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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
RENTAL SERVICE CORPORATION
(Name of Subject Company)
RENTAL SERVICE CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
76009V102
(CUSIP Number of Class of Securities)
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Robert M. Wilson
Executive Vice President, Chief Financial Officer, Secretary and Treasurer
Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
(480) 905-3300
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
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Copies to:
Elizabeth A. Blendell, Esq. Mark D. Gerstein, Esq.
Latham & Watkins Latham & Watkins
633 West Fifth Street, Suite 4000 233 South Wacker Drive
Los Angeles, California 90071-2007 Sears Tower, Suite 5800
(213) 485-1234 Chicago, Illinois 60606-6401
(312) 876-7700
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Item 1. Security and Subject Company.
The name of the subject company is Rental Service Corporation, a Delaware
corporation ("RSC"), and the address of its principal executive offices is
6929 East Greenway Parkway, Suite 200, Scottsdale, Arizona 85254. This
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-
9") relates to the common stock, par value $.01 per share (the "Shares"), of
RSC.
Item 2. Tender Offer of the Bidder.
This Schedule 14D-9 relates to the tender offer by UR Acquisition
Corporation, a Delaware corporation ("UR Acquisition") and a wholly owned
subsidiary of United Rentals, Inc., a Delaware corporation ("United Rentals"
and, together with UR Acquisition, the "Bidder"), to purchase all of the
outstanding Shares at a price of $22.75 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated April 5, 1999 and the related Letter of
Transmittal (which together constitute the "Tender Offer"). The Tender Offer
expires at 12:00 Midnight, New York City time, on Friday, April 30, 1999. The
Tender Offer is disclosed in a Tender Offer Statement on Schedule 14D-1 dated
April 5, 1999 (as amended prior to the date hereof, the "Schedule 14D-1"), as
filed by the Bidder with the Securities and Exchange Commission (the "SEC") on
such date. Based on information set forth in the Schedule 14D-1, the principal
executive offices of each of UR Acquisition and United Rentals are located at
Four Greenwich Office Park, Greenwich, Connecticut 06830.
According to the Schedule 14D-1, the purpose of the Tender Offer is to
facilitate the acquisition of a majority of the outstanding Shares as a first
step in the acquisition of RSC. United Rentals discloses in the Schedule 14D-1
that it is seeking to enter into negotiations with RSC with respect to a
merger with UR Acquisition or another direct or indirect subsidiary of United
Rentals (the "Proposed Second-Step Merger") which would be consummated as soon
as practicable after consummation of the Tender Offer. According to the
Schedule 14D-1, RSC would be the surviving corporation in the Proposed Second-
Step Merger and would continue as a wholly owned subsidiary of United Rentals.
Upon the consummation of the Proposed Second-Step Merger, each then
outstanding Share (other than Shares held (1) by the Bidder or any wholly
owned subsidiary of United Rentals, (2) in RSC's treasury, and (3) by
stockholders who properly exercise appraisal rights under the General
Corporation Law of the State of Delaware, as amended (the "DGCL")) would be
converted into the right to receive in cash the price per share paid by UR
Acquisition pursuant to the Tender Offer. In addition, as disclosed in the
Schedule 14D-1, UR Acquisition reserves the right to amend the Tender Offer
upon entering into a merger agreement with respect to the Proposed Second-Step
Merger or otherwise to negotiate a merger agreement with RSC not involving a
tender offer pursuant to which UR Acquisition would terminate the Tender Offer
and Shares would, upon consummation of such merger, be converted into cash,
common stock of United Rentals and/or other securities in such amounts as may
be negotiated by United Rentals and RSC.
According to the Schedule 14D-1, the Tender Offer is subject to the
fulfillment of certain conditions, including, among other things:
The Minimum Condition--there being validly tendered and not withdrawn
prior to the expiration of the Tender Offer that number of Shares which,
together with any Shares owned by the Bidder, constitute a majority of the
Shares outstanding on a fully diluted basis (i.e. as though all options or
other securities convertible into or exercisable or exchangeable for Shares
had been so converted, exercised or exchanged).
