the Dealer Manager as set forth below. Stockholders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
Beacon Hill Partners, Inc.
90 Broad Street--20(th) Floor
New York, New York 10004
Banks and Brokers call collect: (212) 843-8500
All others call Toll Free: (800) 755-5001
The Dealer Manager for the Offer is:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
<PAGE>
Letter of Transmittal
to Tender Shares of Common Stock
of
Rental Service Corporation
at
$29.00 Net Per Share
Pursuant to the Offer to Purchase Dated June 29, 1999
of
Pandion Acquisition Corp.
a wholly owned subsidiary of
Atlas Copco North America Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 27, 1999, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Stop-Reorg New York, NY 10271
Ridgefield Park, NJ 07660
</TABLE>
<TABLE>
<S> <C>
FACSIMILE TRANSMISSION: FOR CONFIRMATION BY TELEPHONE:
(for Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE
LISTED ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR
BELOW, WITH SIGNATURE GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM
W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Rental
Service Corporation (the "Company") if certificates evidencing Shares are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if delivery of Shares (as defined below) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
(hereinafter referred to as the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase (as defined below).
Stockholders whose certificates for Shares are not immediately available or who
cannot deliver their certificates or deliver confirmation of the book-entry
transfer of their Shares (as defined below) into the Depositary's account at the
Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents
required hereby to the Depositary on or prior to the Expiration Date (as defined
in the Offer to Purchase), must tender their Shares pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase. See
Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER-FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITORY.
<PAGE>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account No. at the Book-Entry Transfer Facility ____________________________
Transaction Code No. _______________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Window Ticket Number (if any) ______________________________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivery is by book-entry transfer, name of Tendering Institution: ______
Account No. at the Book-Entry Transfer Facility ____________________________
Transaction Code No. _______________________________________________________
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------
NUMBER OF
SHARE SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
----------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Total Shares
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
/ / CHECK HERE IF CERTIFICATES HAVE BEEN LOST OR MUTILATED. SEE SECTION 12.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Pandion Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of Atlas
Copco North America Inc., a Delaware corporation ("Parent"), the above-described
shares of common stock, $.01 par value (together with the associated preferred
share purchase rights, the "Shares"), of Rental Service Corporation, a Delaware
corporation (the "Company"), pursuant to the Purchaser's offer to purchase all
of the outstanding Shares at a purchase price of $29.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 29, 1999 (the "Offer
to Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as may be amended or supplemented from time to time,
together with the Offer to Purchase, constitute the "Offer"). The Offer is being
made in connection with the Agreement and Plan of Merger, dated as of June 28,
1999 (the "Merger Agreement"), among the Parent, the Purchaser and the Company.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns and transfers to
or upon the order of the Purchaser all right, title and interest in and to all
the Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof) and irrevocably constitutes
and appoints the Depositary the true and lawful agent and attorney-in-fact of
the undersigned with respect to such Shares (and all such other Shares or
securities), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares (and any such other Shares or securities), or
transfer ownership of such Shares (and any such other Shares or securities) on
the account books maintained by the Book-Entry Transfer Facility, together, in
any such case, with all accompanying evidences of transfer and authenticity, to
or upon the order of the Purchaser upon receipt by the Depositary, as the
undersigned's agent, of the purchase price (adjusted, if appropriate, as
provided in the Offer to Purchase), (b) present such Shares (and any such other
Shares or securities) for transfer on the books of the Company and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities), all in accordance with the
terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Purchaser
as the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his
substitute shall in his sole discretion deem proper, and otherwise act
(including pursuant to written consent) with respect to all the Shares tendered
hereby which have been accepted for payment by the Purchaser prior to the time
of such vote or action (and any and all other Shares or securities issued or
issuable in respect of such Shares) which the undersigned is entitled to vote at
any meeting of stockholders of the Company (whether annual or special and
whether or not an adjourned meeting), any actions by consent in lieu of any such
meeting or otherwise. This proxy is irrevocable and is granted in consideration
of, and is effective upon, the acceptance for payment by Purchaser of Shares
tendered in accordance with the terms of the Offer. Such acceptance for payment
shall revoke all prior proxies granted by the undersigned at any time with
respect to such Shares (and any such other Shares or other securities), and no
subsequent proxies will be given (and if given or executed, will not be deemed
effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect of such Shares) and that when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and the same will
not be subject to any adverse claim. The undersigned, upon request, will execute
and deliver any additional documents deemed by the Depositary or the Purchaser
to be necessary or desirable to complete the sale, assignment and transfer of
the Shares tendered hereby (and any and all such other Shares or other
securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators and legal
representatives of the undersigned. Except as stated in the Offer to Purchase,
this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer. The
Purchaser's acceptance of such Shares for payment will constitute a binding
agreement between the undersigned and the Purchaser upon the terms and subject
to the conditions of the Offer, including, without limitation, the undersigned's
representation and warranty that the undersigned owns the Shares being tendered.
<PAGE>
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
certificates evidencing Shares not tendered or not purchased, in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased and return any certificates for Shares not tendered or not purchased
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed, please
issue the check for the purchase price of any Shares purchased and return any
Shares not tendered or not purchased in the name(s) of, and mail said check and
any certificates to, the person(s) so indicated. Stockholders delivering Shares
by book-entry transfer may request that any Shares not accepted for payment be
returned by crediting such account maintained at the Book-Entry Transfer
Facility as such stockholder may designate by making an appropriate entry under
"Special Payment Instructions." The undersigned recognizes that the Purchaser
has no obligation, pursuant to the "Special Payment Instructions," to transfer
any Share from the name of the registered holder(s) thereof if the Purchaser
does not accept for payment any of the Shares so tendered.
<PAGE>
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased
are to be returned by credit to an account at the Book-Entry Transfer
Facility.
Issue / / Check / / Certificate to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(See Substitute Form W-9)
/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:
Account No. ____________________________________________________________
- ------------------------------------------------
- ------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be mailed to someone other than the undersigned or to the undersigned at an
address other than that shown below the undersigned's signature(s).
Mail check and/or certificates to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(See Substitute Form W-9)
- ------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
STOCKHOLDER: SIGN HERE
(Complete Substitute Form W-9 below)
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF OWNER(S))
Name(s) ____________________________________________________________________
____________________________________________________________________________
Capacity (full title) ______________________________________________________
(SEE INSTRUCTIONS)
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
Area Code and Telephone Number _____________________________________________
Taxpayer Identification or Social Security Number __________________________
(SEE SUBSTITUTE FORM W-9)
Dated: ______________________________, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full
title and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(If required--See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s) ____________________________________________________
Name _______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _____________________________________________
Dated: ______________________________, 1999
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions," or
(ii) if such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of the Securities Transfer Agents Medallion Program, the New York Stock
Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion
Program (each an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of
Transmittal is to be completed by stockholders either if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if the tenders of Shares are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in Section 3 of the
Offer to Purchase. Certificates for all physically tendered Shares, or any
Book-Entry Confirmation of Shares, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), unless
an Agent's message is utilized, and any other documents required by this Letter
of Transmittal, must be received by the Depositary at one of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Offer to
Purchase). Stockholders whose certificates for Shares are not immediately
available or who cannot deliver their certificates or Book-Entry Confirmation
and all other required documents to the Depositary on or prior to the Expiration
Date may tender their Shares by properly completing and duly executing the
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. Pursuant to these procedures (a)
the tender of Shares must be made by or through an Eligible Institution; (b) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, must be received by the
Depositary on or prior to the Expiration Date; and (c) the certificates for all
physically tendered Shares or Book-Entry Confirmations, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), unless an Agent's Message is utilized, and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three trading days after the date of execution of such Notice
of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
The term "trading day" is any day on which the New York Stock Exchange is open
for business.
If certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal (or a copy thereof)
must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING SHARES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER AND EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any certificate(s)
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
this case, a new certificate for the remainder of the Shares represented by the
old certificate will be sent to you unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the Expiration
Date. All Shares evidenced by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all owners must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
<PAGE>
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of the authority of such person so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment or certificates for Shares not tendered or purchased
are to be issued to a person other than the registered holder(s). Signatures on
any such certificates or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares listed, the certificate must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly with the
name(s) of the registered holder(s) appearing on the certificates for such
Shares. Signature(s) on any such certificates or stock powers must be guaranteed
by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder, or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder or such person) payable on account of
the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTION. If a check or certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent or such
certificates are to be returned to someone other than the signer of this Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. A stockholder tendering
Shares by book-entry transfer may request that Shares not purchased be credited
to the account at the Book-Entry Transfer Facility as such stockholder may
designate under "Special Payment Instructions" hereon. If no such instructions
are given, any such Shares not purchased will be returned by crediting the
account at the Book-Entry Transfer Facility designated above.
8. SUBSTITUTE FORM W-9. A tendering stockholder is required to provide the
Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 which is provided under "Important Tax Information" below, and to
certify whether the stockholder is subject to backup withholding of Federal
income tax. If a tendering stockholder is subject to backup withholding, the
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to Federal income tax withholding of 31% of
any payments made to the stockholder, but such withholdings will be refunded if
the tendering stockholder provides a TIN within 60 days.
9. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8
to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at its address on the face of this Letter of Transmittal.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses or telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may be obtained from the Information Agent, the Dealer
Manager or from brokers, dealers, commercial banks or trust companies.
11. WAIVER OF CONDITIONS. Subject to the terms of the Merger Agreement,
the conditions of the Offer may be waived by the Purchaser, in whole or in part,
at any time or from time to time, in the Purchaser's sole discretion, in the
case of any Shares tendered.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary at (800) 522-6645. The stockholder will then be
instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF),
TOGETHER WITH CERTIFICATES OR BOOK-ENTRY CONFIRMATION AND ALL OTHER
REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR
PRIOR TO THE EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9 below. If such stockholder
is an individual, the TIN is such stockholder's Social Security Number. If a
tendering stockholder is subject to backup withholding, such stockholder must
cross out item (2) of the Certification box on the Substitute Form W-9. If the
Depositary is not provided with the correct TIN, the stockholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such stockholder may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. Exempt stockholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form certifying that the TIN provided on the Substitute Form W-9
is correct (or that such stockholder is awaiting a TIN).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, the
stockholder should write "Applied For" in the space provided for the TIN in Part
I, and sign and date the Substitute Form W-9. If "Applied For" is written Part
I, the Depositary will withhold 31% of any payments made to the stockholder, but
such withholdings will be refunded if the tendering stockholder provides a TIN
within 60 days.
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE Part I--PLEASE PROVIDE YOUR TIN:
FORM W-9 TIN IN THE BOX AT THE RIGHT Social Security
DEPARTMENT OF THE TREASURY, AND CERTIFY BY SIGNING AND Number or Employer
INTERNAL REVENUE SERVICE DATING BELOW. Identification Number (if
awaiting
TIN, write "Applied For")
------------------------------------------------------------
PAYOR'S REQUEST FOR Part II--For Payees exempt from backup withholding, see the
TAXPAYER IDENTIFICATION attached Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete as
instructed therein.
NUMBER ("TIN") Certification--Under penalties of perjury, I certify that:
AND CERTIFICATION (1) The number shown on this form is my correct TIN or (or I
am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (a) I am
exempt from backup withholding or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
------------------------------------------------------------
SIGNATURE: Date:
</TABLE>
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see the instructions in the
attached Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ATTACHED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to
me, and either (1) I have mailed or delivered an application to receive a
TIN to the appropriate IRS Center or Social Security Administration Officer
or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a TIN by the time of payment, 31% of any
payments made to me thereafter will be withheld until I provide a number.
SIGNATURE: _______________________________ DATE: ________________________
<PAGE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent or the Dealer Manager as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
Beacon Hill Partners, Inc.
90 Broad Street--20(th) Floor
New York, New York 10004
Banks and Brokers Call Collect (212) 843-8500
All Others Call Toll Free: (800) 755-5001
THE DEALER MANAGER FOR THE OFFER IS:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
<PAGE>
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
of
Rental Service Corporation
to
Pandion Acquisition Corp.
a wholly owned subsidiary of
Atlas Copco North America Inc.
(Not to be used for Signature Guarantees)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 27, 1999, UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates representing shares of
common stock, par value $.01 (together with the associated preferred share
purchase rights, the "Shares"), of Rental Service Corporation, a Delaware
corporation (the "Company"), are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary (as defined in the Offer
to Purchase) on or prior to the Expiration Date (as defined in the Offer to
Purchase). This form may be delivered by hand or transmitted by facsimile or
mail to the Depositary. See Section 3 of the Offer to Purchase, dated June 29,
1999 (the "Offer to Purchase").
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Stop--Reorg New York, NY 10271
Ridgefield Park, NJ 07660
</TABLE>
<TABLE>
<S> <C>
FACSIMILE TRANSMISSION: FOR CONFIRMATION BY TELEPHONE:
(for Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN ONE
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN THE
FACSIMILE NUMBER SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE)
UNDER THE INSTRUCTION THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in the Offer to Purchase) and certificates for
Shares to the Depositary within the time period shown herein. Failure to do so
could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Pandion Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Atlas Copco North America Inc., a
Delaware Corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated June 29, 1999 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, as may be amended or supplemented from
time to time, together with the Offer to Purchase, constitute the "Offer"),
receipt of which is hereby acknowledged, the number of Shares indicated below,
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares Tendered: SIGN HERE
Certificate No(s) (if available): Name(s) of Record Holder(s):
(Please Print)
/ / Check if securities will be tendered by
book-entry transfer Address(es):
Name of Tendering Institution:
(Zip Code)
Account No.: Area Code and Telephone No(s):
Signature(s):
Dated: , 1999
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, (a) represents that
the above-named person(s) "own(s)" the Shares tendered hereby within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended,
(b) represents that such tender of Shares complies with Rule 14e-4 under the
Exchange Act and (c) guarantees delivery to the Depositary, at one of its
addresses set forth above, of certificates representing the Shares tendered
hereby in proper form for transfer, or confirmation of book-entry transfer of
such Shares into the Depositary's accounts, in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), and any other required documents, all within three trading days of the
date hereof. A "trading day" is any day on which the New York Stock Exchange is
open for business.
Name of Firm: __________________________________________________________________
Authorized Signature: __________________________________________________________
Title: _________________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(Zip Code)
Area Code and Telephone Number: ________________________________________________
Dated: _______, 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM. CERTIFICATES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
[Credit Suisse First Boston Corporation Letterhead]
Offer To Purchase For Cash
All Outstanding Shares of Common Stock
of
Rental Service Corporation
at
$29.00 Net Per Share
by
Pandion Acquisition Corp.
a wholly owned subsidiary of
Atlas Copco North America Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 27, 1999,
UNLESS THE OFFER IS EXTENDED.
June 29, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been engaged to act as Dealer Manager in connection with the offer
by Pandion Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Atlas Copco North America Inc., a Delaware corporation
("Parent"), to purchase all outstanding shares of common stock, par value $.01
(together with the associated preferred share purchase rights, the "Shares"), of
Rental Service Corporation, Inc., a Delaware corporation (the "Company"), at a
purchase price of $29.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase, dated June 29, 1999 (the "Offer to Purchase") and
the related Letter of Transmittal (which, as may be amended or supplemented from
time to time, together with the Offer to Purchase, constitute the "Offer").
The Offer is being made in connection with the Agreement and Plan of Merger,
dated as of June 28, 1999, among the Parent, the Purchaser and the Company (the
"Merger Agreement"). Holders of Shares whose certificates for such Shares are
not immediately available or who cannot deliver their certificates and all other
required documents to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
The Offer is conditioned upon, among other things, the satisfaction or
waiver of certain conditions, including (1) there being at least that number of
Shares representing a majority of the total issued and outstanding Shares on a
fully diluted basis on the date such Shares are purchased pursuant to the Offer,
validly tendered and not withdrawn prior to the expiration of the Offer, and (2)
receipt by the Purchaser and the Company of certain governmental and regulatory
approvals. See Section 15 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase, dated June 29, 1999;
<PAGE>
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients (manually signed facsimile copies of the
Letter of Transmittal may be used to tender Shares);
3. Letter to Clients which may be sent to your clients for whose accounts
you hold Shares in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the
Offer;
4. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase) or if the
procedures for book-entry transfer, as set forth in the Offer to
Purchase, cannot be completed on a timely basis;
4. Letter to Stockholders of the Company from John M. Sullivan, Chairman of
the Executive Committee of the Board of Directors of the Company,
together with a Solicitation/ Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company;
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered and not properly withdrawn prior to the Expiration Date as soon
as permitted under applicable law. For purposes of the Offer, the Purchaser will
be deemed to have accepted for payment, and thereby purchased, tendered Shares
if, as and when the Purchaser gives oral and written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for Shares or timely confirmation
of a book-entry transfer of such Shares, if such procedure is available, into
the Depositary's account at The Depository Trust Company, pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, or, in
the case of a book-entry transfer, an Agent's Message (as defined the Offer to
Purchase) and (iii) any other documents required by the Letter of Transmittal.
Your attention is invited to following:
1. The tender price is $29.00 per Share, net to the seller in cash, without
interest;
2. The Offer is being made for all outstanding Shares;
3. The Offer is being made pursuant to the terms of an Agreement and Plan
of Merger, dated as of June 28, 1999, by and among Parent, the Purchaser
and the Company (the "Merger Agreement"). The Merger Agreement provides,
among other things, for the making of the Offer by the Purchaser, and
further provides that, as soon as practicable following completion of the
Offer, the Purchaser will be merged with and into the Company (the
"Merger"). The Company will continue as the surviving corporation after
the Merger and will be a wholly owned subsidiary of the Parent;
4. The Board of Directors of the Company has approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the
Merger, has determined that the Offer and the Merger are fair to, and in
the best interests of, the Company's stockholders, has declared that the
Merger Agreement is advisable, and recommends that holders of Shares
accept the Offer and tender their Shares pursuant to the Offer;
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on Tuesday, July 27, 1999, unless the Offer is extended; and
<PAGE>
6. The Offer is conditioned upon, among other things, the satisfaction or
waiver of certain conditions, including (1) there being at least that
number of Shares representing a majority of the total issued and
outstanding Shares on a fully diluted basis on the date such Shares are
purchased pursuant to the Offer, validly tendered and not withdrawn prior
to the expiration of the Offer, and (2) receipt by the Purchaser and the
Company of certain governmental and regulatory approvals. See Section 15
of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person (other than the Dealer Manager, the Information Agent and
the Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. However, the Purchaser
will, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients.
The Purchaser will pay or cause to be paid any stock transfer taxes payable
on the transfer of Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 27, 1999, UNLESS THE OFFER IS
EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and any
other required documents should be sent to the Depositary and certificates
representing the tendered Shares should be delivered, or such Shares should be
tendered by book-entry transfer, all in accordance with the instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures specified in Section 3
of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
Beacon Hill Partners, Inc., the Information Agent, or Credit Suisse First Boston
Corporation, the Dealer Manager, at their respective addresses and telephone
numbers set forth on the back cover of the enclosed Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of the enclosed Offer to Purchase.
Very truly yours,
Credit Suisse First Boston Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE PARENT, THE PURCHASER, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
Offer To Purchase For Cash
All Outstanding Shares of Common Stock
of
Rental Service Corporation
at
$29.00 Net Per Share
by
Pandion Acquisition Corp.
a wholly owned subsidiary of
Atlas Copco North America Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 27, 1999, UNLESS THE OFFER IS EXTENDED.
June 29, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June 29,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
may be amended or supplemented from time to time, together with the Offer to
Purchase, constitute the "Offer") relating to an offer by Pandion Acquisition
Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of
Atlas Copco North America Inc., a Delaware corporation ("Parent"), to purchase
all of the outstanding shares of common stock, par value $.01 (together with the
associated preferred share purchase rights, the "Shares"), of Rental Service
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$29.00 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase. We are
(or our nominee is) the holder of record of Shares held by us for your account.
THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND
CANNOT BE USED BY YOU TO TENDER SHARES. A TENDER OF SHARES MAY BE MADE ONLY BY
US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
Holders of Shares whose certificates for such Shares (the "Certificates")
are not immediately available or who cannot deliver their Certificates and all
other required documents to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Please note the following:
1. The tender price is $29.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase;
2. The Offer is being made for all outstanding Shares;
3. The Offer is being made pursuant to the terms of an Agreement and Plan
of Merger, dated as of June 28, 1999, by and among Parent, the Purchaser
and the Company (the "Merger Agreement"). The Merger Agreement provides,
among other things, for the making of the Offer by the Purchaser, and
further provides that, as soon as practicable following completion of the
Offer, the Purchaser will be merged with and into the Company (the
"Merger"). The Company will continue as the surviving corporation after
the Merger and will be a wholly owned subsidiary of the Parent;
4. The Board of Directors of the Company has approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the
Merger, has determined that the Offer and the
<PAGE>
Merger are fair to, and in the best interests of, the Company's
stockholders, has declared that the Merger Agreement is advisable, and
recommends that holders of Shares accept the Offer and tender their
Shares pursuant to the Offer;
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on Tuesday, July 27, 1999, unless the Offer is extended; and
6. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS, INCLUDING (1) THERE BEING AT LEAST THAT
NUMBER OF SHARES REPRESENTING A MAJORITY OF THE TOTAL ISSUED AND
OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE SUCH SHARES ARE
PURCHASED PURSUANT TO THE OFFER, VALIDLY TENDERED AND NOT WITHDRAWN PRIOR
TO THE EXPIRATION OF THE OFFER, AND (2) RECEIPT BY THE PURCHASER AND THE
COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY APPROVALS. SEE SECTION 15
OF THE OFFER TO PURCHASE.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. The Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Shares residing in any jurisdiction in which the
making of the Offer or acceptance thereof would not be in compliance with the
securities laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of the Purchaser by Credit
Suisse First Boston Corporation in its capacity as Dealer Manager or by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all Shares, please complete, sign,
detach and return to us the instruction form contained in this letter. An
envelope in which to return your instruction form to us is enclosed. If you
authorize the tender of your Shares, all such Shares will be tendered unless
otherwise indicated in such instruction form. PLEASE FORWARD YOUR INSTRUCTIONS
TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
2
<PAGE>
Instructions With Respect To
The Offer To Purchase For Cash
All Outstanding Shares Of Common Stock
of
Rental Service Corporation
by
Pandion Acquisition Corp.
a wholly owned subsidiary of
Atlas Copco North America Inc.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated June 29, 1999 of Pandion Acquisition Corp. (the "Purchaser"),
a Delaware corporation and a wholly owned subsidiary of Atlas Copco North
America Inc. (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as may be amended or supplemented from time to time, together with the
Offer to Purchase, constitute the "Offer") relating to shares of common stock,
par value $.01 (together with the associated preferred share purchase rights,
the "Shares"), of Rental Service Corporation, a Delaware corporation.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you for
the account of the undersigned, on the terms and subject to the conditions set
forth in the Offer to Purchase and the Letter of Transmittal.
Number of Shares to be
Tendered:(*) ____________________
<TABLE>
<S> <C>
SIGN HERE
Signature(s)
Account Number:
Date: , 1999
(Print Name(s))
(Print Address(es))
(Area Code and Telephone Number(s)
(Taxpayer Identification or Social Security
Number(s))
</TABLE>
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
THIS FORM MUST BE RETURNED TO THE BROKERAGE FIRM MAINTAINING YOUR ACCOUNT.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
- ---------------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Husband and wife The actual owner of
(joint account) the account, or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult, or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust (grantor
is also trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under state law
8. Sole proprietorship The owner(4)
- ---------------------------------------------------------
<CAPTION>
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
<S> <C> <C>
- ---------------------------------------------------------
9. A valid trust, estate The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate The corporation
11. Religious, charitable The organization
or education
organization
12. Partnership account The partnership
held in the name of
the business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
governmental, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security Number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a) or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
- Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see the regulations under Sections 6041, 6041A(a), 6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made only by the Offer to Purchase dated June 29,
1999 and the related Letter of Transmittal and any amendments or supplements
thereto, and is being made to all holders of Shares. The Offer is not being made
to (nor will tenders be accepted from or on behalf of) holders of Shares in any
jurisdiction in which the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Purchaser may, in its discretion, take such action as it may deem
necessary to make the Offer in any jurisdiction and extend the Offer to holders
of Shares in such jurisdiction. In those jurisdictions where securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Purchaser by Credit Suisse
First Boston Corporation ("Credit Suisse First Boston" or the "Dealer Manager")
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RENTAL SERVICE CORPORATION
AT
$29.00 NET PER SHARE
BY
PANDION ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
Pandion Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Atlas Copco North America Inc., a Delaware
corporation ("Parent"), is offering to purchase all of the outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Rental Service
Corporation, a Delaware corporation (the "Company"), at a price of $29.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated June 29,
1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"). Tendering stockholders who have Shares registered in their names and
who tender directly to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") will not be charged brokerage fees or commissions or, subject to
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of
Shares pursuant to the Offer. Following the Offer, the Purchaser intends to
effect the Merger described below.
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JULY 27, 1999, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS, INCLUDING (1) THERE BEING AT LEAST THAT NUMBER OF
SHARES REPRESENTING A MAJORITY OF THE TOTAL ISSUED AND OUTSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE SUCH SHARES ARE PURCHASED PURSUANT TO THE OFFER,
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, AND (2)
RECEIPT BY THE PURCHASER AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY
APPROVALS. SEE SECTION 15 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 28, 1999 (the "Merger Agreement"), by and among Parent, the Purchaser
and the Company. The Merger Agreement provides that, among other things, after
the purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with relevant
provisions of the General Corporation Law of the State of Delaware, as amended
(the "DGCL"), the Purchaser will be merged with and into the Company (the
"Merger"). At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company, Shares held by any subsidiary of the
Company, Parent, the Purchaser or any other subsidiary of Parent, or Shares
which are held by stockholders, if any, who properly exercise their appraisal
rights under the DGCL) will be cancelled and converted into the right to receive
$29.00 in cash, or any higher price that is paid in the Offer, without interest
thereon (less any required withholding taxes).
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE COMPANY AND THE COMPANY'S STOCKHOLDERS, HAS DECLARED THAT THE MERGER
AGREEMENT IS ADVISABLE, AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment pursuant to
the Offer. In all cases, on the terms and subject to the conditions of the
Offer, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting such payment to tendering stockholders. Under no circumstances
will interest on the purchase price of Shares be paid by the Purchaser because
of any delay in making any payment. Payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase), pursuant to
the procedures set forth in the Offer to Purchase, (ii) a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof) with
all required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) and (iii) any other
documents required by the Letter of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate to
the Purchaser's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Tuesday, July 27, 1999 (or any other time then
set as the Expiration Date), the Purchaser may, subject to the terms of the
Merger Agreement as described below elect to, (i) extend the Offer and, subject
to applicable withdrawal rights, retain all tendered Shares until the expiration
of the Offer, as extended, (ii) subject to complying with applicable rules and
regulations of the Securities and Exchange Commission, accept for payment all
Shares so tendered and not extend the Offer or (iii) terminate the Offer and not
accept for payment any Shares and return all tendered Shares to tendering
stockholders. The term "Expiration Date" means 12:00 Midnight, New York City
time, on Tuesday, July 27, 1999, unless the Purchaser shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
the Purchaser, shall expire.
Subject to the limitations set forth in the Offer and the Merger Agreement
and the applicable rules and regulations of the Securities and Exchange
Commission, the Purchaser reserves the right (but will not be obligated), at any
time or from time to time in its sole discretion, to (i) extend the period
during which the Offer is open or (ii) amend the Offer in any other respect by
giving oral or written notice of such extension to the Depositary and by making
a public announcement of such extension. Except to the extent required by the
Merger Agreement, there can be no assurance that the Purchaser will exercise its
right to extend or amend the Offer. Any extension of the period during which the
Offer is open will be followed, as promptly as practicable, by public
announcement thereof, such announcement to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the rights of a
tendering stockholder to withdraw such stockholder's Shares.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration
Date and, unless theretofore accepted for payment pursuant to the Offer, also
may be withdrawn at any time after August 27, 1999. For a withdrawal of
Shares tendered pursuant to the Offer to be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the
back cover of the Offer to Purchase. Any notice of withdrawal must specify
the name of the person who tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name in which the certificates representing
such shares are registered if different from that of the person who tendered
the Shares. If certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release
of such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such certificates have been tendered
by an Eligible Institution (as defined in the Offer to Purchase), the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
book-entry transfer as set forth in the Offer to Purchase, any notice of
withdrawal must also specify the name and number of the account of the
Book-Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Purchaser, in its sole discretion,
and its determination will be final and binding on all parties.
The information required to be disclosed by Paragraph (e)(l)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided to the Purchaser its list of stockholders and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal
and other related materials are being mailed to record holders of Shares and
will be mailed to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent as set forth below. The Purchaser will not pay any fees
or commissions to any broker or dealer or any other person (other than the
Dealer Manager and the Information Agent) for soliciting tenders of Shares
pursuant to the Offer. Additional copies of the Offer to Purchase, the Letter of
Transmittal and all other tender offer materials may be obtained from the
Information Agent or the Dealer Manager, and will be furnished promptly at the
Purchaser's expense.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street - 20th Floor
New York, New York 10004
Banks and Brokers Call Collect (212) 843-8500
All Others Call Toll Free (800) 755-5001
The Dealer Manager for the Offer is:
[CREDIT SUISSE FIRST BOSTON CORPORATION LOGO]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 646-4543
June 29, 1999
<PAGE>
Exhibit 99(a)(8)
99-06-28 Press Room
Atlas Copco to acquire Rental Service
Stockholm, June 28, 1999 - Atlas Copco and Rental Service Corporation have
signed a definitive merger agreement, by which Atlas Copco will acquire
all outstanding shares in Rental Service Corporation at a price of USD 29
per share. Rental Service is one of the largest equipment rental companies
in North America, with 272 locations, operating in 29 states of the United
States and two Canadian provinces. The transaction has a total value of
approximately USD 730 million net equity consideration to Rental Service
Corporation's shareholders (exclusive of approximately USD 900 million net
debt assumed).
According to the agreement, Atlas Copco North America Inc., will commence a cash
tender offer on or about June 29 for all of Rental Service's outstanding shares
of common stock. The agreement also provides for each Rental Service share not
acquired by Atlas Copco in the tender offer to be converted into a right to
receive USD 29 in cash per share in a merger to be completed following
consummation of the tender offer. The boards of both companies have approved the
transaction. The acquisition, which is subject to antitrust approval and other
customary conditions, is expected to close in August.
Rental Service Corporation has been advised by Merrill Lynch, Pierce, Fenner &
Smith Inc. and Morgan Stanley & Co Inc. that the consideration to be received by
Rental Service's stockholders pursuant to the merger agreement is fair, from a
financial point of view, to the Company's stockholders.
Atlas Copco has been advised by and received a USD 2.0 billion bank commitment
from Credit Suisse First Boston.
Atlas Copco, the owner of Prime Service, Inc., will consolidate its position in
the North American equipment rental business through the acquisition of Rental
Service. The acquisition will result in a number of important synergy gains with
Atlas Copco's existing operations. Increased purchasing power and better
utilization of the rental fleet, combined with certain economies of scale, will
result in even better service to customers. While keeping the operational
integrity of Prime Service and Rental Service distinct, the two divisions should
jointly develop common services such as administration and finance. Importantly,
Rental Service should immediately benefit from better access to, and lower cost
of capital.
"It is a strategic goal for Atlas Copco to increase its revenues from the
use-of-products. By consolidating two of the most well established companies
under the same umbrella, we can offer even better service to our customers in
the fast-growing equipment rental business in North America, " said Giulio
Mazzalupi, President and CEO of the Atlas Copco Group. "The acquisition will
provide for important
<PAGE>
synergies with Prime Service and with other companies in the Atlas Copco Group.
However, we will maintain the operational integrity of both Prime and Rental
Service."
John M. Sullivan, Chairman of the Executive Committee of Rental Service
Corporation's Board of Directors, added, "We are excited about this opportunity
to join Atlas Copco's worldwide family. We believe we will be able to serve our
customers with the best range of equipment in an even more efficient and
responsive manner. This merger also provides the potential for expanding career
opportunities for our employees as part of a major worldwide organization."
Rental Service, which will continue to operate under its present name, will be a
division in Atlas Copco's Rental Service business area and a sister division to
Prime Service, which does business as Prime Equipment and Prime Energy Systems.
The business area will have annual revenues of more than USD 1.2 billion pro
forma, making Atlas Copco the second largest company in the North American
rental industry. The new area will have more than 100,000 customers, served by
more than 450 stores combined, operating mainly in the industrial and
construction sectors.
The U.S. equipment rental industry is estimated to exceed USD 20 billion in
annual revenues, and during the 1990s has grown at a high rate, driven by an
outsourcing trend as companies have tended to rent more of their equipment. The
industry is fragmented, with the 100 largest companies accounting for less than
22 percent of the total revenue. Consolidation of the industry is under way, and
a number of mergers and acquisitions have taken place in the past few years.
Rental Service is one of the largest companies in the equipment rental industry
in the United States and currently operates 272 rental yards in 29 states, with
some 3,600 employees. The company offers a broad range of products for rent,
including aerial manlifts, compressors and generators, forklifts and light
earthmoving equipment, as well as small equipment such as power tools. Rental
Service had revenues of USD 578 million in 1998 and an operating profit margin
of 17.5 percent. The company has been public since 1996 and has since 1997 been
listed on the New York Stock Exchange. Additional information about Rental
Service is available at the company's web site, www.rentalservice.com.
Atlas Copco is an international group of industrial companies with its head
office in Stockholm, Sweden. In 1998, the Group had revenues of USD 4.2 billion,
with 97 percent of revenues outside Sweden, and more than 23,000 employees.
Atlas Copco companies develop, manufacture, and market electric and pneumatic
tools, compressed air equipment, construction and mining equipment, assembly
systems, motion control products, and offers related service and equipment
rental. Atlas Copco North America Inc., is a subsidiary of Atlas Copco AB. In
July 1997, Atlas Copco acquired Prime Service, Inc. Other well-known North
American companies in the Atlas Copco Group are Milwaukee Electric Tool Company
and Chicago Pneumatic Tool Company. Additional information about Atlas Copco is
available at the Group's web site, www.atlascopco.com, which provides access to
current news about the Company.
<PAGE>
This news release contains certain forward-looking statements, including without
limitation, statements concerning Rental Service's operations, economic
performance and financial condition. These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. Actual results
could differ materially from the results referred to in the forward-looking
statements. These forward-looking statements are based largely on Rental
Service's current expectations and are subject to a number of risks and
uncertainties, including without limitation, changes in external market factors,
changes in Rental Service's business or growth strategy or an inability to
execute its strategy due to changes in its industry or the economy generally,
the emergence of new or growing competitors, various other competitive factors
and other risks and uncertainties indicated from time to time in Rental
Service's filings with the Securities and Exchange Commission. In light of these
risks and uncertainties, there can be no assurance that the results referred to
in the forward-looking statements contained in this news release will in fact
occur. Additionally, Rental Service makes no commitment to disclose any
revisions to forward-looking statements, or any facts, events or circumstances
after the date hereof that may bear upon forward-looking statements.
For further information, please contact:
Lennart Johansson, Senior Vice President, Controlling, M&A Director.
Phone +46 8 743 8570, mobile +46 70 588 8570, [email protected]
Hans Ola Meyer, Senior Vice President, Group Treasurer, (analysts)
Phone +46 8 743 8292, mobile +46 70 588 8292, [email protected]
Annika Berglund, Vice President, Corporate Communications, (media)
Phone +46 8 743 8070, mobile +46 70 322 8070, [email protected]
<PAGE>
June 25, 1999
The Directors
Atlas Copco AB (publ)
S-10523 Stockholm
Sweden
Attention: Hans Ola Meyer
Dear Sirs:
Re: Project Pandion
We refer to the proposed offer (the "TENDER OFFER") to be made by Pandion
Acquisition Corp., a special purpose vehicle company ("NEWCO") a wholly owned
subsidiary of Atlas Copco North America Inc. a wholly owned subsidiary of Atlas
Copco AB for all of the existing share capital of Rental Service Corporation
(the "TARGET").
We have pleasure in setting out the terms upon which Credit Suisse First Boston
("CSFB") is prepared to arrange and underwrite a facility in connection with the
Tender Offer.
CSFB hereby commits to underwrite and arrange a 364 day revolving credit
facility (the "FACILITY") in a maximum principal amount of US$2,000,000,000 upon
the terms and subject to the conditions set out in the summary of terms and
conditions (the "TERM SHEET") attached hereto and subject to the matters set out
or referred to below. Words and expressions defined in the Term Sheet have the
same meanings when used in this letter.
The commitment of CSFB to arrange and underwrite the Facility is subject to the
following:
(i) there being, in CSFB's opinion, no material adverse change in the
business, assets, condition (financial or otherwise), operations,
performance, properties or prospects of Atlas Copco AB, or the
Target and its subsidiaries since 31st March 1999;
<PAGE>
(ii) there not having occurred in CSFB's opinion, any material adverse
change in financial, banking or capital markets conditions such that
a successful syndication of the Facility could be materially
affected;
(iii) there being no event or circumstance in relation to the Tender Offer
which would result in CSFB acting contrary to any law, regulation,
treaty or official directive or request applicable to it;
(iv) the preparation, execution and delivery of legal documentation in
accordance with the terms and conditions set out in the Term Sheet;
(v) all information furnished to us in connection with the Tender Offer
and the Facility being true and accurate.
As consideration for CSFB's commitment hereunder you agree to pay the fees set
out in a separate fee letter (the "Fee Letter") of even date herewith addressed
by CSFB to you.
This letter, the Term Sheet and the Fee Letter and the contents of the same are
confidential and shall not be disclosed to any person without the prior approval
of CSFB, which shall not be unreasonably withheld other than (i) as required by
law or court order, (ii) to your directors, officers, employees, investors and
advisors on a confidential and need-to-know basis, and (iii) other than the Fee
Letter, to the Target and its advisors in connection with the Offer.
The commitment given under this letter is non-assignable.
This letter shall be governed by, and construed in accordance with the laws of
England and Wales. Any dispute shall be subject to the non-exclusive
jurisdiction of the Courts of England and Wales to which you and CSFB
irrevocably submit.
Please acknowledge your agreement to the terms of this letter and the Fee Letter
by countersigning the attached copy of this letter and returning it together
with a copy of the Fee Letter countersigned by yourselves to CSFB at the above
address not later than 11:45 p.m. London time on June 27th 1999 failing which
CSFB's commitment hereunder will expire at such time. By countersigning the
attached copy of this letter you confirm CSFB's appointment as the sole and
exclusive arranger of the Facility on the terms set out in this letter, the Term
Sheet and the Fee Letter.
<PAGE>
We look forward to working with you in relation to the Offer.
Yours faithfully,
By: /s/ L. Smith-Morgan By: /s/ Andrew Nimmo
-------------------------- --------------------------
Name: L. Smith-Morgan Name: Andrew Nimmo
Position: Director Position: Director
For and on behalf of:
Credit Suisse First Boston
Accepted and agreed
By: /s/ Hans Ola Meyer By: /s/ Lennart Johansson
-------------------------- --------------------------
Name: Hans Ola Meyer Name: Lennart Johansson
Position: Senior Vice President Position: Senior Vice President
For and on behalf of:
Atlas Copco AB
<PAGE>
ATLAS COPCO AB GUARANTY
THIS GUARANTY (this "Guaranty"), dated as of June ___, 1999, by ATLAS
COPCO AB, a corporation formed and organized under the laws of the Kingdom of
Sweden ("Guarantor"), in favor of Rental Service Corporation, a Delaware
corporation ("RSC"). Guarantor hereby unconditionally guarantees to RSC the
prompt payment and performance of the obligations and agreements of each of
Atlas Copco North America Inc. ("Parent") and Pandion Acquisition Corp.
("Purchaser") under the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of June 28, 1999, by and among Parent, Purchaser and RSC; provided,
however, that this undertaking and agreement shall terminate immediately
following the earlier of (i) the Effective Time of the Merger (as each is
defined in the Merger Agreement) and (ii) the termination of the Merger
Agreement in accordance with its terms. Guarantor agrees that this Guaranty is
a guaranty of payment and performance and not of collection, and that its
obligations under this Guaranty shall be primary, absolute and unconditional,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, the Merger
Agreement or any other agreement, document or instrument to which
Guarantor, Parent, Purchaser and/or RSC is or may become a party;
(b) the absence of any action to enforce this Guaranty or the Merger
Agreement or the waiver or consent by RSC with respect to any of
the provisions thereof;
(c) the insolvency of Parent or Purchaser; or
(d) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety
or guarantor.
In addition to the waivers set forth above, Guarantor waives and agrees
that it shall not at any time insist upon, plead or in any manner whatever claim
or take the benefit or advantage of, any appraisal, valuation, stay, extension,
marshaling of assets or redemption laws, or exemption, whether now or at any
time hereafter in force, which may delay, prevent or otherwise affect the
performance by Guarantor of its obligations under, or the enforcement by RSC of,
this Guaranty. Guarantor hereby waives diligence, presentment and demand
(whether for non-payment or protest or of acceptance, maturity, extension of
time, change in nature or form of the obligations, acceptance of further
security, release of further security, composition or agreement arrived at as to
the amount of, or the terms of, the obligations under this Guaranty, notice of
adverse change in Parent's or Purchaser's financial condition or any other fact
which might increase the risk to Guarantor) with respect to any of the
obligations under this Guaranty or all other demands whatsoever and, except as
otherwise provided in this Guaranty, waives the benefit of all provisions of law
which are or might be in conflict with the terms of this Guaranty.
<PAGE>
Guarantor represents, warrants and agrees that, as of the date of this Guaranty,
its obligations under this Guaranty are not subject to any offsets or defense
against RSC, Parent or Purchaser of any kind. Guarantor further agrees that its
obligations under this Guaranty shall not be subject to any counterclaims,
offsets or defenses against RSC, Parent or Purchaser of any kind which may arise
in the future. It is agreed between Guarantor and RSC that the foregoing
waivers are the essence of the transaction contemplated by the Merger Agreement
and that, but for this Guaranty and such waivers, RSC would not have entered
into or would decline to enter into the Merger Agreement.
Guarantor hereby represents and warrants to RSC that (1) it has full
corporate power and authority to execute and deliver this undertaking and
perform its obligations hereunder, (2) it has taken all corporate actions
necessary to authorize the execution, delivery and performance of this
undertaking by it, (3) such execution, delivery and performance do not conflict
with, violate or otherwise result in a default under its Certificate of
Incorporation, By-laws or other organizational documents, and (4) this
undertaking is the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms, except that (A) such enforcement may
be subject to applicable bankruptcy, insolvency or similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (B) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
This Guaranty shall remain in full force and effect and continue to be
effective should any petition be filed by or against Guarantor, Parent or
Purchaser for liquidation or reorganization, should Guarantor, Parent and/or
Purchaser become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
Guarantor's, Parent's and/or Purchaser's assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the obligations under this Guaranty, or any part thereof, are,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by RSC, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the obligations under this Guaranty shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
This Guaranty shall be governed and construed in accordance with the
laws of the State of Delaware, without regard to the laws that might be
applicable under conflicts of laws principles. The choice of the laws of the
State of Delaware as the governing law of this Guaranty shall be upheld as a
valid choice of law in any action in the Swedish courts.
Guarantor hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of any Delaware State court, or
Federal court of the United States of America, sitting in Delaware, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Guaranty or the transactions contemplated hereby or for
recognition or enforcement of any judgment relating thereto, and each of the
parties hereby irrevocably and unconditionally (i) agrees not to commence any
such action or proceeding
<PAGE>
except in such courts, (ii) agrees that any claim in respect of any such action
or proceeding may be heard and determined in such Delaware State court or, to
the extent permitted by law, in such Federal court, (iii) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such action or proceeding in any
such Delaware State or Federal court, and (iv) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such Delaware State or Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law, including, without limitation,
any judgment in relation to this Guaranty obtained in any Delaware State court
or Federal court of the United States of America, sitting in Delaware, against
Guarantor shall be recognized and enforced in Sweden without retrial or
examination of the merits in the case.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS GUARANTY IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS GUARANTY. GUARANTOR CERTIFIES AND ACKNOWLEDGES THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, AND (iii) IT MAKES SUCH WAIVERS
VOLUNTARILY.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Guaranty as of the date first above written.
ATLAS COPCO AB
(public)
By: /s/ Lennart Johansson
------------------------------
Name: Lennart Johansson
----------------------------
Title: Senior Vice President
---------------------------
By: /s/ Hakan Osvald
------------------------------
Name: Hakan Osvald
----------------------------
Title: Vice President
---------------------------
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 28, 1999
AMONG
ATLAS COPCO NORTH AMERICA INC.
PANDION ACQUISITION CORP.
AND
RENTAL SERVICE CORPORATION,
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I.THE TENDER OFFER.............................................................................2
1.1 THE OFFER......................................................................................2
1.2 SEC FILINGS....................................................................................3
1.3 COMPANY ACTION.................................................................................4
1.4 COMPOSITION OF THE COMPANY BOARD...............................................................5
ARTICLE II.THE MERGER..................................................................................6
2.1 THE MERGER.....................................................................................6
2.2 CLOSING........................................................................................6
2.3 EFFECTIVE TIME.................................................................................6
2.4 EFFECTS OF THE MERGER..........................................................................7
2.5 CERTIFICATE OF INCORPORATION...................................................................7
2.6 BYLAWS.........................................................................................7
2.7 OFFICERS AND DIRECTORS.........................................................................7
2.8 EFFECT ON CAPITAL STOCK........................................................................7
2.9 SURRENDER AND PAYMENT..........................................................................9
ARTICLE III.REPRESENTATIONS AND WARRANTIES............................................................11
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................11
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT......................................................23
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................................25
ARTICLE IV.COVENANTS RELATING TO CONDUCT OF BUSINESS..................................................26
4.1 COVENANTS OF THE COMPANY......................................................................26
4.2 COVENANTS OF PARENT AND MERGER SUB............................................................29
4.3 ADVICE OF CHANGES; GOVERNMENT FILINGS.........................................................29
ARTICLE V.ADDITIONAL AGREEMENTS.......................................................................30
5.1 RECOMMENDATION; PREPARATION OF PROXY STATEMENT; THE COMPANY STOCKHOLDERS MEETING..............30
5.2 ACCESS TO INFORMATION.........................................................................31
5.3 APPROVALS AND CONSENTS; COOPERATION...........................................................31
5.4 TRANSACTION PROPOSALS.........................................................................32
5.5 EMPLOYEE BENEFITS.............................................................................34
5.6 FEES AND EXPENSES.............................................................................35
5.7 INDEMNIFICATION; DIRECTORS'AND OFFICERS'INSURANCE.............................................35
5.8 PUBLIC ANNOUNCEMENTS..........................................................................36
5.9 TAKEOVER STATUTES.............................................................................36
5.10 RIGHTS AGREEMENT..............................................................................37
5.11 PERFORMANCE BY MERGER SUB.....................................................................37
5.12 RESIGNATION OF DIRECTORS......................................................................37
5.13 FURTHER ASSURANCES............................................................................37
ARTICLE VI.CONDITIONS PRECEDENT.......................................................................37
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER....................................37
ARTICLE VII.TERMINATION AND AMENDMENT.................................................................38
7.1 TERMINATION...................................................................................38
7.2 EFFECT OF TERMINATION.........................................................................40
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
7.3 AMENDMENT.....................................................................................40
7.4 EXTENSION; WAIVER.............................................................................41
ARTICLE VIII.GENERAL PROVISIONS.......................................................................41
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER REPRESENTATIONS AND
WARRANTIES....................................................................................41
8.2 NOTICES.......................................................................................41
8.3 INTERPRETATION................................................................................42
8.4 COUNTERPARTS..................................................................................43
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES................................................43
8.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.............................................43
8.7 SEVERABILITY..................................................................................44
8.8 ASSIGNMENT....................................................................................44
8.9 ENFORCEMENT...................................................................................45
8.10 DEFINITIONS...................................................................................45
</TABLE>
ii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
<S> <C>
Agreement...............................................................Preamble
Board of Directors...............................................Section 8.10(a)
Business Day.....................................................Section 8.10(b)
Certificate of Merger................................................Section 2.3
Certificates......................................................Section 2.9(b)
Closing..............................................................Section 2.2
Closing Date.........................................................Section 2.2
Code..............................................................Section 3.1(i)
Company.................................................................Preamble
Company Assets....................................................Section 3.1(v)
Company Benefit Plans..........................................Section 3.1(m)(i)
Company Board...........................................................Recitals
Company Common Stock....................................................Recitals
Company Disclosure Schedule..........................................Section 3.1
Company Equity Plans..............................................Section 2.8(d)
Company Material Contracts........................................Section 3.1(l)
Company Permits...................................................Section 3.1(g)
Company Options...................................................Section 2.8(d)
Company Rights Agreement ......................................Section 3.1(c)(i)
Company SEC Reports............................................Section 3.1(e)(i)
Company Stockholders Meeting......................................Section 5.1(a)
Company Voting Debt..........................................Section 3.1(c)(iii)
Confidentiality Agreement ...........................................Section 5.2
Consolidated Group................................................Section 3.1(i)
Continuing Directors..............................................Section 1.4(c)
D&O Insurance........................................................Section 5.7
Delaware Secretary of State..........................................Section 2.3
DGCL....................................................................Recitals
Dissenting Shares ................................................Section 2.9(h)
Effective Time.......................................................Section 2.3
Environmental Claim.......................................Section 3.1(o)(vii)(A)
Environmental Laws........................................Section 3.1(o)(vii)(B)
Environmental Permits.........................................Section 3.1(o)(ii)
EQSPP.............................................................Section 2.8(d)
ERISA..........................................................Section 3.1(m)(i)
Exchange Act.................................................Section 3.1(d)(iii)
Exchange Agent....................................................Section 2.9(a)
Expenses.............................................................Section 5.6
Extension Conditions..............................................Section 7.1(b)
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
GAAP...........................................................Section 3.1(e)(i)
Governmental Entity..........................................Section 3.1(d)(iii)
Hazardous Materials.......................................Section 3.1(o)(vii)(C)
HSR Act......................................................Section 3.1(d)(iii)
Indemnified Party....................................................Section 5.7
Injunction...............................................................Annex A
Intellectual Property ...........................................Section 8.10(c)
Issue Right.......................................................Section 2.8(e)
Knowledge........................................................Section 8.10(d)
Liens.........................................................Section 3.1(c)(ii)
Material Adverse Effect..........................................Section 8.10(e)
Material Subsidiaries ...........................................Section 8.10(f)
Merger..................................................................Recitals
Merger Consideration..............................................Section 2.8(c)
Merger Sub..............................................................Preamble
Minimum Condition.................................................Section 1.1(a)
Minimum Shares....................................................Section 1.1(a)
NYSE.........................................................Section 3.1(d)(iii)
Offer...................................................................Recitals
Offer Documents...................................................Section 1.2(a)
Order....................................................................Annex A
Organizational Documents.........................................Section 8.10(g)
Outside Date......................................................Section 7.1(b)
Parent..................................................................Preamble
Parent Representatives ..............................................Section 5.2
Payment Fund .....................................................Section 2.9(a)
Person...........................................................Section 8.10(h)
Premium Limit........................................................Section 5.7
Price Per Share.........................................................Recitals
Proxy Statement................................................Section 3.1(f)(i)
Release...................................................Section 3.1(o)(vii)(D)
Required Company Vote.............................................Section 3.1(k)
Required Consents................................................Section 8.10(i)
Required Regulatory Approvals.....................................Section 6.1(d)
Rights Amendment....................................................Section 5.10
Schedule 14D-1....................................................Section 1.2(a)
Schedule 14D-9....................................................Section 1.2(b)
SEC...............................................................Section 1.1(b)
Securities Act................................................Section 3.1(c)(iv)
Subsidiary.......................................................Section 8.10(j)
Surviving Corporation................................................Section 2.1
Surviving Corporation Common Stock................................Section 2.8(a)
Takeover Statute.....................................................Section 5.9
Tax...........................................................Section 8.10(k)(i)
Taxable.......................................................Section 8.10(k)(i)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Taxes.........................................................Section 8.10(k)(i)
Tax Return...................................................Section 8.10(k)(ii)
Terminating Company Breach........................................Section 7.1(h)
Terminating Parent Breach.........................................Section 7.1(i)
the other party..................................................Section 8.10(l)
Transaction Proposal.................................................Section 5.4
Violation.....................................................Section 3.1(d)(ii)
</TABLE>
v
<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated as of June 28, 1999
(this "AGREEMENT"), by and among ATLAS COPCO NORTH AMERICA INC., a Delaware
corporation ("PARENT"), PANDION ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), and RENTAL SERVICE
CORPORATION, a Delaware corporation (the "COMPANY").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company each have approved the acquisition of the Company by Parent upon
the terms and subject to the conditions of this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to
cause Merger Sub to commence a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "OFFER") to purchase all of the
issued and outstanding shares of the common stock, par value $.01 per share, of
the Company ("COMPANY COMMON STOCK") at a price per share of Company Common
Stock of $29.00 net to the seller in cash (such price, as it may be increased in
accordance with the terms of this Agreement, the "PRICE PER SHARE") upon the
terms and conditions set forth in this Agreement, including ANNEX A hereto;
WHEREAS, Atlas Copco AB, a corporation formed and organized under
the laws of the Kingdom of Sweden ("Atlas Copco AB"), has agreed to guaranty,
pursuant to an instrument of even date herewith, the performance by Parent and
Merger Sub of their respective obligations under this Agreement.