The Financing Condition--the receipt by United Rentals (North America),
Inc., a wholly owned subsidiary of United Rentals, of financing for the
Tender Offer and the Proposed Second-Step Merger pursuant to the commitment
letter, dated as of April 4, 1999, issued by Goldman Sachs Credit Partners
L.P. (the "Commitment Letter").
The United Rentals Merger Agreement Condition--RSC having entered into a
definitive merger agreement with the Bidder that would provide for the
acquisition of RSC pursuant to the Tender Offer and the Proposed Second-
Step Merger.
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The Stock Option Cancellation Condition--the termination or invalidation
of the option granted by RSC to NationsRent, Inc., a Delaware corporation
("NationsRent"), to purchase up to 4,795,431 Shares (subject to certain
adjustments), or approximately 19.9% of RSC's issued and outstanding Shares
on January 19, 1999, without any Shares having been issued thereunder.
The Termination Fee Cancellation Condition--the invalidation of the
amounts payable by either RSC or NationsRent to the other upon a
termination under certain circumstances of the Agreement and Plan of Merger
(the "NationsRent Merger Agreement"), dated as of January 20, 1999, between
RSC and NationsRent, or the termination of the obligation to pay such
amounts, without any amount or portion thereof having been paid by RSC or
any of its affiliates pursuant to the NationsRent Merger Agreement or
otherwise.
The Stockholder Vote Condition--the stockholders of RSC shall not have
approved the NationsRent Merger Agreement.
The NationsRent Merger Agreement Termination Condition--UR Acquisition
being satisfied, in its sole discretion, that the NationsRent Merger
Agreement has been terminated.
The Section 203 Condition--UR Acquisition being satisfied, in its sole
discretion, that the provisions of Section 203 of the DGCL are inapplicable
to the Tender Offer and the Proposed Second-Step Merger.
The Economic Impairment Condition--RSC not having entered into or
effectuated any agreement or transaction with any person or entity having
the effect of impairing UR Acquisition's ability to acquire RSC or
otherwise diminishing the expected economic value to UR Acquisition of the
acquisition of RSC.
The HSR Condition--the expiration or termination, prior to the
expiration date of the Tender Offer, of the waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations thereunder applicable to the
acquisition of Shares pursuant to the Tender Offer.
In addition, according to the Schedule 14D-1, the Bidder will not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, pay for, and may delay the acceptance for payment of
or, subject to any applicable rules and regulations of the SEC, the payment
for any tendered Shares, and may terminate the Tender Offer as to any Shares
not then paid for, if in the sole judgment of UR Acquisition:
(1) at or prior to the expiration date of the Tender Offer any one or
more of the Minimum Condition, the Stock Option Cancellation Condition, the
Termination Fee Cancellation Condition, the Stockholder Vote Condition, the
NationsRent Merger Agreement Termination Condition, the United Rentals
Merger Agreement Condition, the Section 203 Condition, the Economic
Impairment Condition or the HSR Condition has not been satisfied, or
(2) at any time after April 5, 1999 and prior to the acceptance for
payment of Shares, the Financing Condition shall not have occurred or
certain other events set forth in the Schedule 14D-1 shall have occurred,
which in any such case, in the sole judgment of the Bidder, and regardless
of the circumstances giving rise to such condition (including any action or
inaction by the Bidder or any of their affiliates), makes it inadvisable to
proceed with the Tender Offer and/or with the acceptance for payment or
payment for Shares.