WHEREAS, in order to complete such acquisition, the respective
Boards of Directors of Parent, Merger Sub and the Company have approved the
merger of Merger Sub with and into the Company (the "MERGER"), upon the terms
and subject to the conditions of this Agreement and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"), whereby each
issued and outstanding share of Company Common Stock not owned directly or
indirectly by Parent, Merger Sub or the Company will be converted into the right
to receive the Price Per Share;
WHEREAS, the Board of Directors of the Company (the "COMPANY
BOARD") has approved this Agreement, the Offer and the Merger, has determined
that the Offer and the Merger are fair to and in the best interests of the
Company's stockholders, has declared this Agreement and the adoption of this
Agreement advisable and is recommending that the Company's stockholders accept
the Offer, tender their shares of Company Common Stock thereunder and adopt this
Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
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NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
THE TENDER OFFER
1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article VII, then (i) not later than the first
Business Day after execution of this Agreement, Parent and the Company shall
issue separate public announcements regarding the execution of this Agreement
and (ii) Merger Sub shall, as soon as practicable, but in no event later than
five Business Days from and after the date of such announcement, including the
date of announcement as the first Business Day in accordance with Rule 14d-2
under the Exchange Act, commence (within the meaning of Rule 14d-2(a) of the
Exchange Act) the Offer to purchase all of the outstanding shares of Company
Common Stock at the Price Per Share. The initial expiration date of the Offer
shall be the twentieth Business Day from and after the date the Offer is
commenced, including the date of commencement as the first Business Day in
accordance with Rule 14d-2 under the Exchange Act. The Offer shall be made
pursuant to an Offer to Purchase and related Letter of Transmittal in form
reasonably satisfactory to the Company and containing terms and conditions set
forth in this Agreement. The obligation of Merger Sub to accept for payment and
pay for shares of Company Common Stock tendered pursuant to the Offer shall be
subject only to (i) there being at least that number of shares of Company Common
Stock representing a majority of the total issued and outstanding shares of
Common Stock on a fully diluted basis on the date such shares are purchased
pursuant to the Offer (the "MINIMUM SHARES") validly tendered and not withdrawn
prior to the expiration of the Offer (the "MINIMUM CONDITION") and (ii) the
satisfaction of the other conditions set forth in Annex A hereto, any of which
conditions may be waived by Merger Sub in its sole discretion; PROVIDED,
HOWEVER, that Merger Sub shall not waive the Minimum Condition without the prior
written consent of the Company. The Company agrees that no shares of Company
Common Stock held by the Company or any of its Subsidiaries will be tendered to
Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither
Parent nor Merger Sub will (i) decrease the Price Per Share payable in the
Offer, (ii) decrease the number of shares of Company Common Stock sought
pursuant to the Offer or change the form of consideration payable in the Offer,
(iii) change or amend the conditions to the Offer set forth in ANNEX A hereto or
impose additional conditions to the Offer, (iv) change the expiration date of
the Offer or (v) otherwise amend, add or waive any term or condition of the
Offer in any manner adverse to the holders of shares of Company Common Stock;
PROVIDED, HOWEVER, that if on any scheduled expiration date of the Offer any
conditions to the Offer have not been satisfied or waived, Merger Sub may, and
at the request of the Company shall, from time to time, extend the expiration
date of the Offer for up to 5 additional Business Days (but in no event shall
Merger
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Sub be required to extend the expiration date of the Offer beyond the 120th
day following commencement of the Offer unless the Offer is on or after such
date being extended due to an event described in subsection (a) of Annex A,
in which case the Offer may be required by the Company to be extended to the
180th day following commencement of the Offer); and PROVIDED FURTHER that
Merger Sub may (x) without the consent of the Company, extend the Offer for
any period required by any applicable law, including, without limitation, any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") applicable to the Offer and (y) a one-time extension
of the Offer if (1) the conditions to the Offer shall have been satisfied or
waived and (2) the number of shares of Company Common Stock that have been
validly tendered and not withdrawn represent more than 50% but less than 90%
of the total issued and outstanding shares of Company Common Stock on a fully
diluted basis; PROVIDED, HOWEVER, that in no event shall the extension
permitted under the foregoing clause (y) exceed, in the aggregate, 10
Business Days. Notwithstanding anything to the contrary in this Agreement,
Parent may extend the Offer during (but only to the end of) the period in
which the Company is attempting to cure a breach pursuant to Section 7.1(h).
Parent and Merger Sub will, subject to the terms and conditions of this
Agreement, use their best efforts to consummate the Offer. Assuming the
prior satisfaction or waiver of all the conditions to the Offer set forth in
ANNEX A hereto, and subject to the terms and conditions of this Agreement,
Merger Sub shall, and Parent shall cause Merger Sub to, accept for payment
and pay for, in accordance with the terms of the Offer, all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer as soon
as permitted under applicable law, recognizing that the parties wish to close
as expeditiously as possible following expiration or termination of the
waiting period under the HSR Act. Parent shall provide, or cause to be
provided, to Merger Sub, on a timely basis, the funds necessary to purchase
any shares of Company Common Stock that Merger Sub becomes obligated to
purchase pursuant to the Offer.
1.2 SEC FILINGS.
(a) As soon as reasonably practicable on the commencement
date of the Offer, Parent and Merger Sub shall file with the SEC, with respect
to the Offer, a Tender Offer Statement on Schedule 14D-1 (as amended from time
to time, the "SCHEDULE 14D-1"). The Schedule 14D-1 will comply as to form and
content in all material respects with the applicable provisions of the federal
securities laws and will contain or incorporate by reference the Offer to
Purchase, the related Letter of Transmittal and other ancillary documents and
agreements pursuant to which the Offer will be made (the Schedule 14D-1, the
Offer to Purchase, the Letter of Transmittal and such other documents being
collectively referred to herein as the "OFFER DOCUMENTS"). The Company and its
outside legal counsel shall be given a reasonable opportunity to review and
comment upon the Offer Documents and any amendment or supplement thereto prior
to the filing thereof with the SEC, and Parent and Merger Sub shall consider
such comments in good faith. Parent and Merger Sub agree to provide to the
Company and its outside legal counsel any comments which Parent, Merger Sub or
their counsel may receive from the Staff of the SEC with respect to the Offer
Documents promptly after receipt thereof and consult in good faith with the
Company and its outside legal counsel with respect thereto. Parent, Merger Sub
and the Company agree to correct promptly any information provided by any of
them for use in the Offer Documents which shall have become misleading in
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any material respect, and Parent and Merger Sub further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and disseminated to the Company's stockholders, in each case as and
to the extent required by the applicable provisions of the federal securities
laws.
(b) Upon commencement of the Offer, the Company shall
promptly file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (as amended from time to time, the "SCHEDULE 14D-9") containing the
recommendation of the Company Board described in Section 5.1(a) (subject to the
right of the Company Board to fail to make, withdraw or modify such
recommendation and/or its declaration of advisability in accordance with the
terms of this Agreement, including but not limited to, Section 5.4). The
Schedule 14D-9 will comply as to form and content in all material respects with
the applicable provisions of the federal securities laws. The Company will use
its reasonable best efforts to cause the Schedule 14D-9 to be filed with the SEC
on the same date that the Schedule 14D-1 is filed with the SEC; PROVIDED,
HOWEVER, that in any event the Schedule 14D-9 will be filed no later than five
Business Days following the commencement date of the Offer. The Company will
cooperate with Parent and Merger Sub in mailing or otherwise disseminating the
Schedule 14D-9 with the appropriate Offer Documents to the stockholders of the
Company. Parent and its outside legal counsel shall be given a reasonable
opportunity to review and comment upon the Schedule 14D-9 and any amendment or
supplement thereto prior to the filing thereof with the SEC, and the Company
shall consider any such comments in good faith. The Company agrees to provide
to Parent and Merger Sub and their outside legal counsel any comments which the
Company or its outside legal counsel may receive from the Staff of the SEC with
respect to the Schedule 14D-9 promptly after receipt thereof and consult in good
faith with Parent and its outside legal counsel with respect thereto. The
Company, Parent and Merger Sub agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause such Schedule 14D-9 as so corrected to be filed with
the SEC and disseminated to the Company's stockholders, in each case as and to
the extent required by the applicable provisions of the federal securities laws.
Parent, Merger Sub and the Company each hereby agree to provide promptly such
information necessary to the preparation of the Schedule 14D-9 and the Offer
Documents, including, without limitation, the exhibits and schedules thereto,
which the respective party responsible therefor shall reasonably request.
1.3 COMPANY ACTION. Promptly upon execution of this Agreement and in
connection with the Offer, the Company shall furnish Merger Sub with such
information (including a list of the stockholders of the Company, mailing labels
and a list of securities positions, each as of a recent date), and shall
thereafter render such assistance, as Parent or Merger Sub may reasonably
request in communicating the Offer to the Company's stockholders. Subject to
the requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Merger Sub and each of their respective affiliates and
associates shall (a) hold in confidence the information contained in any of such
labels and lists, (b) use such information only in connection with the Offer and
the Merger and (c) if this Agreement is terminated and at the written request of
the Company, promptly deliver to the Company all such information (written,
electronic or as otherwise
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embodied) and destroy all copies, extracts, compilations or derivations
thereof then in their possession or that of their representatives.
1.4 COMPOSITION OF THE COMPANY BOARD.
(a) Promptly upon the acceptance for payment of, and payment
by Merger Sub in accordance with the Offer for, not less than a majority of the
total issued and outstanding shares of Company Common Stock on a fully diluted
basis pursuant to the Offer, Merger Sub shall be entitled to designate such
number of members of the Company Board, rounded up to the next whole number,
equal to that number of directors which equals the product of the total number
of directors on the Company Board (giving effect, if applicable, to (i) the
number of newly created directorships if the size of the Company Board is
increased pursuant to this Section 1.4(a) and (ii) the number of vacancies if
the resignation of any directors is secured pursuant to this Section 1.4(a))
multiplied by the percentage that such number of shares of Company Common Stock
then owned beneficially or of record in the aggregate by Merger Sub or Parent of
the total issued and outstanding shares of Company Common Stock on a fully
diluted basis; PROVIDED, HOWEVER, that until the Effective Time there shall be
at least two Continuing Directors serving as directors of the Company and Parent
and Merger Sub shall use their best efforts to ensure that at least two
Continuing Directors serve as directors of the Company until the Effective Time.
Upon the written request of Merger Sub, the Company shall, on the date of such
request, either increase the size of the Company Board or use its reasonable
efforts to secure the resignations of such number of its incumbent directors as
is necessary to enable Merger Sub's designees to be so elected to the Company
Board.
(b) The Company's obligations under this Section 1.4 shall be
subject to Section 14(f) of the Exchange Act and Rule l4f-1 promulgated
thereunder. The Company shall, at its sole expense, promptly take all actions
required pursuant to Section 14(f) of the Exchange Act and Rule l4f-1
promulgated thereunder in order to fulfill its obligations under this
Section 1.4, and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Parent
and Merger Sub will supply to the Company in writing and be solely responsible
for any information with respect to any of them and their nominees, officers,
directors and affiliates as may be required by Section 14(f) of the Exchange Act
and Rule l4f-1 promulgated thereunder and applicable rules and regulations.
(c) After the time that Merger Sub's designees constitute at
least a majority of the Company Board and until the Effective Time, any
(i) amendment or termination of this Agreement, (ii) amendment to the
Organizational Documents of the Company, (iii) extension of time for the
performance or waiver of the obligations or other acts of Parent or Merger Sub
or waiver of the Company's rights hereunder or (iv) action by the Company with
respect to this Agreement and the transactions contemplated hereby which
materially and adversely affects the interests of the stockholders of the
Company, shall require, in addition to any other affirmative vote required under
the DGCL, the affirmative vote of not less than a majority of (1) the entire
Company Board, which majority shall include the concurrence of a majority of the
Continuing Directors or (2) to the extent permitted under the DGCL, a committee
of the Company Board
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consisting of only Continuing Directors; PROVIDED, HOWEVER, that if the
foregoing provisions of this subsection (c) relating to the concurrence of a
majority of Continuing Directors or approval by a committee consisting of
Continuing Directors are invalid or incapable of being enforced under
applicable law, then neither Parent nor Merger Sub shall approve (either in
its capacity as a stockholder or as a party to this Agreement, as
applicable), and Parent and Merger Sub shall use their reasonable efforts to
prevent the occurrence of, any of the actions referred to in clauses (i) to
(iv) above unless such actions shall have received the unanimous approval of
the entire Company Board. For purposes of this Section 1.4, the term
"CONTINUING DIRECTORS" shall mean any directors of the Company then serving,
if any, who are directors as of the date hereof. If there is more than one
Continuing Director and prior to the Effective Time, the number of Continuing
Directors is reduced for any reason, the remaining Continuing Director or
Directors shall be entitled to designate persons to fill such vacancies who
shall be deemed Continuing Directors for purposes of this Agreement, and the
Company, Parent and Merger Sub shall, upon such designation, cause such
designee(s) to be so elected. In the event there is only one Continuing
Director and he or she resigns or is removed or if all Continuing Directors
resign or are removed, he, she or they, as applicable, shall be entitled to
designate his, her or their successors, as the case may be, each of whom
shall be deemed a Continuing Director for purposes of this Agreement, and the
Company, Parent and Merger Sub shall, upon such designation, cause such
designee(s) to be so elected. The Company Board shall not delegate any
matter set forth in this Section 1.4 to any committee of the Company Board
unless such committee consists only of Continuing Directors.
ARTICLE II.
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, as soon as practicable
following completion of the Offer, Merger Sub shall be merged with and into the
Company. Following the Merger, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation and as
a wholly-owned subsidiary of Parent (the "SURVIVING CORPORATION").
2.2 CLOSING. The closing of the Merger (the "CLOSING") will take
place two business days after satisfaction or waiver (as permitted by this
Agreement and applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article VI
(the "CLOSING DATE"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Winthrop, Stimson,
Putnam & Roberts, One Battery Park Plaza, New York, New York 10004-1490, unless
another place is agreed to in writing by the parties hereto.
2.3 EFFECTIVE TIME. Upon the Closing, the parties shall file with
the Secretary of State of the State of Delaware (the "DELAWARE SECRETARY OF
STATE") either (i) a certificate of merger or other appropriate documents, in
form and substance satisfactory to the Company and Parent, or (ii) in the event
Merger Sub shall have acquired (through the Offer or otherwise) 90% or more of
the outstanding shares of Company Common Stock (and Parent agrees to contribute
shares of Company Common Stock owned by Parent to Merger Sub for such purpose),
a
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certificate of ownership and merger (in either such case, the "CERTIFICATE OF
MERGER") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings, recordings or publications required under the
DGCL in connection with the Merger. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such time as the parties may agree and specify in
the Certificate of Merger (the time the Merger becomes effective being herein
referred to as the "EFFECTIVE TIME").
2.4 EFFECTS OF THE MERGER. At and after the Effective Time, the
Merger will have the effects set forth in Section 259 of the DGCL.
2.5 CERTIFICATE OF INCORPORATION. At the Effective Time and without
any further action on the part of the Company or Merger Sub, the certificate of
incorporation of the Company shall be amended in its entirety to read as the
certificate of incorporation of Merger Sub reads as in effect immediately prior
to the Effective Time and, as so amended, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, provided that such certificate of
incorporation shall be amended to reflect "Rental Service Corporation" as the
name of the Surviving Corporation.
2.6 BYLAWS. At the Effective Time and without any further action on
the part of the Company or Merger Sub, the bylaws of the Company shall be
amended in their entirety to read as the bylaws of Merger Sub read as in effect
immediately prior to the Effective Time and, as so amended, shall be the bylaws
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
2.7 OFFICERS AND DIRECTORS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be a director or until their respective successors are duly elected
and qualified, as the case may be. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be.
2.8 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holder of any shares of Company Common Stock or any shares of capital
stock of Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding
share of capital stock of Merger Sub shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation ("SURVIVING CORPORATION COMMON STOCK"). Each
certificate that prior to the Effective Time represented one (1) or more shares
of capital stock of Merger Sub shall thereafter represent that number of shares
of Surviving Corporation Common Stock into which the shares of capital stock of
Merger Sub theretofore represented by such certificate shall have been
converted; PROVIDED, HOWEVER, that each record holder of a certificate or
certificates that prior to the Effective Time represented one (1) or more shares
of capital stock of Merger Sub shall receive, upon surrender of such certificate
or certificates, a new certificate or certificates evidencing and representing
the number of shares
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of Surviving Corporation Common Stock to which such record holder shall be
entitled pursuant to the foregoing conversion.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
Each share of Company Common Stock that is owned by the Company or by any wholly
owned Subsidiary of the Company or by Parent, Merger Sub or any other wholly
owned Subsidiary of Parent shall automatically be retired (subject to the
certificate of incorporation of Merger Sub) and shall cease to be outstanding,
and no cash or other consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to
Section 2.9(h), at the Effective Time each issued and outstanding share of
Company Common Stock (other than shares of Company Common Stock to be retired in
accordance with Section 2.8(b)), whether or not then vested or subject to a
repurchase option in favor of the Company, shall be converted into the right to
receive $29.00 in cash, without interest (the "MERGER CONSIDERATION"). As of
the Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be retired (subject to the certificate of
incorporation of Merger Sub) and shall cease to be outstanding, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive upon
the surrender of such certificates, the Merger Consideration.
(d) STOCK OPTIONS AND RESTRICTED STOCK. At the Effective
Time, each unexpired and unexercised outstanding option, whether or not then
vested or exercisable in accordance with its terms, to purchase shares of
Company Common Stock (the "COMPANY OPTIONS") previously granted by the Company
or its Subsidiaries under any plan, agreement or arrangement (collectively, the
"COMPANY EQUITY PLANS") shall be automatically converted into the right to
receive from Parent, at the Effective Time, cash in an amount equal to the
product of (i) the Merger Consideration minus the exercise price per share under
such Company Option, times (ii) the number of shares of Common Stock which may
be purchased upon exercise of such Company Option (whether or not then
exercisable or vested), less any required withholding, and thereupon each
Company Option shall terminate and each holder thereof shall have no further
rights to any Company Common Stock. Prior to the Effective Time, the Company
will take all action necessary to (A) shorten the offering period under the
Company's Employee Qualified Stock Purchase Plan (the "EQSPP") in which the
Effective Time occurs so that such offering period terminates on the day prior
to the Effective Time, and (B) terminate the EQSPP effective as of the Effective
Time. Immediately prior to the Effective Time, the restrictions on all shares
of restricted Company Common Stock shall lapse and each such share of restricted
stock shall be fully vested and, at the Effective Time, shall be subject to
conversion pursuant to Section 2.8(c) into the right to receive the Merger
Consideration, less any applicable withholding thereon. Prior to or at the
Effective Time, the Company will adopt such resolutions or take such actions as
are necessary, subject if necessary to obtaining consents of holders thereof, to
carry out the terms of this Section 2.8(d).
(e) RIGHTS TO ACQUIRE COMPANY COMMON STOCK. At the Effective
Time, each right of a person to be issued Company Common Stock, whether or not
then vested or otherwise matured, previously granted by the Company in
connection with an acquisition (an "ISSUE
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RIGHT"), shall be automatically converted into the right to receive from
Parent, at the Effective Time, cash in an amount equal to the product of (i)
the Merger Consideration, times (ii) the number of shares of Company Common
Stock issuable pursuant to such Issue Right.
2.9 SURRENDER AND PAYMENT.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent
shall designate a bank or trust company reasonably acceptable to the Company to
act as agent (the "EXCHANGE AGENT") for the holders of shares of Company Common
Stock, Company Options and Issue Rights in connection with the Merger and the
payment of the Merger Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to Section 2.8. Prior to the filing of the
Certificate of Merger with the Delaware Secretary of State, Parent or Merger Sub
shall deposit with the Exchange Agent cash in an aggregate amount equal to the
product of (i) the number of shares of Company Common Stock issued and
outstanding (and not to be retired pursuant to Section 2.8(b)) immediately prior
to the Effective Time, multiplied by (ii) the Merger Consideration (plus an
additional amount as required to cash out Company Options pursuant to Section
2.8(d) and Issue Rights pursuant to Section 2.8(e)). The deposit made by Parent
or Merger Sub pursuant to the preceding sentence is hereinafter referred to as
the "PAYMENT FUND." The Exchange Agent shall cause the Payment Fund to be
(i) held for the benefit of the holders of Company Common Stock and
(ii) promptly applied to making the payments provided for in Section 2.8(c).
The Payment Fund shall not be used for any purpose that is not provided for
herein.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall provide to each holder of
record of a certificate or certificates or other instrument or instruments (the
"CERTIFICATES") which immediately prior to the Effective Time represented issued
and outstanding shares of Company Common Stock (other than shares to be retired
in accordance with Section 2.8(b)), (i) a Letter of Transmittal (which shall be
upon customary terms and may specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent, together
with such Letter of Transmittal, duly executed in accordance with the Letter of
Transmittal and the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the Exchange Agent shall pay the
holder of such Certificate the Merger Consideration in respect of such
Certificate, and the Certificate so surrendered shall forthwith be retired and
shall cease to exist. If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the shares of Company Common
Stock represented by the Certificate or Certificates surrendered in exchange
therefor, it shall be a condition to such payment that the Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such shares or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable. Until surrendered as contemplated by this Section 2.9, each
Certificate (other than Certificates representing Dissenting Shares or shares of
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Company Common Stock to be retired pursuant to Section 2.8(b)) shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration upon such surrender.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Merger Consideration paid upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares of Company Common
Stock theretofore represented by such Certificates. At and after the Effective
Time, there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of shares of Company Common Stock. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II, except as otherwise provided by law.
(d) UNCLAIMED FUNDS. Any portion of the Payment Fund made
available to the Exchange Agent pursuant to Section 2.9(a) that remains
unclaimed by holders of Certificates for 180 days after the Effective Time of
the Merger shall be delivered to Parent, upon demand, and any holders of
Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of the Merger Consideration.
(e) NO LIABILITY. None of Parent, Merger Sub, the Company or
the Exchange Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) INVESTMENT OF FUNDS. The Payment Fund shall be invested
by the Exchange Agent in obligations of, or guaranteed by, the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investor Services, Inc. or Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies Inc., respectively, in each case with maturities not
exceeding six months. All earnings thereon shall inure to the benefit of
Parent.
(g) LOST CERTIFICATES. In the event that any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed before the Company has notice that the Certificate has been acquired
by a protected purchaser (as that term is defined in Section 8-303 of the
Delaware Uniform Commercial Code), and, if required by Parent, the posting by
such Person of a bond in such reasonable amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate or the payment of the Merger Consideration, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration with respect to such Certificate to which such Person is entitled
pursuant hereto.
(h) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such shares in accordance with the DGCL (the "DISSENTING SHARES"),
shall not be converted into the right to receive the Merger Consideration,
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unless such holder fails to perfect or withdraws or otherwise loses its right
to appraisal. If, after the Effective Time, such holder fails to perfect or
withdraws or otherwise loses its right to appraisal, such shares of Company
Common Stock shall be treated as if they had been converted as of the
Effective Time into a right to receive the Merger Consideration. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of shares of Company Common Stock, and Parent shall have the right
to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
Parent or upon the entry of a final judgment by a court of competent
jurisdiction, make any payment with respect to, or settle or offer to settle,
any such demands.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the Company Disclosure Schedule delivered by the Company to Parent at
or prior to the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE")
or the Company SEC Reports, the Company represents and warrants to Parent and
Merger Sub as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company
and its Material Subsidiaries has been duly incorporated and is validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
requisite corporate power and authority to carry on its business as presently
conducted. Each of the Company and its Material Subsidiaries is duly qualified
and in good standing or otherwise authorized to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except where the failure to so
qualify could not reasonably be expected to have a Material Adverse Effect on
the Company or materially impair or delay the ability of the Company to
consummate the transactions contemplated hereby. The copies of the
Organizational Documents of the Company which were previously furnished or made
available to Parent are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(b) SUBSIDIARIES; INVESTMENTS. Section 3.1(b) of the Company
Disclosure Schedule sets forth the name, jurisdiction of incorporation,
authorized capitalization and share ownership of each direct or indirect
Subsidiary of the Company. Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, greater
than 4.9% of any capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest, including interests in
partnerships and joint ventures, in any business. There are no outstanding
options, warrants or other rights of any kind to acquire any additional shares
of capital stock of any Subsidiary or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares, nor is any Subsidiary committed to issue
any such option, warrant, right or security.
(c) CAPITAL STRUCTURE.
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(i) As of the date of this Agreement, the
authorized capital stock of the Company consists of (A) 40,000,000
shares of Company Common Stock, of which 24,271,458 shares are issued
and outstanding (including 177,238 shares of Company Common Stock issued
and outstanding and held in escrow by third party escrow agents for
release to other third parties, pursuant to acquisitions by the Company
or its Subsidiaries), and (B) 500,000 shares of preferred stock, par
value $.01 per share, of which no shares are issued and outstanding.
There are no shares of Preferred Stock issued and outstanding or in the
treasury of Company and no shares of Company Common Stock held in the
treasury of the Company. Except as set forth in Section 3.1(c) of the
Company Disclosure Schedule, no shares of capital stock or other equity
securities of the Company are issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company
are, and all shares which may be issued pursuant to the Company Equity
Plans will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. All issued and
outstanding shares of the capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, and no class
of capital stock is entitled to preemptive rights. As of the date of
this Agreement, there are no outstanding options, warrants or other
rights to acquire capital stock from the Company other than (1) rights
issued pursuant to the Rights Agreement, dated April 16, 1999, as
amended, between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "COMPANY RIGHTS AGREEMENT"), (2) options
representing in the aggregate the right to purchase 1,932,543 shares of
Company Common Stock under the Company Equity Plans, (3) Issue Rights to
acquire 228,992 shares of Company Common Stock and (4) rights to
purchase approximately 27,000 shares of Company Common Stock pursuant to
the EQSPP on or about July 6, 1999.
(ii) All of the issued and outstanding shares
of capital stock of the Company's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and are owned by the
Company, free and clear of any liens, claims, encumbrances,
restrictions, preemptive rights or any other claims of any third party
("LIENS"), other than restrictions on transfer under federal or state
securities laws.
(iii) As of the date of this Agreement, no
bonds, debentures, notes or other indebtedness of the Company having the
right to vote on any matters on which stockholders may vote ("COMPANY
VOTING DEBT") are issued or outstanding.
(iv) Except as otherwise set forth in this
Section 3.1(c), as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or its
Material Subsidiaries is a party or by which any of them is bound
obligating the Company or any Material Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or such Material
Subsidiary or obligating the Company or such Material Subsidiary to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. As of
the date of this
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Agreement, there are no outstanding obligations of the Company or any
Material Subsidiary to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or such Material Subsidiary.
There are no irrevocable proxies with respect to shares of capital
stock of the Company registered with the Company. Except as set
forth in the Company Disclosure Schedule, there are no agreements or
arrangements pursuant to which the Company is or could be required to
register shares of Company Common Stock or other securities under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
(d) AUTHORITY; NO CONFLICTS.
(i) The Company has all requisite corporate
power and corporate authority to enter into this Agreement and, subject
to the adoption of this Agreement and approval of the Merger by the
requisite vote of the holders of Company Common Stock, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of the Company, subject in the case of the consummation of the Merger to
the adoption of this Agreement by the requisite vote of the stockholders
of the Company, if required. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(ii) The execution and delivery of this
Agreement does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right of
consent, termination, amendment, cancellation or acceleration of or "put
right" with respect to any obligation or the loss of a material benefit
under, or the creation of a Lien on any assets (any such conflict,
violation, default, right of consent, termination, amendment,
cancellation or acceleration, loss or creation, a "VIOLATION") pursuant
to: (A) any provision of the Organizational Documents of the Company or
any of its Material Subsidiaries or (B) except as could not reasonably
be expected to have a Material Adverse Effect on the Company or
materially impair or delay the ability of the Company to consummate the
transactions contemplated hereby and, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, the Company's Material
Subsidiaries or their respective properties or assets, other than any
required consents of landlords.
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(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, any
supranational, national, state, municipal or local government, any
instrumentality, subdivision, court, administrative agency or commission
or other authority thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY"), is required by
or with respect to the Company or any Material Subsidiary in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby,
except for (x) those required under or in relation to (A) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), (B) the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), (C) the DGCL with respect to the filing and recordation
of appropriate merger or other documents, including the Certificate of
Merger, (D) rules and regulations of the New York Stock Exchange
("NYSE"), and (E) antitrust or other competition laws of other
jurisdictions and (y) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain would not reasonably be expected to have a Material Adverse
Effect on the Company or materially impair or delay the ability of the
Company to consummate the transactions contemplated hereby.
(e) REPORTS AND FINANCIAL STATEMENTS.
(i) The Company has filed all required
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC with respect to periods commencing on and after
January 1, 1997 (collectively, including all exhibits thereto, the
"COMPANY SEC REPORTS"). None of the Company SEC Reports, as of their
respective dates (and, if amended or superseded by a filing prior to the
date of this Agreement or of the Closing Date, then on the date of such
filing), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading. Each of the financial statements
(including the related notes) included in the Company SEC Reports
presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the
Company and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with U.S.
generally accepted accounting principles ("GAAP") consistently applied
during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to
the absence of complete notes and normal year-end adjustments. All of
such Company SEC Reports, as of their respective dates (and as of the
date of any amendment to the respective Company SEC Report), complied as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as set forth in the Company SEC
Reports filed prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
since December 31, 1998, the Company does not have any
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liabilities or obligations of any nature required by GAAP to be set
forth on a consolidated balance sheet of the Company which would be
reasonably expected to have a Material Adverse Effect on the Company.
(f) INFORMATION SUPPLIED.
(i) None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in
(A) the proxy statement related to the Company Stockholders Meeting (the
"PROXY STATEMENT"), if applicable, (B) the Schedule 14D-9 or (C) the
Offer Documents will, at the respective times such documents are filed,
and, with respect to the Offer Documents and the Proxy Statement, if
any, when first published, sent or given to the stockholders of the
Company, contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they are made, not misleading or, in the case of the Offer
Documents and the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the Company Stockholders Meeting (as
defined below), if any, and at the Effective Time, contain an untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made,
not misleading or necessary to correct any statement in any earlier
communication with respect to the Offer or the solicitation of proxies
for the Company Stockholders Meeting, if any, which shall have become
misleading. The Proxy Statement, if any, and Schedule 14D-9 will comply
as to form in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the
SEC thereunder.
(ii) Notwithstanding the foregoing provisions
of this Section 3.1(e), no representation or warranty is made by the
Company with respect to statements made or incorporated by reference in
the Proxy Statement, if any, or Schedule 14D-9 based on information
supplied by Parent or Merger Sub for inclusion or incorporation by
reference therein.
(g) COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS. The
Company and its Material Subsidiaries hold in full force and effect all permits,
licenses, certificates, franchises, registrations, variances, exemptions, orders
and approvals of all Governmental Entities, except for those which the failure
to hold would not reasonably be expected to have a Material Adverse Effect upon
the Company (the "COMPANY PERMITS"). The Company and its Material Subsidiaries
are in compliance with the terms of the Company Permits, except where the
failure to comply would not reasonably be expected to have a Material Adverse
Effect on the Company. Other than any Company Permits which are ministerial in
nature or the absence of which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect on the Company, no Company
Permits will be required, as a result of the Merger or the other transactions
contemplated hereby, to be issued, re-issued or transferred in order to permit
the Company following the Merger to continue to operate its business. The
businesses of the Company and its Material Subsidiaries are not being and have
not been conducted in
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violation of any law, ordinance, regulation, judgment, decree, injunction,
rule or order of any Governmental Entity, except for violations which would
not reasonably be expected to have a Material Adverse Effect on the Company.
As of the date of this Agreement, no investigation by any Governmental Entity
with respect to the Company or any Material Subsidiary is pending or, to the
knowledge of the Company, threatened, other than investigations which would
not reasonably be expected to have a Material Adverse Effect on the Company.
(h) LITIGATION. There is no litigation, arbitration, claim,
suit, action, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any Material Subsidiary
which would reasonably be expected to have a Material Adverse Effect on the
Company, nor is there any judgment, award, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any
Material Subsidiary which would reasonably be expected to have a Material
Adverse Effect on the Company.
(i) TAX RETURNS AND TAX PAYMENTS. Except as disclosed in the
Disclosure Schedule, the Company and each of its Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which the
Company or any of its Subsidiaries is or has been a member (a "CONSOLIDATED
GROUP") has timely filed all Tax Returns required to be filed by it or caused
all such Tax Returns to be so filed with respect to any such Consolidated Group,
in material compliance with all applicable laws, and such Tax Returns are
complete and correct in all material respects, all Taxes shown thereon to be due
have timely been paid and adequate reserves have been provided in its financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any Tax Returns. Except as disclosed in the Disclosure Schedule: (i) no
material claim for unpaid Taxes has become a lien against the property of the
Company or any of its Subsidiaries or a member of any Consolidated Group or is
being asserted against the Company or any of its Subsidiaries or a member of any
Consolidated Group; (ii) no audit of any Tax Return of Company or any of its
Subsidiaries or a member of any Consolidated Group is pending, being conducted
or, to the knowledge of the Company, threatened by a Tax authority; (iii) no
extension of the statute of limitations on the assessment of any Taxes has been
granted by Company, any of its Subsidiaries or a member of any Consolidated
Group and is currently in effect; (iv) no consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") has been filed with
respect to the Company; (v) the Company and each of its Subsidiaries is not a
party to any agreement or arrangement that would result, separately or in the
aggregate, in the actual or deemed payment by the Company or any of its
Subsidiaries of any "excess parachute payments" within the meaning of Section
280G of the Code; (vi) the Company and each of its Subsidiaries is not a party
to any tax sharing or allocation agreement, nor has it given any indemnity
against Taxes imposed on any other Person, that has not expired by its terms or
otherwise have been terminated and for which no amount is claimed to be owed;
(vii) the Company and each of its Subsidiaries has not been a United States real
property holding corporation with the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(viii) the Company and each of its Subsidiaries is neither doing business in nor
engaged in a trade or business in any jurisdiction in which it has not filed all
required income or franchise tax returns; (ix) the Company and each of its
Subsidiaries has made all payments of estimated Taxes required to be made under
Section 6655
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of the Code and any comparable state, local or foreign Tax provision; (x) all
Taxes required to be withheld, collected or deposited by or with respect to
the Company and each of its Subsidiaries have been timely withheld, collected
or deposited, as the case may be, and, to the extent required, have been paid
to the relevant taxing authority; (xi) the Company and each of its
Subsidiaries has not issued or assumed (A) any obligations described in
Section 279(a) of the Code, (B) any applicable high yield discount
obligations, as defined in Section 163(i) of the Code, or (C) any
registration-required obligations, within the meaning of Section 163(f)(2) of
the Code, that are not in registered form; (xii) there are no written
requests for information currently outstanding that could affect the Taxes of
the Company or any of its Subsidiaries other than requests for information in
audits; and (xiii) there is no power of attorney currently in force with
respect to any matter relating to Taxes that could materially affect the Tax
liability of the Company or any of its Subsidiaries.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998 through the date of this Agreement, (A) each of the Company and the
Company's Material Subsidiaries has conducted its business in the ordinary
course and has not incurred any material liability, except in the ordinary
course of their respective businesses; and (B) there has not occurred or arisen
any event, condition or occurrence affecting the Company or its Material
Subsidiaries that has had, or would reasonably be expected to have, a Material
Adverse Effect on the Company.
(k) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock (the "REQUIRED
COMPANY VOTE") is the only vote of the holders of any class or series of the
Company capital stock necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby, and such vote is not necessary in the
event of a merger described in clause (ii) of Section 2.3.
(l) CERTAIN AGREEMENTS. All contracts listed as an exhibit
to the Company's Annual Report on Form 10-K under the rules and regulations of
the SEC relating to the business of the Company and its Subsidiaries, (the
"COMPANY MATERIAL CONTRACTS") are valid, enforceable and in full force and
effect except to the extent they have previously expired or been terminated in
accordance with their terms, and neither the Company nor its Subsidiaries has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time, or both, could reasonably be expected to
constitute a default under the provisions of, any such Company Material
Contract, except where the lack of validity, full force and effect,
enforceability or defaults could not reasonably be expected to have a Material
Adverse Effect on the Company. To the knowledge of the Company, no counterparty
to any such Company Material Contract has violated any provision of, or
committed or failed to perform any act which, with or without notice, lapse of
time, or both, could reasonably be expected to constitute a default or other
breach under the provisions of, such Company Material Contract, except for
defaults or breaches which would not reasonably be expected to have a Material
Adverse Effect on the Company.
(m) EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
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(i) With respect to each employee benefit plan
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and with respect to each other
material employee benefit plan, program, arrangement and contract
(including any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination,
change in control and severance plan, program, arrangement and
contract), to which the Company or any Material Subsidiary is a party,
which is maintained or contributed to by the Company or any Material
Subsidiary, or with respect to which the Company or any Material
Subsidiary could incur material liability under Section 4069, 4201 or
4212(c) of ERISA (the "COMPANY BENEFIT PLANS"), the Company has made
available to Parent a true and complete copy of such Company Benefit
Plans.
(ii) Each of the Company Benefit Plans that is
an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA and that is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the United
States Internal Revenue Service, and the Company is not aware of any
circumstances likely to result in the revocation of any such favorable
determination letter that would reasonably be expected to have a
Material Adverse Effect on the Company.
(iii) With respect to the Company Benefit Plans,
no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances, in connection with which the
Company or any Material Subsidiary could be subject to any liability
under the terms of such Company Benefit Plans, ERISA, the Code or any
other applicable law which would reasonably be expected to have a
Material Adverse Effect on the Company.
(iv) Neither of the Company nor any Material
Subsidiary is a party to any collective bargaining or other labor union
contracts and no collective bargaining agreement is being negotiated by
the Company or any Material Subsidiary. There is no pending labor
dispute, lock-out, strike or work stoppage against the Company or any
Material Subsidiary which may interfere with the respective business
activities of the Company or any Material Subsidiary, except where such
dispute, lock-out strike or work stoppage would not reasonably be
expected to have a Material Adverse Effect on the Company. There is no
pending charge or complaint against the Company or any Material
Subsidiary by the National Labor Relations Board or any comparable state
agency, except where such unfair labor practice, charge or complaint
would not reasonably be expected to have a Material Adverse Effect on
the Company. Except as set forth in the Company Disclosure Schedule,
there are no current union organizing activities among the employees of
the Company or of any Subsidiary. The execution of this Agreement and
the consummation of the transaction contemplated by this Agreement will
not result in a breach or other violation of any collective bargaining
agreement to which the Company or any Subsidiary is a party, except for
such breaches or violations which would reasonably be expected to have a
Material Adverse Effect upon the Company.
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(v) Set forth in Section 3.1(m)(v) of the
Company Disclosure Schedule is a list of all binding employment
contracts or severance agreements with employees of the Company or of
any Subsidiary which are not set forth in the Company SEC Reports.
(n) INTELLECTUAL PROPERTY. As used herein, "Material
Intellectual Property" means (A) the Company's mark "Rental Service Corporation"
and the related logo, a copy of which is set forth on Section 3.1(n) of the
Company Disclosure Schedule and (B) its rights with respect to the Master
Agreement dated August 31, 1994 among Wynne Systems, Inc. and ACME Acquisition
Corp.
(i) Except as would not be reasonably likely
to have a Material Adverse Effect upon the Company, the Company owns,
has the right to acquire, is licensed or otherwise has the right to use
(in each case, free and clear of all Liens) all the Material
Intellectual Property as it is used in its business as it is currently
conducted.
(ii) (A) Except as would not be reasonably
likely to have a Material Adverse Effect upon the Company, none of the
Material Intellectual Property of the Company is the subject of any
license, security interest or other agreement granting rights therein to
any third party; (B) no judgment, decree, injunction, rule or order has
been rendered by any U.S. or foreign Governmental Entity which would
limit, cancel or question the validity of, or the Company's rights in
and to any Material Intellectual Property in any respect that would
reasonably be expected to have individually or in the aggregate a
Material Adverse Effect with respect to the Company; and (C) the Company
has not received notice of any pending or threatened suit, action or
proceeding that seeks to limit, cancel or question the validity of, or
the Company's rights in and to any Material Intellectual Property,
which, if adversely determined, would reasonably be expected to have
individually or in the aggregate a Material Adverse Effect with respect
to the Company.
(iii) Except as would not be reasonably likely
to have a Material Adverse Effect upon the Company, to the knowledge of
the Company (A) no claims are pending or threatened that the Company or
any Material Subsidiary is infringing on or otherwise violating the
rights of any person with regard to any Material Intellectual Property,
and (B) no person is infringing on or otherwise violating any right of
the Company or any Material Subsidiary with respect to any Material
Intellectual Property owned by and/or licensed to the Company or any
Material Subsidiary.
(o) ENVIRONMENTAL PROTECTION.
(i) The Company and each of its Subsidiaries
is in compliance with all applicable Environmental Laws and neither it
nor any of its Subsidiaries has received any communication from any
person or Governmental Entity that alleges that it or any of its
Subsidiaries is not in compliance with applicable Environmental Laws,
except where any failure or alleged failure to be in such compliance
would not reasonably
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be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
(ii) The Company and each of its Subsidiaries
has obtained or has applied for all environmental, health and safety
permits and governmental authorizations (collectively, the
"ENVIRONMENTAL PERMITS") necessary for the construction of their
facilities or the conduct of their operations except where the failure
to so obtain would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, and all
such Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency
approval, and it and its Subsidiaries are in compliance with all terms
and conditions of the Environmental Permits except as would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(iii) There is no Environmental Claim (as
defined below) pending or, to the knowledge of the Company's executive
officers, threatened (A) against the Company or any of its Subsidiaries,
(B) against any person or entity whose liability for such Environmental
Claim the Company or any of its Subsidiaries has retained or assumed
either contractually or by operation of law, or (C) against any real or
personal property or operations which the Company or any of its
Subsidiaries owns, leases, manages or operates in whole or in part,
which, in any such case described in this Section 3.1(o)(iii), would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(iv) Except as set forth in the environmental
audits, reports, surveys and assessments made available pursuant to
clause (vi) below, the Company has no knowledge of any Releases of any
Hazardous Materials (as defined below) that would be reasonably likely
to result in any Environmental Claim against the Company or any of its
Subsidiaries, or against any person or entity whose liability for such
Environmental Claim the Company or any of its Subsidiaries has retained
or assumed either contractually or by operation of law or which would
result in the Company incurring liability under any Environmental Law,
except for any Environmental Claim or liability which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(v) The Company has no knowledge, with respect
to any predecessor of it or any of its Subsidiaries or any real property
formerly owned, leased or operated by it or any of its Subsidiaries, of
any pending or threatened Environmental Claim which could reasonably be
expected to have a Material Adverse Effect on the Company, or of any
Release of Hazardous Materials that would be reasonably likely to result
in any Environmental Claim which would reasonably be expected to have a
Material Adverse Effect on the Company.
(vi) The Company has made available to Parent
true and complete copies of all material environmental audits, surveys,
reports and assessments
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relating to real property owned, leased or operated by the Company or
any of its Subsidiaries.
(vii) As used in this Agreement:
(A) "ENVIRONMENTAL CLAIM" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity (including
any Governmental Entity) alleging potential liability (including potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties) relating to
a Release or threatened Release into the environment of any Hazardous Materials
at any location, whether or not owned, operated, leased or managed by the
Company or any of its Subsidiaries any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(B) "ENVIRONMENTAL LAWS" means all applicable federal,
state and local laws, rules and regulations relating to pollution, the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), natural resources or protection of human health as it
relates to the environment including laws and regulations relating to Releases
or threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(C) "HAZARDOUS MATERIALS" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls; (B) any chemicals, materials or substances which are
now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or words
of similar import under any Environmental Law and (C) any other chemical,
material, substance or waste, exposure to or use of which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in which the
Company or any of its Subsidiaries operates.
(D) "RELEASE" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
(p) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except Merrill Lynch, Pierce
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Fenner & Smith Incorporated ("Merrill Lynch") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley").
(q) OPINIONS OF FINANCIAL ADVISORS. The Company has received
the opinions of Merrill Lynch and Morgan Stanley, each dated the date of this
Agreement, to the effect that, as of such date, the consideration to be received
by holders of Company Common Stock under this Agreement is fair, from a
financial point of view, to the holders of Company Common Stock.
(r) BOARD RECOMMENDATION. The Company Board, at a meeting
duly called and held, (i) has determined that this Agreement and the
transactions contemplated hereby, including the Merger, taken together are fair
to and in the best interests of the stockholders of the Company, and declared
advisable this Agreement, (ii) assuming that neither Parent nor Merger Sub is an
Interested Stockholder (as such term is defined in Section 203 of the DGCL)
immediately prior to the Company Board taking the actions described in this
Section 3.1(r), took all other actions necessary to render the restrictions on
business combinations contained in Section 203 of the DGCL inapplicable to the
Offer, the Merger, this Agreement, and the transactions contemplated hereby and
thereby and (iii) resolved to recommend that the holders of the shares of
Company Common Stock accept the Offer, tender all their shares of Company Common
Stock pursuant to the Offer and approve this Agreement and the transactions
contemplated herein, including the Merger.
(s) INSURANCE. Section 3.1(s) of the Company Disclosure
Schedule sets forth a true and complete list of all of the Company's material
insurance policies and agreements. The Company agrees to use its best efforts
to keep its existing insurance policies and agreements in place through the
Effective Time.
(t) RENTAL FLEET. The Company's rental fleet is "rental
ready," except where the failure to be rental ready would not reasonably be
expected to have a Material Adverse Effect on the Company. "Rental ready" means
that each item of rental equipment is fully operable and available for rental to
customers, excluding items which are undergoing maintenance and repairs in the
ordinary course of business and items scheduled to be sold without violation of
clause (iii) of Section 4.1(i).
(u) CERTAIN BUSINESS PRACTICES. Except as would not
reasonably be expected to have a Material Adverse Effect on the Company, none of
the Company, any of its Subsidiaries or, to the Company's knowledge, any
directors, officers, agents or employees of the Company or any of its
Subsidiaries has, in connection with the business or affairs of the Company or
its Subsidiaries, (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, or
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(v) PROPERTIES. Section 3.1(v) of the Disclosure Schedule
contains a true and complete list of all real properties owned or leased by the
Company. The Company has good and marketable title to all properties, assets
and rights of any kind whatsoever which are material to the conduct of its
business (whether real, personal or mixed, and whether tangible or intangible)
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owned by it (collectively, along with leased real property of the Company, the
"Company Assets"), in each case free and clear of all Liens and other
encumbrances except for such Liens which have been disclosed in the SEC
Documents or are listed on Section 3.1(v) of the Company Disclosure Schedule and
except those Liens and defects or burdens on title which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company. There are no pending or, to the knowledge of the Company,
threatened condemnation proceedings against or affecting any Company Asset, and,
to the knowledge of the Company, none of the Company Assets is subject to any
commitment or other arrangement for its sale to a third party outside the
ordinary course of business, which in the case of any such condemnation or sale
either individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect on the Company. Each of the leases for real property
under which the Company or any Subsidiary is currently a lessee is valid,
enforceable and in full force and effect, and neither the Company nor any
Subsidiary has violated any provision of, or failed to perform any act which,
with or without notice, lapse of time, or both, could reasonably be expected to
constitute a default under the provisions of, any such lease, except where the
lack of validity, full force and effect or enforceability or the existence of
such default would not reasonably be expected to have a Material Adverse Effect
on the Company.
(w) ARIZONA STATUTE. The Company is not a "issuing public
corporation" within the meaning of Section 10-2701 of the Arizona Revised
Statutes.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Parent has been duly
incorporated and is validly existing and in good standing under the laws of its
jurisdiction of organization and has requisite corporate power and authority to
carry on its business as presently conducted. Parent is duly qualified and in
good standing or otherwise authorized to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, except where the failure so to qualify could
not reasonably be expected to have a Material Adverse Effect on Parent. The
copies of the Organizational Documents of Parent which were previously furnished
or made available to the Company are true, complete and correct copies of such
documents as in effect on the date of this Agreement.
(b) AUTHORITY; NO CONFLICTS.
(i) Parent has all requisite corporate power
and corporate authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of Parent. This Agreement has been duly executed and delivered
by Parent and constitutes a valid and binding agreement of Parent,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting
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creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
(ii) The execution and delivery of this
Agreement does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby will not, result in any
Violation of: (A) any provision of the Organizational Documents of
Parent or any of its Material Subsidiaries or (B) except as could not
reasonably be expected to have a Material Adverse Effect on Parent or
materially impair or delay the ability of Parent to consummate the
transactions contemplated hereby and subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, any of its Material Subsidiaries or
their respective properties or assets.
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent in
connection with the execution and delivery of this Agreement by Parent
or the consummation by Parent of the transactions contemplated hereby,
except for (A) the consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to
clause (x) of Section 3.1(c)(iii) and (B) such consents, approvals,
orders, authorizations, registrations, declarations and filings the
failure of which to make or obtain could not reasonably be expected to
have a Material Adverse Effect on Parent or materially impair or delay
the ability of Parent to consummate the transactions contemplated
hereby.
(c) FINANCIAL STATEMENTS. Each of the financial statements
(including the related notes) included in the English language version of the
Annual Report for Atlas Copco AB for the year ended December 31, 1998 have been
prepared in conformity with generally accepted accounting principles in Sweden
and the Annual Accounts Act.
(d) INFORMATION SUPPLIED.
(i) None of (A) the Offer Documents or (B) the
information supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Proxy Statement, if any,
the Schedule 14D-9 and any other documents to be filed with the SEC in
connection with the transactions contemplated hereby, including any
amendment or supplement to such documents, will, at the respective times
such documents are filed, and, with respect to the Proxy Statement, if
any, and the Offer Documents, when first published, sent or given to
stockholders of the Company, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to made the statements made therein, in the light of
the circumstances under which they are made, not misleading or, in the
case of the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the
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Company Stockholders Meeting, if any, and at the Effective Time,
contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order
to made the statements made therein, in the light of the circumstances
under which they are made, not misleading or necessary to correct any
statement in any earlier communication with respect to the Offer or
the solicitation of proxies for the Company Stockholders Meeting, if
any, which shall have become misleading. The Offer Documents will
comply as to form in all material respects with the requirements of
the Exchange Act and Securities Act and the rules and regulations of
the SEC thereunder.
(ii) Notwithstanding the foregoing provisions
of this Section 3.2(d), no representation or warranty is made by Parent
or Merger Sub with respect to statements made or incorporated by
reference in the Offer Documents based on information supplied by the
Company for inclusion or incorporation by reference therein.
(e) VOTE REQUIRED. No vote of the holders of the outstanding
shares of equity securities of Parent or Atlas Copco AB is necessary to approve
this Agreement or any of the transactions contemplated hereby.
(f) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except Credit Suisse First Boston.
(g) OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date of
this Agreement, neither Parent nor any of its Subsidiaries or, to the best of
their knowledge, any of their respective affiliates or associates (as such terms
are defined under the Exchange Act) (i) beneficially owns, directly or
indirectly or (ii) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in case of either
clause (i) or (ii), shares of capital stock of the Company.
(h) FINANCING. Parent has available, and will make available
to Merger Sub, sufficient funds to consummate the Offer and the Merger on the
terms contemplated by this Agreement.
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent
and Merger Sub represent and warrant to the Company as follows:
(a) ORGANIZATION AND CORPORATE POWER. Merger Sub is a wholly
owned Subsidiary of Parent and a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware. The copies of the
Organizational Documents of Merger Sub which were previously furnished or made
available to the Company are true, complete and correct copies of such
documents.
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(b) CORPORATE AUTHORIZATION. Merger Sub has all requisite
corporate power and corporate authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger Sub
of the transactions contemplated hereby have been duly authorized by all
necessary corporate and stockholder action on the part of Merger Sub. This
Agreement has been duly executed and delivered by Merger Sub and constitutes a
valid and binding agreement of Merger Sub, enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(c) NON-CONTRAVENTION. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger Sub
of the transactions contemplated hereby do not and will not contravene or
conflict with the Organizational Documents of Merger Sub.
(d) NO BUSINESS ACTIVITIES. Merger Sub is not a party to any
material agreements and has not conducted any activities other than in
connection with the organization of Merger Sub, the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby.
Merger Sub has no Subsidiaries.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that Parent shall
otherwise consent in writing, which consent shall not be unreasonably withheld
or delayed):
(a) ORDINARY COURSE. The Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in all material respects, and shall use all reasonable efforts
to preserve intact their present business organizations and preserve their
relationships with customers, suppliers, lessors of real property and others
having business dealings with them; PROVIDED, HOWEVER, that no action by the
Company or its Subsidiaries with respect to matters specifically addressed by
any other provision of this Section 4.1 shall be deemed a breach of this
Section 4.1(a) unless such action would constitute a breach of one or more of
such other provisions.
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall
not, and shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable or exchangeable for any shares of its capital
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stock except as otherwise permitted under certain option agreements to effect
cashless option exercises.
(c) ISSUANCE OF SECURITIES. The Company shall not and shall
cause its Subsidiaries not to issue, deliver, sell, pledge or otherwise encumber
(except as pledged on the date hereof and disclosed pursuant to the Company
Disclosure Schedule or the Company SEC Reports), or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into or exercisable or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or Company Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than the issuance of Company Common Stock upon the exercise of
stock options or stock appreciation rights outstanding on the date hereof.
(d) ORGANIZATIONAL DOCUMENTS. Except to the extent required
to comply with their respective obligations hereunder or required by law, the
Company and its Material Subsidiaries shall not amend or propose to amend their
respective Organizational Documents.
(e) INDEBTEDNESS. The Company shall not (i) incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or guarantee any debt securities of other Persons other than (x)
indebtedness of the Company or its Subsidiaries to the Company or its
Subsidiaries or (y) in the ordinary course of business, including, without
limitation, indebtedness for acquisitions made in accordance with clause (ii) of
subsection (i) below, (ii) make any loans, advances or capital contributions to,
or investments in, any other Person, other than by the Company or its
Subsidiaries to or in the Company or its Subsidiaries or (iii) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than, in the case of clauses (ii)
and (iii), loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary course of
business.
(f) BENEFIT PLANS. The Company shall not, and shall not
permit its Material Subsidiaries to (i) increase the compensation payable or to
become payable to any of its executive officers or employees or (ii) take any
action with respect to the grant of any severance or termination pay, or stay,
bonus or other incentive arrangement (other than pursuant to benefit plans and
policies as in effect on the date of this Agreement), except (A) any such
increases made in the ordinary course of business, (B) any person subsequently
becoming eligible to participate in plans existing on the date hereof or (C) as
provided in Section 5.5.
(g) OTHER ACTIONS. The Company shall not, and shall not
permit its Subsidiaries to, take any action that could reasonably be expected to
result in (i) any of the representations or warranties of the Company set forth
in this Agreement that are qualified as to materiality becoming untrue, (ii) any
of such representations and warranties that are not so qualified becoming untrue
in any material respect or (iii) except as otherwise permitted by Sections
5.1(a) or 5.4, any of the conditions to the Merger set forth in Article VI not
being satisfied.
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(h) TAX ELECTIONS AND CONTROVERSIES. Except in the ordinary
course of business and consistent with past practice, the Company shall not make
any Tax election and shall not without the consent of Parent, which shall not be
unreasonably withheld, change its method of accounting or settle or compromise
any federal, state, local or foreign Tax liability.
(i) OTHER ACTIONS. The Company shall not, and shall not
permit its Subsidiaries to:
(i) revalue in any material respect any of its
assets, including writing down the value of inventory or equipment or
writing-off notes or accounts receivable, other than in the ordinary
course of business consistent with past practice or as required by
generally accepted accounting principles;
(ii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the stock
or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof, provided that the foregoing shall not restrict
acquisitions made in the ordinary course of business, consistent with
past practices and involving aggregate purchase price not exceeding $10
million (and in connection therewith, the Company agrees to consult as
to the terms thereof with Parent);
(iii) sell, lease, license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any of
its properties or assets other than any such properties or assets the
value of which does not exceed $250,000 individually and $2,000,000 in
the aggregate, except sales or encumbering or subjecting to Liens in the
ordinary course of business consistent with past practice;
(iv) acquire or agree to acquire any assets in
transactions not subject to clause (ii) above, other than in the
ordinary course of business consistent with past practice, that are
material, individually or in the aggregate, to the Company, or make or
agree to make any capital expenditures except capital expenditures
which, individually or in the aggregate, do not exceed $100 million (of
which $85 million is for capital expenditures committed but for which
the properties have not yet been received) in the aggregate;
(v) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization, except in respect of an entity
acquired after the date hereof;
(vi) change any material accounting principle
used by it, except as required by generally accepted accounting
principles, the SEC or applicable law; or
(vii) settle or compromise any litigation or
settle a dispute under any contract or other agreement (whether or not
commenced prior to the date of this Agreement) other than settlements or
compromises of litigation where the amount paid
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(net, after giving effect to insurance proceeds actually received or
used to satisfy such claim) by the Company in settlement or compromise
does not exceed $250,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such matters does
not exceed $1,000,000.
(j) AGREEMENT. The Company shall not, and shall not permit
its Subsidiaries, to enter into any agreement to do any of the foregoing.
4.2 COVENANTS OF PARENT AND MERGER SUB. During the period from the
date of this Agreement and continuing until the Effective Time (except as
expressly contemplated or permitted by this Agreement or to the extent that the
Company shall otherwise consent in writing) Parent shall carry on its business
in the usual, regular and ordinary course in all material respects, and shall
not, and shall not permit any of its Subsidiaries to, take any action that could
reasonably be expected to result in (i) any of the representations or warranties
of Parent or Merger Sub set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Merger set forth in Article VI not being satisfied.
4.3 ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall
(a) confer on a regular and frequent basis with the other, (b) report (to the
extent permitted by law, regulation and any applicable confidentiality
agreement) to the other on operational matters and (c) promptly notify the other
orally and in writing of (i) any representation or warranty made by it contained
in this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it (A) to comply with or satisfy in any respect any covenant,
condition or agreement required to be complied with or satisfied by it under
this Agreement that is qualified as to materiality or (B) to comply with or
satisfy in any material respect any covenant, condition or agreement required to
be complied with or satisfied by it under this Agreement that is not so
qualified as to materiality or (iii) any change, event or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect on such
party or materially and adversely affect its ability to consummate the Merger in
a timely manner; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall file all reports required to be filed by each of them with the
SEC and all other Governmental Entities between the date of this Agreement and
the Effective Time and shall (to the extent permitted by law or regulation or
any applicable confidentiality agreement) deliver to the other party copies of
all such reports promptly after the same are filed. Subject to applicable laws
relating to the exchange of information, each of the Company and Parent shall
have the right to review in advance, and to the extent practicable each will
consult with the other, with respect to all the information relating to the
other party and each of their respective Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials submitted
to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each
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party agrees that, to the extent practicable, it will consult with the other
party with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other party apprised of the status of matters
relating to completion of the transactions contemplated hereby.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 RECOMMENDATION; PREPARATION OF PROXY STATEMENT; THE COMPANY
STOCKHOLDERS MEETING.
(a) The Company shall, through the Company Board, recommend
to its stockholders that they accept the Offer and tender all of their shares of
Company Common Stock to Merger Sub and vote in favor of adoption of this
Agreement; PROVIDED, HOWEVER, that the Company Board may withdraw or modify such
recommendation (and its declaration of the advisability of this Agreement) to
the extent that the Company Board determines in good faith to do so consistent
with the exercise of its fiduciary duties (after consulting with outside legal
counsel and, if appropriate, its outside financial advisor, and other than in
connection with a Transaction Proposal) or as permitted under Section 5.4.
Except as provided in Section 5.4, if required by the DGCL or the Company's
Organizational Documents in order to consummate the Merger, the Company shall,
as soon as practicable following the acquisition by Merger Sub of the shares of
the Company Common Stock pursuant to the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS
MEETING") for the purpose of obtaining the Required Company Vote. Parent and
Merger Sub shall vote or cause to be voted all the shares of Company Common
Stock owned of record by Parent, Merger Sub or any of Parent's other
Subsidiaries in favor of the approval of the Merger and adoption of this
Agreement. After the date hereof and prior to the expiration of the Offer,
Parent shall not purchase, offer to purchase, or enter into any contract,
agreement or understanding regarding the purchase of shares of Company Common
Stock, except pursuant to the terms of the Offer and the Merger.
(b) Notwithstanding the preceding paragraph or any other
provision of this Agreement, in the event Parent, Merger Sub or any other
Subsidiary of Parent shall beneficially own, in the aggregate, at least 90% of
the outstanding shares of the Company Common Stock, the Company shall not be
required to call the Company Stockholders Meeting or to file or mail the Proxy
Statement, and the parties hereto shall, at the request of Parent or the Company
and subject to Article VI, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the acceptance for
payment of and payment for shares of the Company Common Stock by Merger Sub
pursuant to the Offer without a meeting of stockholders of the Company in
accordance with Section 253 of the DGCL.
(c) If required by applicable law, as soon as practicable
following Parent's request, the Company and Parent shall prepare and file with
the SEC the Proxy Statement. Each of the Company and Parent shall use
reasonable efforts to cause the Proxy Statement to be
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mailed to the Company's stockholders, as promptly as practicable. The Company
shall use its reasonable best efforts to obtain and furnish the information
required to be included by it in the Proxy Statement and, after consultation
with Parent, shall respond promptly to any comments of the SEC relating to
any preliminary proxy statement regarding the Merger and the other
transactions contemplated by this Agreement and to cause the Proxy Statement
to be mailed to its stockholders, all at the earliest practicable time. The
Company, acting through its Board of Directors, shall include in the Proxy
Statement the recommendation of its Board of Directors that stockholders of
the Company vote in favor of the approval and adoption of this Agreement and
the Merger. The Company shall use its reasonable best efforts to solicit
from stockholders of the Company proxies in favor of such approval and
adoption and shall take all other actions necessary or advisable to secure
the vote or consent of the Company's stockholders required by the DGCL to
effect the Merger. All obligations of the Company in this Section 5.1(c)
shall be subject to the Company's rights under Section 5.4.
5.2 ACCESS TO INFORMATION. From the date hereof until the earlier of
the Effective Time or the termination of this Agreement, upon reasonable notice,
the Company shall afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Parent ("PARENT
REPRESENTATIVES") reasonable access during normal business hours, to all of its
and its Subsidiaries' properties, books, contracts, commitments and records and
its officers, management employees and representatives and, during such period,
the Company shall furnish promptly to Parent, consistent with its legal
obligations, all information concerning its business, properties and personnel
as the other party may reasonably request; PROVIDED, HOWEVER, the Company may
restrict the foregoing access to the extent that (i) a Governmental Entity
requires the Company or any of its Subsidiaries to restrict access to any
properties or information reasonably related to any such contract on the basis
of applicable laws and regulations or (ii) any law, treaty, rule or regulation
of any Governmental Entity applicable to the Company or any of its Subsidiaries
requires the Company or any of its Subsidiaries to restrict access to any
properties or information (subject, however, to existing confidentiality and
similar non-disclosure obligations and the preservation of attorney client and
work product privileges). Such information shall be held in confidence to the
extent required by, and in accordance with, the provisions of the letter
agreement dated June 14, 1999, between the Company and Atlas Copco AB (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement shall,
notwithstanding language in such Confidentiality Agreement to the contrary,
remain in full force and effect.
5.3 APPROVALS AND CONSENTS; COOPERATION. Each of the Company and
Parent shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) its reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on their part under this Agreement and applicable laws to consummate the Offer
and consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including (i) preparing
and filing as promptly as practicable (including, without limitation, filing the
notifications provided for under the HSR Act within five business days following
the date of this Agreement) all documentation to effect all necessary
applications, notices, petitions, filings, tax ruling requests and other
documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be
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obtained from any third party and/or any Governmental Entity in order to
consummate the Offer or Merger or any of the other transactions contemplated
by this Agreement and (ii) taking all reasonable steps as may be necessary to
obtain all such consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. Without limiting the
generality of the foregoing, each of the Company and Parent agrees to make
all necessary filings in connection with the Required Regulatory Approvals as
promptly as practicable after the date of this Agreement, and to use its
reasonable efforts to furnish or cause to be furnished, as promptly as
practicable, all information and documents requested with respect to such
Required Regulatory Approvals and shall otherwise cooperate with the
applicable Governmental Entity in order to obtain any Required Regulatory
Approvals in as expeditious a manner as possible. Each of the Company and
Parent shall take all necessary action to cause the expiration of the notice
periods under the HSR Act with respect to the Offer or the Merger and the
other transactions contemplated by this Agreement as promptly as possible
after the execution of this Agreement. Each of the Company and Parent shall
take all necessary action to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to the Offer or the Merger
or any other transactions contemplated by this Agreement in connection with
the Required Regulatory Approvals. In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened
to be instituted) challenging the Offer or the Merger or any other
transaction contemplated by this Agreement as violative of applicable
antitrust or competition laws, each of the Company and Parent shall cooperate
and shall contest and resist, except insofar as the Company and Parent may
otherwise agree, any such action or proceeding, including any action or
proceeding that seeks a temporary restraining order or preliminary injunction
that would prohibit, prevent or restrict consummation of the Offer or the
Merger or any other transaction contemplated by this Agreement. The Company
and arent each shall, upon request by the other, furnish the other with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may reasonably be necessary or
advisable in connection with the Offer Documents, Schedule 14D-9, Proxy
Statement or any other statement, filing, tax ruling request, notice or
application made by or on behalf of the Company, Parent or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the Offer, the Merger or the other transactions contemplated
by this Agreement.
5.4 TRANSACTION PROPOSALS. Prior to the termination of this
Agreement, the Company shall not (whether directly or indirectly through
advisors, agents or other intermediaries), and shall not authorize or permit any
of its officers, directors, agents, representatives or advisors to (a) solicit,
initiate or knowingly encourage or facilitate the submission of inquiries,
proposals or offers from any Person (other than Merger Sub or Parent) relating
to (i) any acquisition or purchase of over 20% of the consolidated assets of the
Company or of over 20% of any class of equity securities of the Company, (ii)
any tender offer (including a self tender offer) or exchange offer that if
consummated would result in any third party beneficially owning over 20% of any
class of equity securities of the Company, or (iii) any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company other than
the transactions contemplated by this Agreement (collectively, "TRANSACTION
PROPOSALS"), (b) agree to or recommend to its stockholders any Transaction
Proposal, or (c) enter into or participate in any discussions or negotiations
regarding a Transaction Proposal, or furnish to any Person (other than
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Parent, Merger Sub or any of their representatives) any information with
respect to its business, properties or assets in connection with a
Transaction Proposal; PROVIDED, HOWEVER, that nothing in this Agreement shall
prohibit the Company (either directly or indirectly through advisors, agents
or other intermediaries) from (A) furnishing information pursuant to
appropriate terms of confidentiality concerning the Company and its business,
properties or assets to a third party who has indicated an interest in making
a bona fide Transaction Proposal (provided, that if such confidentiality
terms are less favorable to the Company in any material respect than the
terms of the Confidentiality Agreement, that the Confidentiality Agreement
shall be deemed amended to provide for such more favorable confidentiality
terms) , (B) engaging in discussions or negotiations with such third party,
(C) following receipt of a bona fide Transaction Proposal, taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or otherwise making disclosure to its stockholders, (D)
following receipt of a bona fide Transaction Proposal, failing to make or
withdrawing or modifying its recommendation and/or declaration of
advisability of the Offer and/or adoption of this Agreement, and to the
extent it does so, the Company may refrain from calling, providing notice of
and holding the Company Stockholders Meeting to adopt this Agreement and from
soliciting proxies or consents to secure the vote or written consent of its
stockholders to adopt this Agreement, (E) waiving the provisions of any
confidentiality and/or standstill agreement to which the Company is a party
(provided, that the Company shall be deemed to simultaneously waive any such
provisions of the Confidentiality Agreement), (F) taking any non-appealable,
final action ordered to be taken by the Company by any court of competent
jurisdiction and/or (G) making any disclosure or filing required by law
(including, without limitation, Delaware state law and the rules and
regulations promulgated under the federal securities laws), stock exchange
rules or the rules, regulations, order or request of any Governmental Entity
(including the SEC), but in each case referred to in the foregoing clauses
(A) through (E) only to the extent that the Company Board shall have
concluded in good faith after consulting with its outside legal counsel and
financial advisor that such action is consistent with the discharge of its
fiduciary duties to the stockholders of the Company under applicable law;
PROVIDED, FURTHER, that the Board of Directors of the Company shall not take
any of the foregoing actions referred to in clauses (A) through (D) above,
until after 24 hours notice to Parent with respect to such action. The
Company Board shall, to the extent that it has concluded in good faith after
consulting with its outside legal counsel and financial advisors that such
action is consistent with the discharge of its fiduciary duties to the
stockholders of the Company under applicable law, promptly inform Parent of
the initial material terms and conditions of such Transaction Proposal and
the identity of the Person making it. Upon execution of this Agreement, the
Company shall immediately cease and cause its advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations conducted heretofore with respect to any Transaction Proposal
with any party other than Parent, Merger Sub or their representatives, and
shall, upon consummation of the Offer, use its reasonable best efforts to
cause any such other party in possession of confidential information about
the Company that was furnished by or on behalf of the Company to return or
destroy all such information in the possession of any such party or in the
possession of any agent or advisor of any such party. Notwithstanding
anything to the contrary contained in Section 5.4 or elsewhere in this
Agreement, prior to the Effective Time, the Company may, in connection with a
possible Transaction Proposal, refer any third party to this Section 5.4 and
Section 7.2(b) and make a copy of this Section 5.4 and Section 7.2(b)
available to a third party.
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5.5 EMPLOYEE BENEFITS.
(a) Parent agrees that, and shall take all necessary action
to ensure that, during the period commencing at the Effective Time and ending on
the first anniversary thereof, the employees of the Company will continue to be
provided with (whether by Parent, the Surviving Corporation or otherwise)
employee benefit plans (other than stock option or other plans involving the
potential issuance of securities of the Company and other incentive or
performance based programs or arrangements) which in the aggregate are not
materially less favorable than those currently provided by Company to such
employees, to the extent permitted under laws and regulations in force from time
to time; PROVIDED, HOWEVER, that subject to compliance with this Section 5.5,
Parent reserves the right to review all employee benefits after the Effective
Time and to make such changes as it deems appropriate. Parent intends to cause
Surviving Corporation to provide or enter into incentive and performance based
compensation plans or arrangements with management employees of the Company, the
purpose of which will be to provide such management employees with incentive and
performance based compensation at levels of benefits and performance targets
which are to replace the incentive and performance based compensation that such
management employees are eligible to participate in and receive from the Company
on the date hereof (excluding any equity based incentive plans), however,
nothing in this Section 5.5(a) shall require the Surviving Corporation to
provide any specific type of plan or arrangement (i.e., stock options).
(b) For purposes of determining eligibility to participate,
waiting periods, vesting and accrual or entitlement to benefits where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Corporation or any of their respective Subsidiaries, employees of
the Company and its Subsidiaries as of the Effective Time shall receive service
credit for service with the Company and its Subsidiaries if and to the same
extent such service credit was granted for such purposes under the Company
Benefit Plans, subject to offsets for previously accrued benefits and no
duplication of benefits.
(c) Parent shall cause the Surviving Corporation to assume
and honor in accordance with their terms all written employment, severance and
termination plans and agreements (including change in control provisions) of
employees of the Company and its Subsidiaries as in effect on the Closing Date,
subject to all rights to amend or terminate as set forth therein, Section 5.5(a)
and the other agreements, plans and policies identified in Section 5.5(c) of the
Company Disclosure Schedule but excluding any obligations regarding compensation
plans linked to equity performance or earnings per share.
(d) From and after the Effective Time, Parent shall and shall
cause the Surviving Corporation and its Subsidiaries to (i) cause any
pre-existing condition or limitation and any eligibility waiting periods (to the
extent such conditions, limitations or waiting periods did not apply to the
employees of the Company under the Company Benefit Plans) under any group health
plans of Parent or any of its Subsidiaries to be waived with respect to
employees of the Company and it Subsidiaries and their eligible dependents, and
(ii) give each employee of the Company and its Subsidiaries credit for the plan
year in which the Effective Time occurs toward applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the
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Effective Time (or such later date on which participation commences) during
the applicable plan year.
5.6 FEES AND EXPENSES. Subject to Section 7.2(b), whether or not the
transactions contemplated hereby are consummated, all Expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such Expenses, except (a) if the Merger is
consummated, the Surviving Corporation shall pay, or cause to be paid, any and
all property or transfer taxes imposed on the Company or its Subsidiaries and
any real property transfer tax imposed on any holder or former holder of shares
of capital stock of the Company resulting from the Merger, (b) the Expenses
incurred in connection with the printing, filing and mailing to stockholders of
the Proxy Statement and the solicitation of stockholder approvals shall be
shared equally by the Company and Parent, and (c) as provided in Section 7.2.
As used in this Agreement, "EXPENSES" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Offer Documents and the Proxy
Statement and the solicitation of stockholder approvals and all other matters
related to the transactions contemplated hereby.
5.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Parent and
the Surviving Corporation shall cause to be maintained in effect (i) for a
period of six (6) years after the Effective Time, the current provisions
regarding indemnification of current or former officers and directors (each an
"INDEMNIFIED PARTY") contained in the Organizational Documents of the Company or
its Subsidiaries and in any agreements between an Indemnified Party and the
Company or its Subsidiaries, provided that in the event any claim or claims are
asserted or made within such six year period, all rights to indemnification in
respect of any claim or claims shall continue until final disposition of any and
all such claims, and (ii) for a period of six (6) years, policies of directors'
and officers' liability insurance and fiduciary liability insurance equivalent
to the current policies maintained by the Company (the "D&O Insurance") and
which are, in the aggregate, no less advantageous to the insured (and provided
that any substitution of policies shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time) with
respect to claims arising from facts or events that occurred on or before the
Effective Time; PROVIDED, that (A) the Company following the Merger shall not be
required to spend in excess of 200% of the amount spent on current annual
premiums for the D&O Insurance (the "PREMIUM LIMIT") per year therefor; PROVIDED
further that if the Company following the Merger would be required to spend in
excess of the Premium Limit per year to obtain insurance having the maximum
available coverage under such D&O Insurance policies, the Company will be
required to spend up to such amount to maintain or procure insurance coverage
pursuant hereto, subject to availability of such (or similar) coverage and
(B) such policies may in the sole discretion of the Company be one or more
"tail" policies for all or any portion of the full six year period, provided
that such "tail" policies, contain terms and conditions and provide coverage no
less advantageous to the insureds than the terms, conditions and coverage in the
D&O Insurance. The Company agrees that in the event it would be required to
spend in excess of the Premium Limit per year to obtain insurance having the
maximum available coverage under D&O
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Insurance policies, the Company will notify the officers and directors who
are the beneficiaries thereof and permit such officers and directors to pay
any excess amount over the Premium Limit which may be necessary to maintain
such policies. This covenant is intended to be for the benefit of, and shall
be enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives. For a period of six (6) years after the Effective
Time (provided that in the event any claim or claims are asserted or made
within such six year period, all rights to indemnification in respect of any
claim or claims shall continue until final disposition of any and all such
claims), Parent shall indemnify the Indemnified Parties to the same extent as
such Indemnified Parties are entitled to indemnification under the
instruments described and to the extent set forth in clause (i) of the first
sentence of this Section 5.7. Without limitation of the foregoing, in the
event any such Indemnified Party is or becomes involved in any action,
proceeding or investigation in connection with any matter occurring prior to
or on the Effective Time, including the transactions contemplated hereby,
Parent will pay as incurred such Indemnified Party's reasonable fees and
expenses of counsel selected by the Indemnified Party and reasonably
acceptable to Parent (including the cost of any investigation and preparation
and the cost of any appeal) incurred in connection therewith. This covenant
shall survive the closing of the transactions contemplated hereby and is
intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties and their respective heirs and legal representatives.
Notwithstanding the foregoing, Parent shall not, in connection with any one
action or proceeding for which it is obligated to indemnify the Indemnified
Parties hereunder or separate but substantially similar actions or
proceedings arising out of the same general allegations be liable for fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for all Indemnified Parties (except in the event
that one or more of the Indemnified Parties shall have an actual or potential
conflict of interest that would make it reasonably advisable to retain
separate counsel). Parent shall be entitled to participate in the defense of
any such action or proceeding and counsel selected by the Indemnified Party
shall, to the extent consistent with their professional responsibilities,
cooperate with Parent and any counsel designated by Parent.
5.8 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
the Company and Parent shall use all reasonable efforts to develop a joint
communications plan and each party shall use all reasonable efforts (i) to
ensure that all press releases and other public statements with respect to the
transactions contemplated hereby shall be consistent with such joint
communications plan and (ii) unless otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange, to consult with each other before issuing any press release or
otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
5.9 TAKEOVER STATUTES. The Company and the members of the Company
Board, subject to their fiduciary duties, shall have granted such approvals, if
any, and shall have taken such actions, if any, as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise shall have acted to render
inapplicable, eliminate or minimize the effects of Section 203 of the DGCL or
any other takeover statute ("TAKEOVER STATUTE") as may be applicable to the
transactions to be undertaken pursuant to this Agreement.
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5.10 RIGHTS AGREEMENT. As promptly as practicable on or after the date
hereof, but in no event later than the expiration date of the Offer, the Company
will execute an amendment to the Rights Agreement (the "Rights Amendment")
having the effects described in the subsequent sentences of this Section 5.10.
The Company represents that the Rights Amendment will be sufficient to render
the Rights (as defined in the Rights Agreement) inoperative with respect to any
acquisition of shares of Company Common Stock by Parent, Merger Sub or any of
their affiliates pursuant to this Agreement and for so long as this Agreement
remains in effect. The Company represents that as a result of the Rights
Amendment, the Rights will not be exercisable upon or at any time after
consummation of the Offer and for so long as this Agreement remains in effect by
reason of the transactions contemplated hereby.
5.11 PERFORMANCE BY MERGER SUB. Parent hereby agrees to cause Merger
Sub to comply with its obligations hereunder and under the Offer and to cause
Merger Sub to consummate the Merger as contemplated herein and whenever this
Agreement requires Merger Sub to take any action, such requirement shall be
deemed to include an undertaking of Parent to cause Merger Sub to take such
action. Without limitation of the foregoing, Parent shall vote all of its
shares of stock in Merger Sub for the adoption of this Agreement.
5.12 RESIGNATION OF DIRECTORS. At the Closing, the Company shall
deliver to Parent evidence satisfactory to Parent of the resignation of all
Continuing Directors, effective at the Effective Time.
5.13 FURTHER ASSURANCES. In case at any time after the Effective Time
any further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Parent and Merger Sub shall take
any such reasonably necessary action.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver (subject to Section 1.4(c)) on or prior to
the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained
all approvals of holders of shares of capital stock of the Company necessary to
approve this Agreement and all the transactions contemplated hereby (including
the Merger) to the extent required by law.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
a court or other Governmental Entity of competent jurisdiction shall be in
effect and have the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger; PROVIDED, HOWEVER, that the provisions of this
Section 6.1(c) shall not be available to any party whose failure to fulfill its
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obligations pursuant to Section 5.3 shall have been the cause of, or shall have
resulted in, such order or injunction.
(d) REQUIRED REGULATORY APPROVALS. All Required Consents (as
defined in Section 8.10(h)) and all other authorizations, consents, orders and
approvals of, and declarations and filings with, and all expirations of waiting
periods imposed by, any Governmental Entity which, if not obtained in connection
with the consummation of the transactions contemplated hereby, could reasonably
be expected to have a Material Adverse Effect on the Company or materially
impair or delay the ability of the Company, Parent or Merger Sub to consummate
the transactions contemplated hereby (collectively, "REQUIRED REGULATORY
APPROVALS"), shall have been obtained, waived, declared or filed or have
occurred, as the case may be, and all such Required Regulatory Approvals shall
be in full force and effect.
(e) COMPLETION OF THE OFFER. Merger Sub shall have
(i) commenced the Offer pursuant to Article I hereof and (ii) purchased,
pursuant to the terms and conditions of such Offer, all shares of Company Common
Stock duly tendered and not withdrawn; PROVIDED, HOWEVER, that neither Parent
nor Merger Sub shall be entitled to rely on the condition in clause (ii) above
if either of them shall have failed to purchase shares of Company Common Stock
pursuant to the Offer in violation of the terms of this Agreement or the Offer.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, by action taken or authorized by the Board of Directors
of the terminating party or parties, whether before or after approval of this
Agreement and the matters contemplated herein, including the Merger, by the
stockholders of the Company:
(a) By mutual written consent of Parent and the Company, by
action of their respective Boards of Directors;
(b) By either the Company or Parent if the Merger shall not
have been consummated by the date which is six (6) months from the date of this
Agreement; provided that such date shall be extended to the date which is nine
(9) months from the date of this Agreement in the event all conditions to effect
the Merger other than those set forth in Sections 6.1(b), 6.1(c) and 6.1(d) (the
"EXTENSION CONDITIONS") have been or are capable of being satisfied at the time
of such extension and the Extension Conditions have been or are reasonably
capable of being satisfied on or prior to the date which is nine (9) months from
the date of this Agreement, (such date, as it may be so extended, shall be
referred to herein as the "OUTSIDE DATE"); provided further that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation or condition under this Agreement
has been the cause of, or resulted in, the failure of the Merger to occur on or
before such date and shall not be available to Parent if it has purchased shares
of the Company Common Stock pursuant to the Offer;
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(c) By the Company or Parent if the Offer is terminated or
withdrawn pursuant to its terms without any shares of Company Common Stock being
purchased thereunder; provided that Parent may terminate this Agreement pursuant
to this Section 7.1(c) only if Parent's or Merger Sub's termination or
withdrawal of the Offer is not in violation of the terms of this Agreement or
the Offer;
(d) By either the Company or Parent if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(which order, decree, ruling or other action the parties shall have used their
reasonable efforts to resist, resolve or lift, as applicable, subject to the
provisions of Section 5.3) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;
(e) By either Parent or the Company if any approval by the
stockholders of the Company required for the consummation of the Merger or the
other transactions contemplated hereby shall not have been obtained at the
Company Stockholders Meeting or any adjournment thereof by reason of the failure
to obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(f) By Parent, prior to the payment by Merger Sub for shares
of Company Common Stock pursuant to the Offer, if (i) the Company Board shall
have withdrawn or materially and adversely modified its recommendation of the
Offer or the adoption of this Agreement (it being understood, however, that for
all purposes of this Agreement, and without limitation, the fact that the
Company has supplied any Person with information regarding the Company or has
entered into discussions or negotiations with such Person as permitted by this
Agreement, or the disclosure of such facts, shall not be deemed a withdrawal or
modification of the Company Board's recommendation of the Offer or the adoption
of this Agreement); (ii) the Company Board shall have recommended to the
stockholders of the Company that they approve a Transaction Proposal other than
transactions contemplated by this Agreement and at least two Business Days have
elapsed since the recommendation; or (iii) a tender offer or exchange offer
that, if successful, would result in any Person or "group" becoming a
"beneficial owner" (such terms having the meaning in this Agreement as is
ascribed under Regulation 13D under the Exchange Act) of 50% or more of the
outstanding shares of Company Common Stock is commenced (other than by Parent or
an affiliate of Parent) and the Company Board recommends that the stockholders
of the Company tender their shares in such tender or exchange offer;
(g) By the Company, prior to the payment by Merger Sub for
shares of Company Common Stock pursuant to the Offer, if the Company Board
determines to take any action described in clause (D) of Section 5.4;
(h) By Parent, prior to the payment by Merger Sub for shares
of Company Common Stock pursuant to the Offer, upon a material breach of any
covenant or agreement on the part of the Company set forth in this Agreement, or
if (i) any representation or warranty of the Company that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty of
the Company that is not so qualified shall have become untrue in
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any material respect (a "TERMINATING COMPANY BREACH"); PROVIDED, HOWEVER,
that if such Terminating Company Breach is capable of being cured by the
Company prior to the 21st day following written notice of such breach by
Parent to Company through the exercise of its best efforts, so long as the
Company continues to exercise such best efforts, Parent may not terminate
this Agreement under this Section 7.1(h) prior to such 21st day; or
(i) By the Company, upon a material breach of any covenant or
agreement on the part of Parent or Merger Sub set forth in this Agreement, or if
(i) any representation or warranty of Parent or Merger Sub that is qualified as
to materiality shall have become untrue or (ii) any representation or warranty
of Parent or Merger Sub that is not so qualified shall have become untrue in any
material respect ("TERMINATING PARENT BREACH"); PROVIDED, HOWEVER, that, if such
Terminating Parent Breach is capable of being cured by Parent prior to the 21st
day following written notice of such breach by the Company to Parent through the
exercise of best efforts, so long as Parent continues to exercise such best
efforts, the Company may not terminate this Agreement under this Section 7.1(i)
prior to such 21st day;
(j) By the Company, if Merger Sub shall have failed to
commence the Offer within the five Business Day period specified in
Section 1.1(a) or Merger Sub fails to pay for validly tendered shares of Company
Common Stock in violation of the terms of the Offer or this Agreement; or
(k) By Parent or the Company, if the Offer terminates or
expires on account of the failure of any condition specified in Annex A without
Merger Sub having purchased any shares of Company Common Stock thereunder
(provided that the right to terminate this Agreement pursuant to this
subparagraph shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of any such condition).
7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either
the Company or Parent as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of Parent
or the Company or their respective officers or directors except (i) with respect
to the last sentence of Section 5.2, Section 5.6, this Section 7.2 and
Article VIII and (ii) with respect to any liabilities or damages incurred or
suffered by a party as a result of the willful breach by the other party of any
of its covenants or other agreements set forth in this Agreement.
(b) In the event that this Agreement is terminated pursuant
to Section 7.1(f) or 7.1(g), then the Company shall pay Parent a cash fee of
$20,000,000, which amount shall be payable by wire transfer of immediately
available funds no later than two Business Days after such termination.
7.3 AMENDMENT. Subject to Section 1.4(c), this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the
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stockholders of the Company, but, after any such approval, no amendment shall
be made which by law or in accordance with the rules of NYSE requires further
approval by such stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
7.4 EXTENSION; WAIVER. Subject to Section 1.4(c), at any time prior
to the Effective Time, the parties hereto, by action taken or authorized by
their respective Boards of Directors, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. No delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties hereto may otherwise have at law or in
equity. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, Warranties and Agreements; No
Other Representations and Warranties. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained herein
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement, none
of the Company, Parent or Merger Sub makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement, the documents and the instruments referred to
herein, or the transactions contemplated hereby or thereby, notwithstanding the
delivery or disclosure to the other party or the other party's representatives
of any documentation or other information with respect to any one or more of the
foregoing.
8.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, (b) on the first Business Day following the date of
dispatch if delivered by a nationally recognized next-day
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courier service, (c) on the earlier of the date of receipt or the tenth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy sent on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:
(a) if to Parent or Merger Sub, to
Atlas Copco North America Inc.
1211 Hamburg Turnpike
Suite 214
Wayne, NJ 07470
Attention: Mark Cohen
Telecopy: (973) 633-9722
with copies to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Stephen R. Rusmisel, Esq.
Telecopy: (212) 858-1500
(b) if to the Company, to:
Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
Attention: Rosemary Strunk, Esq.
General Counsel
Telecopier No.: (480) 905-3300
with a copy to:
Latham & Watkins
633 West 5th Street, Suite 4000
Los Angeles, CA 90071
Attention: Elizabeth A. Blendell
Telecopier No.: (213) 891-8763
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes"
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or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties and no presumption or
burden or proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local or foreign statue or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the content
requires otherwise. It is understood and agreed that neither the
specifications of any dollar amount in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items,
are or are not material, and neither party shall use the fact of setting of
such amounts or the fact of the inclusion of such item in the Schedules or
Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement (including the Schedules and Exhibits and
Annex A) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Article II and Sections 1.4(c), 5.5 and 5.7 (each of which is intended to
be for the benefit of the Persons covered thereby and may be enforced by such
Persons).
8.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL
(a) This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might be applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United States
of America, sitting in Delaware, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby
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irrevocably and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of
any such action or proceeding may be heard and determined in such Delaware
State court or, to the extent permitted by law, in such Federal court, (iii)
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
such action or proceeding in any such Delaware State or Federal court, and
(iv) waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such Delaware State or Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.2.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND
(iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.6(c).
8.7 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible. Any provision of this Agreement
held invalid or unenforceable only in part, degree or certain jurisdictions will
remain in full force and effect to the extent not held invalid or unenforceable.
To the extent permitted by applicable law, each party waives any provision of
law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether
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by operation of law or otherwise), without the prior written consent of the
other parties, and any attempt to make any such assignment without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective permitted successors and assigns.
8.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
8.10 DEFINITIONS. As used in this Agreement:
(a) "BOARD OF DIRECTORS" means the Board of Directors of any
specified Person and any properly serving and acting committees thereof.
(b) "BUSINESS DAY" means any day on which banks are not
required or authorized to close in the City of New York.
(c) "INTELLECTUAL PROPERTY" shall mean patents, copyrights,
trademarks (registered and unregistered), service marks, brand names, trade
names, and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing.
(d) "KNOWLEDGE" with respect to the Company means the actual
knowledge of the following officers and employees (as well as any of their
successors) of the Company: Chief Financial Officer, Vice-President--Finance and
Corporate General Counsel, and, without duplication, the employees primarily
responsible for environmental and Tax matters concerning the Company.
(e) "MATERIAL ADVERSE EFFECT" means, with respect to any
Person, any adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, is
materially adverse to the business, operations, assets, liabilities, financial
condition or results of operations of such entity and its Subsidiaries taken as
a whole; provided that (i) with respect to Parent the term Material Adverse
Effect shall include also, without limitation, any adverse change, circumstance,
event or effect that is materially adverse to Parent's ability to pay the Price
Per Share or the Merger Consideration or otherwise perform its obligations under
this Agreement, and (ii) with respect to the Company the term Material Adverse
Effect shall not include (x) any change, circumstance, event, effect or legal
claim that relates to or results primarily from the execution and delivery of
this Agreement or the announcement (or other disclosure) or consummation of the
transactions contemplated by this Agreement, or (y) changes in general economic
conditions, financial markets (including fluctuations in the price of shares of
Company Common Stock or shares of capital stock of Parent) or conditions
generally affecting the equipment rental industry or related industries.
(f) "MATERIAL SUBSIDIARIES" of a Person shall mean the
"Significant Subsidiaries" of such Person as defined under Regulation S-X of the
Securities Act.
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(g) "ORGANIZATIONAL DOCUMENTS" means, with respect to any
entity, the certificate of incorporation, bylaws or other similar governing
documents of such entity.
(h) "PERSON" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
(i) "REQUIRED CONSENTS" - There are no Required Consents.
(j) "SUBSIDIARY" when used with respect to any Person means
any corporation, partnership, association, joint venture or other organization,
whether incorporated or unincorporated, (i) of which such Person or any other
Subsidiary of such Person is a general partner (excluding partnerships, the
general partnership interests of which held by such Person or any Subsidiary of
such Person do not have a majority of the voting and economic interests in such
partnership) or (ii) at least a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries.
(k) (i) "TAX" (including, with correlative meaning, the terms
"TAXES" and "TAXABLE") means all federal, state, local and foreign income,
profits, franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy, transfer and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax, and
(ii) "TAX RETURN" means all returns and reports (including elections, claims,
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a Tax authority in any jurisdiction relating
to Taxes.
(l) "THE OTHER PARTY" means, with respect to the Company,
Parent and Merger Sub and means, with respect to Parent and Merger Sub, the
Company.
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IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ATLAS COPCO NORTH AMERICA INC.,
a Delaware corporation
By: /s/ Mark Cohen
--------------------------------
Name: Mark Cohen
-------------------------
Title: Executive Vice President
-------------------------
PANDION ACQUISITION CORP.,
a Delaware corporation
By: /s/ Mark Cohen
--------------------------------
Name: Mark Cohen
-------------------------
Title: President
-------------------------
RENTAL SERVICE CORPORATION,
a Delaware corporation
By: /s/ Robert M. Wilson
--------------------------------
Name: Robert M. Wilson
-------------------------
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
-------------------------
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
The Offer shall be conditioned upon the Minimum Shares being validly
tendered and not withdrawn prior to the date which is 20 Business Days following
the commencement of the Offer in accordance with the terms hereof or such later
date as the Offer may be extended by an amendment to this Agreement in
accordance with the provisions of the Agreement. Moreover, notwithstanding any
other provision of the Offer, and subject to the terms and conditions of the
Agreement, Merger Sub shall not be obligated to accept for payment any shares of
Company Common Stock until expiration of all applicable waiting periods (and
extensions thereof) under the HSR Act, and Merger Sub shall not be required to
accept for payment, purchase or pay for, and may delay the acceptance for
payment of or payment for, any shares of Company Common Stock tendered in the
Offer, or if the Minimum Shares shall not have been validly tendered pursuant to
the Offer and not withdrawn, may terminate or amend the Offer, subject to the
terms and conditions of the Agreement and Merger Sub's obligation to extend the
Offer pursuant to Section 1.1(b) if, prior to the time of acceptance for payment
of any such shares of Company Common Stock (whether or not any other shares of
Company Common Stock have theretofore been accepted for payment or paid for
pursuant to the Offer), any of the following shall occur and remain in effect:
(a) an order shall have been entered in any action or proceeding before
any United States federal or state Governmental Entity (an "Order"), or a
preliminary or permanent injunction by a United States federal or state court of
competent jurisdiction shall have been issued and remain in effect (an
"Injunction"), which, in either case, would have the effect of (i) making the
purchase of, or payment for, some or all of the Shares pursuant to the Offer or
this Agreement illegal, (ii) otherwise preventing consummation of the Offer or
Merger, or (iii) imposing material limitations on the ability of Merger Sub or
Parent effectively to exercise full rights of ownership of the Shares, including
the right to vote the Shares purchased by it on all matters properly presented
to the shareholders of the Company; provided, however, that in order to invoke
this condition, Parent and Merger Sub shall have used their commercially
reasonable efforts to prevent such Order or Injunction or ameliorate the effects
thereof; and provided, further, that, if the Order or Injunction is a temporary
restraining order or preliminary injunction of a court of competent
jurisdiction, Merger Sub may not, by virtue of this condition alone amend or
terminate the Offer, but may only extend the Offer and thereby postpone
acceptance for payment or purchase of Shares;
(b) there shall have been any United States or foreign federal or state
statute, rule or regulation enacted or promulgated after the date of the Offer
that would reasonably be expected to result in any of the material adverse
consequences referred to in paragraph (a) above;
(c) the Agreement shall have been terminated by the Company or Parent
pursuant to its terms; or
<PAGE>
(d) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a national
securities exchange in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified increase or decrease in a market
index or similar "circuit breaker" process) which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or the European Union generally which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions, (iii) any newly initiated
material limitation (whether or not mandatory) by any Governmental Entity on, or
other similar event that materially and adversely affects, the extension of
credit in the United States or the European Union generally by banks or other
lending institutions, or (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving the
United States or the European Union generally which materially and adversely
affects the extension of credit in the United States or the European Union
generally by banks or other lending institutions.
The foregoing conditions are for the sole benefit of Parent and Merger
Sub and may be asserted by Parent and Merger Sub regardless of the circumstances
giving rise to such condition or, except for the Minimum Condition, may be
waived by Parent and Merger Sub in whole or in part at any time and from time to
time. The failure by Parent or Merger Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
The capitalized terms used in this ANNEX A shall have the meanings set
forth in the Agreement to which it is annexed, except that the term Agreement
shall be deemed to referred to the Agreement to which this ANNEX A is appended.
<PAGE>
[RENTAL SERVICE CORPORATION LETTERHEAD]
June 14, 1999
Atlas Copco AB
S-105
23 Stockholm, Sweden
Attention: Lennart Johansson, Senior Vice President
Ladies and Gentlemen:
In connection with your consideration of a possible negotiated
transaction (the "Transaction") with Rental Service Corporation (the "Company"),
the Company and its Representatives (as defined below) are prepared, upon your
execution and delivery of this letter, to make available to you and your
Representatives certain information concerning the Company and the Company's
subsidiaries' business, financial condition, prospects, operations, assets,
properties and liabilities. All such information (whether written or oral)
relating, directly or indirectly, to the Company or its subsidiaries furnished,
delivered or disclosed by the Company or its Representatives before, on or after
the date hereof (whether prepared by the Company, its Representatives or
otherwise and regardless of the manner in which it is furnished) and all notes,
analyses, compilations, extracts, forecasts, studies, interpretations or other
documents prepared by you or your Representatives in connection with your or
their review of, or your interest in, a Transaction which contain, reflect or
are based, in whole or in part, upon any such information, is hereinafter
referred to in this letter agreement as "Evaluation Material." As a condition
to, and in consideration of, Evaluation Material being furnished to you and your
Representatives, you agree to treat such Evaluation Material in accordance with
the provisions of this letter agreement, and to take or abstain from taking
certain other actions as hereinafter set forth. As used in this letter
agreement, the term "Representatives" means, as to any person, such person's
affiliates and its and their directors, officers, employees, shareholders,
partners, subsidiaries, affiliates, agents, advisors (including, without
limitation, attorneys, accountants, consultants, bankers, appraisers and
financial advisors), controlling persons, potential financing sources or other
representatives. The term "person" as used in this letter agreement shall be
broadly interpreted to include any corporation, partnership, group, individual
or other entity (including the media).
The term "Evaluation Material" does not include, however,
information which (a) is or becomes generally available to the public other than
as a result of a disclosure by you or your Representatives in contravention of
this letter agreement, (b) was available to you on a non-confidential basis
prior to its disclosure by the Company or its Representatives, provided that the
source of such information was not known by you after due inquiry to be bound by
a confidentiality agreement or other contractual, legal or fiduciary obligation
of confidentiality to the Company or any other party with respect to such
information, (c) is or becomes available to you on a non-confidential basis from
a source (other than the Company or any of its
<PAGE>
Representatives), provided that the source of such information was not known
by you after due inquiry to be bound by a confidentiality agreement or other
contractual, legal or fiduciary obligation of confidentiality to the Company
or its Representatives with respect to such information, or (d) is
independently developed by you without violating your obligations under this
letter agreement.
You hereby agree that you and your Representatives (a) will
not use any Evaluation Material other than in connection with your evaluation of
a Transaction, (b) will keep the Evaluation Material confidential, and (c) will
not disclose or reveal any Evaluation Material or any information about a
possible Transaction (including the terms and conditions thereof or any other
facts relating thereto) to any person in any manner whatsoever without the
Company's prior written consent, except as otherwise provided in this letter
agreement or as may be required by law, stock exchange rules or court order
subject to the provisions set forth below. Notwithstanding the foregoing clause
(c), you may disclose Evaluation Material to your Representatives who are
actively and directly participating in your evaluation of a Transaction and who
need to know such information for the sole purpose of evaluating a Transaction;
PROVIDED, HOWEVER, such Representatives are informed by you of the confidential
nature of the Evaluation Material and such Representatives agree to comply with
the terms of this letter agreement applicable to such Representatives; and
PROVIDED, FURTHER, that such information shall not be provided to your financing
sources (if any) without prior notification of their identities to the Company
(which identities the Company shall keep strictly confidential). You shall be
responsible for the breach of this letter agreement by your Representatives
(including those who subsequent to the first date of disclosure of Evaluation
Material cease to be a Representative), and you agree, at your sole expense, to
take all reasonable measures to restrain your Representatives from disclosure or
use of the Evaluation Material in contravention of this letter agreement.
In addition to the foregoing, you agree that, except as
required by law (including, without limitation, Delaware state law and the rules
and regulations promulgated under the federal securities laws), stock exchange
rules or the rules, regulations, order or request of any governmental entity
(including the Securities and Exchange Commission) or as otherwise provided in
this letter agreement, without the prior written consent of the Company you and
your Representatives will not disclose to any other person the fact that the
Evaluation Material exists or has been made available, that you are considering
or are interested in a possible Transaction or any other transaction involving
the Company or that discussions or negotiations are taking place concerning a
Transaction or involving the Company (or any of the terms, conditions or other
facts with respect thereto, including the status thereof). Without limiting the
generality of the foregoing, you agree that, without the prior written consent
of the Company, or as otherwise specifically provided in this letter agreement,
you will not, directly or indirectly, enter into any agreement, arrangement or
understanding, or any discussions which might lead to such an agreement,
arrangement or understanding, with any person other than your Representatives
regarding a possible Transaction. The Company agrees that, without your prior
written consent, except as required by law (including, without limitation,
Delaware state law and the rules and regulations promulgated under the federal
securities laws), stock exchange rules or the rules, regulations, order or
request of any governmental entity (including the Securities and Exchange
2
<PAGE>
Commission) it will not make any general public announcement or disclosure
which specifically identifies you and in connection therewith announces or
discloses (a) that the Evaluation Material has been made available to you,
(b) that you are considering or are interested in a possible Transaction or
any other transaction involving the Company or (c) that discussions or
negotiations are taking place with you concerning a Transaction or involving
the Company (or any of the terms, conditions or other facts with respect
thereto, including the status thereof).
In the event that you or any of your Representatives are requested
pursuant to, or required by, applicable law or regulation or by legal process
(by oral questions, interrogatories, requests for information or documents in
legal proceedings, subpoena, civil investigative demand or other similar process
or by applicable state, rule or regulation or by governmental regulatory
authorities or otherwise) to disclose any Evaluation Material or any other
information concerning a Transaction, you agree to provide the Company with
prompt written notice of any such request or requirement and a copy of such
request so that the Company may seek a protective order or other appropriate
remedy and/or may consult with you with respect to taking steps to resist or
narrow the scope of such request or, in the Company's sole discretion, waive
compliance, in whole or in part, with the provisions of this letter agreement.
If, in the absence of a protective order or other remedy or a waiver by the
Company of compliance with the terms of this letter agreement, you or any of
your Representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Evaluation Material, you or your Representatives will
disclose only that portion of the Evaluation Material as to which you are
advised by such counsel in writing is legally required to be disclosed (and as
to which you provide a certification to the Company to that effect), and you
will exercise your reasonable best efforts to preserve the confidentiality of
the Evaluation Material so disclosed, including, without limitation, by
cooperating with the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Evaluation
Material.
You hereby acknowledge that you are aware, and that you will
advise your Representatives who are informed as to the matters which are the
subject of this letter agreement, that the United States securities laws
prohibit any person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter
agreement from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
At any time upon your decision not to proceed with a
Transaction, you will promptly inform either Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") or Morgan Stanley & Co. Incorporated
("Morgan Stanley"), the Company's financial advisors, of such decision. In such
event or at any time upon the request of the Company or any of its
Representatives for any reason, you will promptly deliver to the Company all
Evaluation Material furnished to you or your Representatives or otherwise in
your or your Representatives' possession and destroy all copies, reproductions,
summaries, extracts or compilations thereof or based thereon and all other
Evaluation Material prepared by you or your Representatives shall be destroyed
and no copy thereof shall be retained; PROVIDED, HOWEVER, in the event you
become a party to any lawsuit, court action or legal proceeding relating to the
Company, a Transaction or
3
<PAGE>
this letter agreement (and for so long as such lawsuit, court action or legal
proceeding is pending), you shall be entitled to retain any Evaluation
Material if, in the written opinion of your outside legal counsel, such
Evaluation Material may not be returned or destroyed due to such lawsuit,
court action or legal proceeding (but, in such circumstances, such Evaluation
Material shall be removed from your premises and escrowed solely in the
office of such outside counsel). Any destruction of Evaluation Material
pursuant to this paragraph shall be confirmed to the Company in writing by an
authorized officer. Notwithstanding the return or destruction of the
Evaluation Material, you and your Representatives will continue to be bound
by their respective obligations of confidentiality and other obligations
hereunder (including with respect to any oral Evaluation Material).
You understand and acknowledge that none of the Company,
Merrill Lynch, Morgan Stanley or any of the Company's other Representatives
(and none of their respective officers, directors, employees, agents,
controlling persons) makes any express or implied representation or warranty
as to the accuracy or completeness of the Evaluation Material. You agree that
none of the Company, Merrill Lynch, Morgan Stanley or any of the Company's
other Representatives (and none of their respective officers, directors,
employees, agents, controlling persons) shall have any liability to you or to
any of your Representatives relating to, arising out of or resulting from the
Evaluation Material or the use thereof or any errors therein or omissions
therefrom. You further agree that you are not entitled to rely on the
accuracy or completeness of the Evaluation Material and that only those
representations or warranties which are made in a final definitive agreement
regarding any Transaction, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect.
You agree that, for a period of one (1) year from the date of
this letter agreement, neither you nor any of your affiliates or Representatives
will in any manner, directly or indirectly, without the prior written consent of
the Company or its Board of Directors:
(a) effect or seek, offer or propose (whether publicly or
otherwise) to effect, agree to effect or cause or
participate in, directly or indirectly, or in any way
assist any other person to effect, offer or propose
(whether publicly or otherwise) to effect or
participate in (i) any acquisition, directly or
indirectly, by purchase or otherwise, of any
securities (or beneficial ownership thereof), or
rights to acquire any securities, of the Company or
any subsidiary thereof or any successor to or person
in control of the Company, or any assets of the
Company or any subsidiary thereof or of any such
successor or controlling person; (ii) any tender or
exchange offer, merger, consolidation or other
business combination involving the Company; (iii) any
recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with
respect to the Company or any material portion of the
Company's business; or (iv) any direct or indirect
"solicitation" of "proxies" (as such terms are used
in the proxy rules of the Securities and Exchange
Commission) or written consents in lieu of a meeting
as to any voting securities of the Company (or seek
to advise or
4
<PAGE>
influence any person with respect to the voting of
any voting securities of the Company);
(b) act, alone or in concert with others, to seek to
control or influence the management, Board of
Directors or policies of the Company or propose any
matter for submission to a vote of stockholders of
the Company;
(c) make any public announcement with respect to, or
submit a proposal for, or offer of (with or without
conditions) any extraordinary transaction involving
the Company or any subsidiary thereof or any of its
securities or assets or relating to any of the types
of matters set forth in clause (a) above;
(d) form, join or in any way participate in a "group" (as
defined under the Securities Act of 1934, as amended)
with respect to any of the foregoing; or
(e) enter into any discussions or arrangements with any
third party with respect to any of the foregoing or
advise, assist, encourage, finance or seek to
persuade others to take any action with respect to
the foregoing.
You will promptly notify the Company of any inquiry or proposal made to you with
respect to any of the foregoing. You also agree during such period not to
request the Company (or its directors, officers, employees or agents) or its
Representatives, directly or indirectly, to amend or waive any provision of this
paragraph (including this sentence).
In consideration of the Evaluation Material being furnished
hereunder, you agree that, for a period of one (1) year from the date of this
letter agreement, neither you nor any of your affiliates will, directly or
indirectly, solicit for employment or employ any employee of the Company or any
of its subsidiaries with whom you or your Representatives have had contact in
connection with your receipt or review of Evaluation Material or your
consideration of a possible negotiated transaction without obtaining the prior
written consent of the Company, provided that this paragraph shall not prohibit
you or your affiliates from discussing employment opportunities with, or hiring,
any employee of the Company who contacts you or initiates such discussions with
you or your affiliate without any direct or indirect solicitation or
encouragement by you or pursuant to a general solicitation for employment which
is not specifically directed at the Company's employees.
You and the Company each understand and agree that no contract
or agreement providing for any Transaction shall be deemed to exist between the
parties unless and until a final definitive agreement has been executed and
delivered by the parties. You and the Company each also agree that unless and
until a final definitive agreement regarding a Transaction has been executed and
delivered by the parties, neither you, the Company nor any of their respective
Representatives will be under any legal obligation and shall have no liability
to the other party of any kind whatsoever with respect to a Transaction, other
than pursuant to this letter agreement.
5
<PAGE>
In connection with your consideration of a Transaction, you acknowledge that
the Board of Directors of the Company has not made any determination to enter
into any transaction or agreement with you solely by virtue of the Company's
execution of this letter agreement.
You agree that all communications regarding a Transaction,
requests for additional information, facility tours or management meetings and
discussions or questions regarding procedures with respect to a Transaction will
be first submitted or directed to either Merrill Lynch or Morgan Stanley, and
not to the Company. You further acknowledge and agree that the Company reserves
the right, in its sole discretion, (a) to conduct any process for any
transaction involving the Company in such manner as the Company may determine
(including, without limitation, negotiating with any other interested parties
and entering into a definitive agreement with any third party without notice to
you or any other person), (b) to change the procedures relating to any process
or our consideration of any transaction involving the Company at any time
without notice to you or any other person, (c) to reject any and all proposals
made by you or any of your Representatives with regard to a Transaction, and (d)
to terminate discussions and negotiations with you at any time and request the
return of all Evaluation Material in accordance with this letter agreement.
The provisions of this letter agreement cannot be amended or
waived except with the written consent of each of the parties hereto. You and
the Company each understand and agree that no failure or delay by the other
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege hereunder. No modification, waiver, termination, rescission, discharge
or cancellation of this letter agreement and no waiver of any provision of or
default under this letter agreement by you or the Company shall affect the
rights of either party thereafter to enforce any other provision or to exercise
any right or remedy in the event of any other default, whether or not similar.
You and the Company further understand and agree that money
damages would be an inadequate remedy for any actual or threatened breach of
this letter agreement by the other party or its Representatives and that you or
the Company, as the case may be, shall be entitled to equitable relief,
including injunctive relief, to prevent any breach of the provisions of this
letter agreement, without the necessity of proving actual damages or of posting
any bond, and specific performance, as a remedy for any such breach. Such
remedies shall not be deemed to be the exclusive remedies for a breach of this
letter agreement, but shall be without prejudice to and in addition to all other
rights and remedies available to you or the Company. In the event of litigation
relating to this letter agreement, if a court of competent jurisdiction
determines that either party or such party's Representatives have breached this
letter agreement, then you shall be liable and shall reimburse the non-breaching
party for its costs and expenses (including, without limitation, legal fees and
expenses) incurred by the breaching party in connection with such breach or
litigation, including any appeals therefrom.
If any term, provision, covenant or restriction of this letter
agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms,
6
<PAGE>
provisions, covenants and restrictions of this letter shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
This letter agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute the same agreement and shall become a binding agreement when a
counterpart has been signed by each party and delivered to the other party. This
letter agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understanding and representations, whether oral or
written, of the parties in connection herewith. No covenant, condition or
representation not expressed in this letter agreement shall affect or be
effective to interpret, change or restrict this letter agreement. No prior
drafts of this letter agreement and no words or phrases from any such prior
drafts shall be admissible into evidence in any action, suit or other proceeding
involving this letter agreement. This letter agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Any assignment of this letter agreement by you without the prior
written consent of the Company shall be void.
This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed in and to be performed in that state.
7
<PAGE>
Please confirm your agreement with the foregoing by signing
and returning one copy of this letter agreement to the undersigned, whereupon
this letter agreement shall become a binding agreement between you and the
Company.
Very truly yours,
RENTAL SERVICE CORPORATION
By: /s/ Robert M. Wilson
---------------------------------------------
Name: Robert M. Wilson
Title: Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
ACCEPTED AND AGREED as of the
date first written above:
ATLAS COPCO AB (public)
By: /s/ Lennart Johansson By: /s/ Hakan Osvald
----------------------------- --------------------------
Name: Lennart Johansson Name: Hakan Osvald
--------------------------- -------------------------
Title: Senior Vice President Title: Vice President
-------------------------- --------------------------
<PAGE>
Exhibit 99(G)
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Atlas Copco North America Inc.:
We have audited the accompanying consolidated balance sheet of Atlas Copco North
America Inc. and subsidiaries (a Delaware corporation) as of December 31, 1998
and the related consolidated statements of income, stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements of Atlas
Copco North America Inc. and subsidiaries as of December 31, 1997, were audited
by other auditors whose report dated January 23, 1998, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlas Copco North America Inc.
and subsidiaries as of December 31, 1998, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
Roseland, New Jersey
January 22, 1999
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands, except share information) 1998 1997
---------- ----------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ -- $ --
Accounts and notes
receivable - net 250,872 237,894
Receivables from affiliates 8,925 31,492
Inventory 205,520 213,861
Prepaid expenses and other current assets 24,434 27,453
Deferred income taxes 34,400 32,582
---------- ----------
Total Current Assets 524,151 543,282
---------- ----------
FIXED ASSETS
Rental fleet - net 556,661 482,922
Property, plant and equipment - net 194,612 201,048
---------- ----------
Total Net Fixed Assets 751,273 683,970
---------- ----------
OTHER NON-CURRENT ASSETS
Goodwill and other intangible assets - net 1,294,629 1,292,555
Investment in unconsolidated
companies 8,287 7,741
Other assets 17,070 8,770
---------- ----------
Total Other Non-Current Assets 1,319,986 1,309,066
---------- ----------
TOTAL $2,595,410 $2,536,318
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
2
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands, except share information) 1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term bank borrowings $ 22,776 $ 9,165
Accounts payable and accrued expenses 179,593 216,536
Amounts due to affiliates 884,584 788,946
Deferred income 11,970 --
----------- -----------
Total Current Liabilities 1,098,923 1,014,647
----------- -----------
NON-CURRENT LIABILITIES:
Pension obligations 30,668 26,016
Postretirement benefit obligations 33,001 31,771
Deferred income taxes 81,502 62,188
Minority interest 5,411 5,412
Amounts due to affiliates 500,000 550,000
Other non-current liabilities 48,303 49,604
----------- -----------
Total Non-current Liabilities` 698,885 724,991
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value:
50,000 shares authorized; 0 shares issued
and outstanding in 1998 and 1997 -- --
Common stock, no par value:
100,000 shares authorized; 88,339
shares issued and outstanding in
1998 and 1997 755,730 755,730
Paid-in capital 8,232 8,232
Retained earnings 44,017 40,883
Accumulated other comprehensive loss:
Additional minimum pension liability (6,952) (6,317)
Cumulative translation adjustment (3,425) (1,848)
----------- -----------
Total Stockholders' Equity 797,602 796,680
----------- -----------
TOTAL $ 2,595,410 $ 2,536,318
----------- -----------
----------- -----------
</TABLE>
3
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands, except share information) 1998 1997
----------- -----------
<S> <C> <C>
NET SALES & EQUIPMENT
RENTALS $ 1,619,020 $ 1,373,805
COSTS AND EXPENSES
Cost of sales 1,194,585 1,041,803
Selling and administrative expenses 289,196 222,341
Relocation Charge 3,801 7,659
Restructure charge -- 4,000
----------- -----------
Total Costs and Expenses 1,487,582 1,275,803
----------- -----------
OPERATING PROFIT 131,438 98,002
EQUITY IN EARNINGS OF
UNCONSOLIDATED COMPANIES 1,311 1,129
INTEREST INCOME & OTHER (EXPENSE)
INCOME - NET (4,260) 1,015
INTEREST EXPENSE (92,420) (63,833)
----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 36,069 36,313
PROVISION FOR INCOME TAXES (30,379) (25,172)
MINORITY INTEREST (556) (1,052)
----------- -----------
NET INCOME 5,134 10,089
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
-----------------------
Common Stock Foreign Minimum Total
(Dollars in thousands except per ------------ Paid-In Retained Currency Pension Stockholders'
share information) Shares Amount Capital Earnings Translation Liability Equity
- -------------------------------- ------ ------ ------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 48,294 $255,730 $8,232 $32,794 ($ 403) ($7,834) $ 288,519
Comprehensive income:
Net income for 1997 10,089 10,089
Foreign currency translation (1,445) (1,445)
Minimum pension liability 1,517 1,517
--------
Total comprehensive income 10,161
Cash dividends (2,000) (2,000)
Issuance of common stock 40,045 500,000 500,000
------ -------- ------ ------- ------- ------- --------
Balance at December 31, 1997 88,339 755,730 8,232 40,883 (1,848) (6,317) 796,680
Comprehensive income:
Net income for 1998 5,134 5,134
Foreign currency translation (1,577) (1,577)
Minimum pension liability (635) (635)
--------
Total comprehensive income 2,922
Cash dividends (2,000) (2,000)
------ -------- ------ ------- ------- ------- --------
Balance at December 31, 1998 88,339 $755,730 $8,232 $44,017 ($3,425) ($6,952) $797,602
------ -------- ------ ------- ------- ------- --------
------ -------- ------ ------- ------- ------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE>
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands except share information) 1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,134 $ 10,089
Adjustments to reconcile net income
to net cash provided by operations:
Charges (credits) not impacting cash:
Depreciation and amortization 131,276 82,284
Equity in earnings of unconsolidated
companies, net of dividends (1,036) (787)
Gain on sale of fixed assets (6,914) (2,244)
Deferred income taxes 17,564 14,976
Loss on sale of business 1,390 --
Deferred income 1,425 --
Restructure charge -- 4,000
CHANGES IN ASSETS LIABILITIES NET OF EFFECTS
OF ACQUISITION:
Increase in accounts and notes receivable (26,207) (29,581)
Decrease (increase) in receivables from affiliates 20,739 (12,331)
Decrease (increase) in inventory 19,260 (15,349)
Decrease (increase) in other assets 2,712 (4,049)
Decrease (increase) in prepaid expenses and
other current assets 2,890 (7,160)
Decrease in accounts payable and
accrued expenses (35,407) (2,693)
(Decrease) increase in amounts due to
affiliates - trade (14,796) 11,122
Increase (decrease) in pension and
post retirement obligations 5,254 (4,496)
(Decrease) increase in other non-current
liabilities (2,290) 22,072
--------- ---------
Net Cash provided by operations 120,994 65,853
--------- ---------
</TABLE>
The accompanying notes to consolidate financial statements are an integral part
of these statements.
6
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands except share information) 1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (172,824) (106,425)
Proceeds from sale of fixed assets 54,045 30,773
Acquisitions, net of cash acquired (79,154) (1,086,762)
Proceeds from sale of business 600 --
----------- -----------
Net cash used in investing activities (197,333) (1,162,414)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- 500,000
Payments on short-term borrowings with affiliates (3,255,000) 2,261,000
Proceeds from short-term borrowings with affiliates 3,320,000 2,763,000
Proceeds from short-term bank borrowings 305,670 125,759
Payments of short-term bank borrowings (304,018) (138,111)
Payments of long-term bank borrowings with affiliates (300,000) (260,963)
Proceeds from long-term borrowings with affiliates 300,000 350,000
Proceeds from sale of receivables 13,567 18,916
Cash dividends paid (2,000) (2,000)
Payments under capitalized lease obligations -- (118)
----------- -----------
Net cash provided by financing activities 78,219 1,095,483
----------- -----------
Effect of exchange rate changes on cash (1,880) 1,078
----------- -----------
Net change in cash and cash equivalents -- --
Cash and cash equivalents at beginning of year -- --
----------- -----------
Cash and cash equivalents at end of year $ -- $ --
----------- -----------
CASH PAID DURING THE YEAR FOR:
Income taxes $ 8,111 $ 18,192
----------- -----------
Interest $ 84,634 $ 58,318
----------- -----------
----------- -----------
NON-CASH FINANCING ACTIVITIES:
Debt assumed from acquisition of Prime $ -- $ 260,963
Debt reclassified from long-term to short-term 50,000 100,000
</TABLE>
See accompanying notes to consolidated financial statements for additional
non-cash financing activities.
7
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(Amounts in thousands, except share information)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Preparation - Atlas Copco North America
-------------------------------------------
Inc. and subsidiaries (the "Company" or "ACNA") is owned by Atlas Copco AB
("ACAB") and Atlas Copco Airpower n.v. ("ACA"), a wholly-owned subsidiary
of ACAB (collectively, the "Group"). At the end of 1998, ACAB and ACA owned
40.2% and 59.8% of the outstanding common shares of ACNA, respectively. In
August, 1997 ACNA issued 40,045 shares of common stock to ACA, in return
receiving $500,000 in cash.
The Company is engaged primarily in the manufacture, sale, and rental of a
diversified line of equipment, geographically disbursed, principally in the
United States. The accompanying consolidated financial statements include
the accounts of the Company and its subsidiaries. All intercompany accounts
and transactions have been eliminated in consolidation. Investments in less
than majority owned subsidiaries and affiliates are accounted for by the
equity method.
Use of Estimates - The preparation of financial statements in conformity
----------------
with generally accepted accounting principles ("GAAP") requires management
to make estimates and use assumptions that affect certain reported amounts
and disclosures; actual amounts may differ.
Foreign Currency Transactions and Translations - The financial statements
----------------------------------------------
of the Company's foreign subsidiaries are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
52. Assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at year-end exchange rates. Sales and expense items are translated
at the average exchange rates prevailing during the period. Resulting
translation adjustments are included in stockholders' equity.
Gains and losses arising from the settlement of foreign currency
transactions and the year-end valuation of foreign-denominated receivables
and payables are included in cost of sales and interest income and other
(expense) income-net in the accompanying Consolidated Statements of Income
and amounted to a net gain of $589 in 1998 and a net loss of $2,821 in
1997.
Revenue Recognition - Revenue is generally recognized when title passes to
-------------------
the customer. Fulfillment of certain contracts can span several months;
revenue on such contracts is primarily recognized on the completed contract
basis. Unearned interest related to conditional sales contracts
(installment sales) is netted against accounts receivable and amortized to
income over the contract period.
8
<PAGE>
The Company rents equipment primarily to the construction, industrial and
homeowner markets. Rental agreements are primarily structured as operating
leases, and rental revenue is recognized in the period in which it is
earned.
Cash and Cash Equivalents - The Company considers all highly liquid
-------------------------
investments with a maturity of three months or less at the date of purchase
to be cash equivalents.
Inventories - Inventories are valued at the lower of cost or market. Cost
-----------
is determined principally by the last-in, first out ("LIFO") method.
Rental fleet - Rental fleet is recorded at cost. Depreciation is computed
------------
using the straight-line method over the estimated useful lives of the
related assets (three to twelve years), after giving effect to the
estimated salvage value (generally 50%). Included in net rental fleet for
1998 and 1997 is $552,648 and $447,548, respectively, related to Prime
Service, Inc. (see note 2 below). Depreciation expense aggregated $64,812
and $32,595 in 1998 and 1997, respectively. Accumulated depreciation at
December 31, 1998 and 1997 aggregated $138,418 and $82,720, respectively.
Maintenance and repairs are charged to operations as incurred. Expenditures
which increase productive capacity or extend the life of the rental fleet
leased under operating leases are capitalized. When rental fleet is
disposed of, the related cost and accumulated depreciation are removed from
the respective accounts and any gains or losses are included in results of
operations.
Property, Plant and Equipment - Property, plant and equipment is recorded
-----------------------------
at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets (three to forty years).
Depreciation expense aggregated $28,660 and $25,702 in 1998 and 1997,
respectively. Maintenance and repairs are charged to operations as
incurred. Expenditures which increase productivity or extend the life of an
asset are capitalized. Upon disposal the related cost and accumulated
depreciation are removed from the respective accounts and any gains or
losses are included in results of operations.
Goodwill and other intangibles - Goodwill represents the excess of cost
------------------------------
over the fair value of assets acquired and liabilities assumed related to
acquisitions by the Company. Goodwill and other intangibles are being
amortized, on a straight-line basis, over three to forty years. Accumulated
amortization aggregated $114,255 and $76,451 at December 31, 1998 and 1997,
respectively.
The recoverability of long term assets, including goodwill, is evaluated
based upon operating results and other changes in the business or business
environment. Should operating results or changes in the business or
business environment indicate potential impairment, the Company will
evaluate whether impairment exists based upon undiscounted expected future
cash flows before amortization.
Income Taxes - Income taxes are accounted for under SFAS No. 109.
------------
"Accounting for Income Taxes." Under SFAS No. 109 deferred income taxes
reflect the tax consequences of differences between the financial reporting
and tax bases of assets and liabilities. A valuation allowance is provided
for deferred tax assets whose realization is not considered to be more
likely than not. Adjustments to the deferred
9
<PAGE>
income tax valuation allowance are made periodically based on management's
assessment of the recoverability of the related assets.
Provisions for deferred income taxes are recorded to the extent of
withholding taxes and incremental U.S. taxes, if any, that will arise from
repatriation of dividends from those foreign subsidiaries where local
earnings are not permanently reinvested.
Research and Development Costs - Research and development costs are charged
------------------------------
to expense in the period in which the costs are incurred and amounted to
approximately $24,843 and $23,399 in 1998 and 1997, respectively.
Relocation Charge - In the first quarter of 1997, Chicago Pneumatic Tool
-----------------
Company ("CP") relocated its headquarters from Utica, New York, to a new
facility in Rock Hill, South Carolina. The company recorded a charge of
$3,801 and $7,659 during 1998 and 1997, respectively, of which the
significant components included employee relocation and transition costs
and the cost of moving machinery and equipment. At December 31, 1998 all
amounts accrued by the Company had been paid.
New Pronouncements - In March 1998, the Accounting Standards Executive
------------------
Committee issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP
98-1 requires that computer software costs that are incurred in the
preliminary project stage be expensed as incurred and that criteria be met
before capitalization of costs to develop or obtain internal use computer
software. Adoption of the SOP is required for fiscal years beginning after
December 15, 1998. The Company does not believe that the new standard will
have a material impact on the Company's consolidated financial statements.
The Financial Accounting Standards Board issued Statements of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
establishes standards for reporting and display of comprehensive income and
Statements of Financial Accounting Standards No. 132, "Employers
Disclosures about Pensions and Other Postretirement Benefits", which
revises disclosure about pension and other postretirement benefit plans.
The Company has adopted the provisions of these statements in 1998.
Reclassifications - Certain prior year amounts have been reclassified to
-----------------
conform with the current year presentation.
2. ACQUISITIONS AND DIVESTITURE
Acquisitions - On July 11, 1997 the Company acquired 100% of the
------------
outstanding shares of Prime Service, Inc. ("Prime"), for a purchase price
of $925,784. The results of Prime are included in the Company's
consolidated results beginning July 11, 1997. Prime's operations primarily
consist of renting equipment and, to a lesser extent, selling complementary
parts, merchandise and used equipment to commercial construction,
industrial and residential users. Prime also acts as a distributor of new
equipment on behalf of major equipment manufacturers. The acquisition was
accounted for as a purchase, and the purchase price was assigned to the
tangible and
10
<PAGE>
intangible assets acquired and liabilities assumed based upon the fair
market value at the date of acquisition. The purchase price exceeded the
amounts assigned to such net assets by approximately $834,709. Included in
net assets acquired are non-compete agreements with an aggregate value of
$1,693 being amortized over three years.
In 1997, subsequent to the Company's acquisition of Prime, Prime completed
five asset acquisitions with each accounted for as a purchase. The combined
purchase price of the five acquisitions was $160,978. The purchase price of
these five acquisitions exceeded the amounts assigned to the fair value of
the net assets acquired by $30,697. During 1998 adjustments to goodwill in
the amount of $3,600 were made related to adjustments in asset valuations.
Included in the net assets acquired are non-compete agreements with an
aggregate value of $7,310 entered into with the prior owners which are
being amortized over three years.
In 1998, Prime completed two asset acquisitions with each accounted for as
a purchase. The combined purchase price of the two acquisitions was
$71,500. The purchase price of these acquisitions exceeded the amounts
assigned to the fair value of the net assets acquired by $34,100. Included
in the net assets acquired are non-compete agreements with an aggregate
value of $24 entered into with the prior owners, being amortized over three
years. Also, in 1998 Prime purchased a facility and certain assets of a
company for $7,654. The amount paid exceeded the fair value of the net
assets acquired by $2,100.
Divestiture - On June 15, 1998, the Company sold the tunnel boring machine
-----------
business of Atlas Copco Robbins Inc. This resulted in a loss of $1,390. At
December 31, 1998, the Company had a receivable in the amount of $2,897 on
its books related to the sale and a reserve of $1,490 against the
receivable. No other reserves were maintained. In 1997, the Company
recorded a charge of $4,000 related to the tunnel boring machine business,
of which the significant component was the write off of equipment of
approximately $3,000.
11
<PAGE>
3. ACCOUNT AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
--------- ---------
<S> <C> <C>
Accounts receivable $ 255,242 $ 241,808
Installment receivables 1,158 1,852
Notes receivable 678 --
--------- ---------
Non-current portion 257,078 243,660
Allowance for doubtful account (434) (359)
(5,772) (5,407)
--------- ---------
Account and note receivable -- net $ 250,872 $ 237,894
--------- ---------
--------- ---------
</TABLE>
During 1998 and 1997, a subsidiary of the Company sold receivables with
full recourse. The proceeds from the sale of these receivables was $13,567
and $18,916 in 1998 and 1997, respectively.
The total amount of receivables sold with recourse, which are outstanding
at December 31, 1998, amount to approximately $14,638, for which the
Company has allowances to cover the estimated exposure under the recourse
provisions.
4. INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
--------- ---------
<S> <C> <C>
Raw materials, component parts
and work-in-progress $ 102,900 $ 106,375
Finished goods and merchandise 130,733 130,752
LIFO Reserve (15,317) (14,847)
--------- ---------
218,316 222,280
Progress billings (12,796) (8,419)
--------- ---------
Inventory -- net $ 205,520 $ 213,861
--------- ---------
--------- ---------
</TABLE>
12
<PAGE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
--------- ---------
<S> <C> <C>
Land and land improvements $ 17,836 $ 17,276
Buildings and building improvements 69,534 61,320
Machinery and equipment 193,328 189,358
Office furniture and fixtures 27,654 23,973
Construction in progress 14,908 13,774
--------- ---------
323,260 305,701
Accumulated depreciation (128,648) (104,653)
--------- ---------
Property, plant and equipment - net $ 194,612 $ 201,048
--------- ---------
--------- ---------
</TABLE>
6. BANK BORROWINGS
Included in short-term bank borrowings are notes and loans which are
payable under available lines of credit maintained in the U.S., as well as
short-term borrowings by foreign subsidiaries through local banks. Where
borrowings are made on a discounted basis, the discount is amortized over
the term of the loan on a straight-line basis. The average rate on
outstanding borrowings was 6.10% and 9.19% at the end of 1998 and 1997,
respectively. The Company's lines of credit may be withdrawn at the
discretion of the banks and do not require commitment fees or compensating
balance arrangements. The Company has $225,000 of available lines of
credit, of which $8,700 was utilized at December 31, 1998. Included in
other non-current liabilities at December 31, 1998 and 1997 are $586 and
$1,276, respectively, of long-term borrowings of a foreign subsidiary. The
outstanding amounts related principally to term loans payable on various
dates through 2001. Such borrowings bear interest rates from 11.5% to
13.5%.
7. INCOME TAXES
The components of earnings before income taxes as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
------- -------
<S> <C> <C>
U.S $32,523 $33,299
Foreign 3,546 3,014
------- -------
Total $36,069 $36,313
------- -------
------- -------
</TABLE>
The domestic and foreign components of the provision for income taxes are
as follows:
13
<PAGE>
<TABLE>
<CAPTION>
(In thousands) 1998 1997
-------- --------
<S> <C> <C>
Current:
Federal $ 6,166 $ 3,878
State 5,138 4,909
Foreign 1,511 1,409
-------- --------
Total Current 12,815 10,196
-------- --------
Deferred:
Federal and State 17,544 15,366
Foreign 20 (390)
-------- --------
Total Deferred 17,564 14,976
-------- --------
Total Provision for Income Taxes $ 30,379 $ 25,172
-------- --------
-------- --------
</TABLE>
The provision for income taxes differs from amounts computed by applying
the statutory federal income tax rate of 35% due to the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
-------- --------
<S> <C> <C>
Federal income taxes at statutory rate $ 12,487 $ 12,709
Goodwill amortization and other permanent items 13,992 8,745
State income taxes less federal income tax effect 3,611 4,423
Other - net 289 (705)
-------- --------
Provision for income taxes $ 30,379 $ 25,172
-------- --------
-------- --------
</TABLE>
The Company and its wholly-owned U.S. subsidiaries file a consolidated
federal income tax return. The Company's federal tax provision is shown net
of tax credits. At the end of 1998, federal net operating loss
carryforwards totaled $23,247, which expire through 2019, capital loss
carryforwards of $4,060, which expire through 2004, and contribution
carryforwards of $336, which expire through 2004. Net operating losses of
$9,961 and contribution carryforwards of $18 are subject to utilization
limitations under the provisions of the Internal Revenue Code. The Company
has tax credit carryforwards relating to foreign tax credits of $1,906
which expire through 2004, alternative minimum tax credit carryforwards of
$10,460, which can be carried forward indefinitely, and research and
development tax credits of $1,391, which expire through 2019. Alternative
minimum tax credits in the amount of $6,948 are subject to utilization
limitations under provisions of the Internal Revenue Code. The capital loss
carryforwards, contribution carryforwards, foreign tax credit
carryforwards and research and development credit carryforwards have all
been offset by a valuation allowance.
The Company's consolidated United States income tax returns have been
audited by the Internal Revenue Service through 1995.
No provision has been made for deferred income taxes on approximately
$7,005 of undistributed earnings of the Company's foreign subsidiaries,
which are permanently reinvested.
Deferred income taxes reflected (a) the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
(b) the net tax effects of operating losses and (c) tax credit
carryforwards. The effects of significant items comprising the Company's
net deferred tax asset and liability as of December 31, 1998 and 1997 are
as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
--------- ---------
<S> <C> <C>
Current deferred tax assets:
Accounts receivable reserves $ 2,075 $ 1,802
Warranty reserves 4,574 5,829
Employee benefits 3,100 6,500
Other current assets 16,834 12,427
Relocation reserve 96 1,863
Restructure reserve 636 1,458
Foreign reserve 192 143
Inventory reserves 6,893 6,143
Valuation allowance -- (3,583)
--------- ---------
Net current assets 34,400 32,582
--------- ---------
Non-current deferred tax assets:
Domestic net operating loss carryforwards (expiring through 2019) 8,137 3,416
Other non-current assets 539 2,888
Tax credit carryforwards
(Foreign, AMT & R&D) 13,757 10,905
Other federal carryforwards 1,539 --
State net operating loss 5,843 5,706
Employee benefits 7,545 6,147
Postretirement benefit obligations 12,599 12,485
Valuation allowance (11,242) (6,807)
--------- ---------
Net non-current assets 38,717 34,740
--------- ---------
Non-current deferred tax liabilities:
Fixed assets and intangible assets 107,034 86,772
LIFO reserve 17,736 8,745
U.S. tax on unrepatriated earnings 588 536
Basic of foreign subsidiaries 321 321
Foreign liabilities 540 554
--------- ---------
Net non-current liabilities 120,219 96,928
--------- ---------
Net non-current $ 81,502 $ 62,188
--------- ---------
--------- ---------
</TABLE>
14
<PAGE>
The Company has recorded a deferred tax asset of $29,276 relating to net
operating loss and tax credit carryforwards, before a valuation allowance
of $11,242. Realization of the Company's deferred tax asset is dependent on
generating sufficient taxable income prior to the expiration of the loss
carryforwards. Although realization is not assured, management believes it
is more likely than not that the net deferred tax assets will be realized.
The Company has certain tax contingencies. Management believes the Company
has adequate accruals. However, events and circumstances may change in the
near term, which could require an adjustment to the accruals.
8. PENSION AND OTHER BENEFIT PLANS
The Company sponsors a defined benefit pension plan (the "Plan") for
substantially all of its U.S. subsidiaries except CP, Milwaukee electric
Tool Company ("METCO") and Prime. Substantially all employees of the
included entities are eligible to participate in the Plan. Benefits under
the Plan are based upon years of service and compensation levels. Effective
January 1, 1998 the Plan was converted to a cash balance format. In
addition, CP sponsored several defined benefit pension plans for employees
who were members of various unions. Benefits under the defined benefit
pension plans were based upon years of service and terms included in the
related collective bargaining agreements. Prime sponsors a defined benefit
plan for substantially all of its employees. Benefits are based upon years
of service and the employee's highest average earnings received in any five
consecutive years during the last ten years before retirement.
Pension and other postretirement benefits for 1998 and 1997 for the Plan
consisted of the following:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Benefit obligation $ 51,657 $ 46,921 $ 17,063 $ 17,426
Fair value of plan assets 51,771 53,734 -- --
Funded status $ 114 $ 6,813 $(17,063) $(17,426)
Accrued benefit cost recognized in the statement of
financial position at December 31 $ 15,156 $ 13,259 $ 19,860 $ 18,605
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
Weighted-average assumptions 1998 1997 1998 1997
---- ---- ---- ----
Discount rate 6.75% 7.50% 6.75% 7.50%
Expected return on plan assets 8.25% 8.50% -- --
Rate of compensation increase 4.50% 4.75% -- --
</TABLE>
15
<PAGE>
For measurement purposes, a 5.75% pre-65 and a 4.75% (2.75% for hourly
participants of Atlas Copco Compressors Inc.) post-65 annual increase in
per capita costs of health care benefits were assumed during 1999; these
rates were assumed to equal 4.75% (2.75% for post-65 hourly Atlas Copco
Compressors participants) in all future years.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Benefit cost $1,897 $1,796 $2,103 $1,751
Employee contributions -- -- 854 956
Plan participants' contributions -- -- 23 29
Benefits paid 2,984 1,567 877 985
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, a 1% increase in the health care cost trend
rate would increase the accrued benefit obligation by $1,814 and increase
the benefit cost for 1998 by $270 and a 1% decrease would decrease the
benefit obligation by $1,543 and decrease the accrued benefit cost for 1998
by $225.
Pension and other postretirement benefits for 1998 and 1997 for the CP plan
consisted of the following:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Benefit obligation $ 51,236 $ 50,534 $ 12,186 $ 13,008
Fair value of plan assets 41,598 41,272 -- --
-------- -------- -------- --------
Funded status (9,638) (9,262) (12,186) (13,008)
Unrecognized net actuarial loss/(gain) 6,952 6,317 (955) (158)
-------- -------- -------- --------
Net amount recognized ($ 2,686) ($ 2,945) ($13,141) ($13,166)
-------- -------- -------- --------
-------- -------- -------- --------
Amounts recognized in the statement of
financial position at December 31
consist of:
Accrued benefit cost ($ 9,638) ($ 9,262) $ 12,186) ($13,008)
Accrued benefit liability 6,952 6,317 (955) (158)
-------- -------- -------- --------
Net amount recognized ($ 2,686) ($ 2,945) ($13,141) ($13,166)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
Weighted-average assumptions 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Discount rate 6.75% 7.00% 6.75% 7.00%
Expected return on plan assets 7.50% 7.50% -- --
</TABLE>
For measurement purposes, a 5.25% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999 and a 4.25%
annual rate of increase was assumed thereafter.
16
<PAGE>
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Benefit cost $ 605 $1,154 $ 969 $ 968
Employee contributions 863 2,388 -- --
Plan participants' contributions -- -- -- --
Benefits paid 5,105 4,763 1,080 915
</TABLE>
The health care lost trend rate assumption has a significant effect on the
amounts reported. For example, a 1% increase in the health care cost trend
rate would increase the benefit obligation by $1,387 and increase the
accrued benefit cost by $104 and a 1% decrease would decrease the benefit
obligation by $1,195 and decrease the accrued benefit cost for 1998 by $89.
Pension benefits for 1998 and 1997 (for the period July 11, 1997 through
December 31, 1997) for the Prime plan consisted of the following:
<TABLE>
<CAPTION>
Pension Benefits
----------------
1998 1997
---- ----
<S> <C> <C>
Benefit obligation $ 24,364 $ 16,434
Fair value of plan assets 16,239 12,103
-------- --------
Funded status ($ 8,125) ($ 4,331)
-------- --------
-------- --------
Accrued benefit cost recognized in the statement of
financial position at December 31 $ 5,874 $ 3,495
-------- --------
-------- --------
<CAPTION>
Pension Benefits
----------------
1998 1997
---- ----
<S> <C> <C>
Weighted-average assumptions
Discounted rate 6.75% 7.00%
Expected return on plan assets 9.50% 9.50%
Rate of compensation increase 5.50% 5.50%
<CAPTION>
Pension Benefits
----------------
1998 1997
---- ----
<S> <C> <C>
Benefit cost $ 3,575 $ 1,431
Employer contributions 2,395 930
Plan participants' contributions -- --
Benefits paid 172 26
</TABLE>
In addition to the aforementioned pension plans, the Company contributes to
qualified 401(k) plans which cover substantially all non-union employees.
Company contributions during 1998 and 1997 totaled $3,531 and $3,176,
respectively. METCO has a profit sharing plan for
17
<PAGE>
substantially all of its employees. Expense for this plan amounted to
approximately $10,001 in 1998 and $10,226 in 1997. Additionally, one of the
Company's subsidiaries participates in several mutli-employer defined
benefit pension plans. Amounts charged to pension cost and contributed to
these plans in 1998 and 1997 totaled $977 and $968, respectively.
9. TRANSACTIONS WITH AFFILIATES
The Company is a member of a group of affiliated companies and has
extensive transactions and relationships with members of that Group (see
Note 1).
Amounts due to affiliates include short-term debt and trade purchases. A
portion of the Company's short-term debt is funded by ACAB. The short-term
borrowings at the end of 1998 and 1997 were $875,115 and $760,131,
respectively, including accrued interest. Total interest paid for all
short-term borrowings from ACAB was $41,607 in 1998 and $31,425 in 1997.
The average interest rates for the outstanding borrowings at year-end were
6.04% in 1998 and 6.26% in 1997.
Amounts due to affiliates (long-term) relates to borrowings from ACAB at
the end of 1998 and 1997 totaling $500,000 and $550,000, respectively. The
carrying value of such borrowings approximates fair value. Such amount
matures as follows: $135,000 in 2000, $65,000 in 2002, $100,000 in 2003 and
$200,000 in 2008. Total interest paid for all long-term borrowings from
ACAB was $42,402 in 1998 and $25,296 in 1997. Interest of $84 and $104 was
accrued on the long-term debt from ACAB in 1998 and 1997, respectively. The
average interest rate for the outstanding borrowings at December 31, 1998
and 1997 was 6.91% and 6.82%, respectively.
Sales to affiliated companies of $92,638 and $104,869 in 1998 and 1997,
respectively, are included in the accompanying consolidated financial
statements.
Inventory purchases from affiliated companies were $170,968 and $160,743 in
1998 and 1997, respectively. The majority of these purchases were made from
affiliates in Belgium, Sweden and Canada. Purchases are payable in U.S.
dollars.
From time to time, the Company has negotiated agreements with certain
affiliated companies to provide for the reimbursement of identifiable
expenses incurred in assisting them in their expansion, warranty, research
and development and various other programs in the United States.
Accordingly, approximately $1,041 and $979 of such reimbursed expenses in
1998 and 1997, respectively, have been included as a reduction of expenses
in the determination of operating results.
10. LEASE TRANSACTIONS
Rental and lease expense charged to operations by the Company under
operating leases amounted to $14,879 and $9,942 in 1998 and 1997,
respectively. These leases cover principally warehouses, offices and other
facilities, and certain equipment.
The Company's future minimum lease payments under noncancelable operating
leases having initial or remaining lease terms in excess of one year as of
December 31, 1998 as follows:
18
<PAGE>
<TABLE>
<CAPTION>
Year
<S> <C>
1999 $ 15,245
2000 13,205
2001 10,649
2002 8,501
2003 6,612
Thereafter 35,859
-------------
Total minimum lease payments $ 90,071
-------------
</TABLE>
The Company also leases (as lessor) compressors under operating lease
agreements for periods of less than one year.
11. INVESTMENTS IN UNCONSOLIDATED COMPANIES
The Company has a 50% equity interest in Toku Hambai Kabushiki Kaisha of
Japan, and a 35% equity interest in Revathi - CP Equipment, Ltd. The
Company accounts for these less than majority owned investments using the
equity method.
Summary of combined operating information for these investments for 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Net sales $77,831 $88,549
Costs and expenses 72,496 83,701
Income before income taxes 5,335 4,848
Net income 3,609 3,010
Equity in net income 1,311 1,129
Share of dividends 275 342
</TABLE>
Summary of combined balance sheet information for these investments at
December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Current assets $28,972 $26,124
Non-current assets 3,078 3,365
Current liabilities 12,698 16,128
Non-current liabilities 202 170
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
As of December 31, 1998, the company had total available irrevocable
letters of credit facilities of $201,587 of which $47,209 was outstanding.
Of the $201,587, $200,000 relates to joint letters of credit/lines of
credit facilities. To the extent that $200,000 of the letters of credit
19
<PAGE>
facilities are used, the availability under the Company's lines of credit
(see Note 6) is decreased and vice-versa. Such irrevocable commercial and
standby letters of credit facilities support various agreements, leases and
insurance policies.
As of December 31, 1998, the Company has guaranteed approximately $800
which primarily covers a subsidiary's performance with respect to specific
projects. Subsidiaries of the Company have guaranteed performance relating
to projects in the amount of $9,686.
The Company has been named co-defendant in a number of product liability
legal actions, as well as certain employee discrimination actions. Also,
the Company has been notified by a party that such party may assert a claim
against the Company for non-performance under a contract, if the party is
unsuccessful in negotiating a change order with the project owner. The
claim, if asserted, could be significant.
Based on the facts and circumstances of each of the individual actions and
the unasserted claim, management is of the opinion that the ultimate
outcome of these matters will not have a material adverse effect on the
consolidated financial statements of the Company.
20