On April 13, 1999, United Rentals filed with the SEC (1) preliminary proxy
materials to solicit proxies from RSC's stockholders to vote against the
NationsRent Merger at the special meeting of stockholders held for the purpose
of voting on the NationsRent Merger (as to which the RSC Board has not yet set
a record date), and (2) a preliminary consent solicitation statement
soliciting written consents from RSC's stockholders to remove the members of
the RSC Board and replace them with hand-picked nominees of United Rentals and
to repeal each provision of RSC's bylaws or amendment thereto adopted
subsequent to January 20, 1999. Also on April 13, 1999, United Rentals
requested that the RSC Board set April 26, 1999 as the record date for
purposes of its solicitation of written consents. The RSC Board intends to
respond to United Rentals' request to set a record date in the manner and at
such time as is required by RSC's bylaws. THIS SCHEDULE 14D-9 DOES NOT
CONSTITUTE A SOLICITATION OF PROXIES WITH RESPECT TO THE NATIONSRENT
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MERGER OR A SOLICITATION TO REVOKE CONSENTS IN CONNECTION WITH THE CONSENT
SOLICITATION OF UNITED RENTALS. ANY SUCH SOLICITATION BY RSC WILL BE MADE ONLY
BY MEANS OF SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH
THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Item 3. Identity and Background.
(a) The name and business address of RSC, which is the entity filing this
Schedule 14D-9, are set forth in the response to Item 1 above.
(b) Except as set forth in the response to this Item 3(b), in the
responses to Items 6, 7 and 8 below or in Annex A attached hereto or as
incorporated by reference herein, to the knowledge of RSC, as of the date
hereof, there are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between RSC or
its affiliates and: (1) RSC, its executive officers, directors or affiliates;
or (2) the Bidder or the respective officers, directors or affiliates of
United Rentals or UR Acquisition.
The NationsRent Merger Agreement
Principal Terms. On January 20, 1999, RSC and NationsRent entered into the
NationsRent Merger Agreement pursuant to which the parties agreed that,
subject to the terms and conditions of the NationsRent Merger Agreement,
NationsRent would be merged with and into RSC, with RSC as the surviving
corporation (the "NationsRent Merger"). At the effective time of the
NationsRent Merger (the "Effective Time"), (1) each share of common stock of
NationsRent would be converted into and become 0.355 of a Share (or, under
certain circumstances would be canceled), and (2) options to purchase shares
of common stock of NationsRent would be converted automatically into options
to purchase Shares (subject to certain adjustments). Shares and options to
purchase Shares which are outstanding immediately prior to the Effective Time
would continue to remain outstanding following the Effective Time and holders
of such Shares and/or options, as the case may be, would continue to hold
their Shares and options following the Effective Time.
Under the terms of the NationsRent Merger Agreement, each of RSC and
NationsRent would designate four (of the nine) members of the board of
directors of the surviving corporation in the NationsRent Merger from among
the members of their respective boards of directors as of January 20, 1999.
The ninth member would be designated by NationsRent, subject to the consent of
RSC (provided that the NationsRent Merger Agreement specifically provides that
the additional board member designated by NationsRent may not be related to H.
Wayne Huizenga or be an affiliate of, or serve as a director or executive
officer of, any entity in which Mr. Huizenga, any person related to him or any
trust or entity for the benefit of any such persons, owns, directly or
indirectly, an equity interest or interests having more than 15% of the
ordinary voting power of such entity). In addition, the NationsRent Merger
Agreement provides that Martin R. Reid, the Chairman of the Board and Chief
Executive Officer of RSC, would become the Chairman of the surviving
corporation, and Robert M. Wilson, the Executive Vice President, Chief
Financial Officer, Secretary and Treasurer of RSC, would become the Senior
Executive Vice President and Chief Financial Officer of the surviving
corporation.
The NationsRent Merger Agreement further provides that the surviving
corporation would honor, and cause its subsidiaries to honor, each existing
employment, change of control, severance and termination agreement between RSC
or its subsidiaries and its executive officers, directors and employees and
all obligations pursuant to outstanding employee benefit compensation plans
and arrangements that have accrued prior to the Effective Time. As described
below and in Annex A, certain of RSC's executive officers and directors have
agreements with RSC of the type described in the preceding sentence and/or are
eligible to participate in such benefit plans and arrangements.
The NationsRent Merger Agreement provides that the NationsRent Merger is
subject to the approval of a majority of the outstanding Shares at a special
meeting of RSC's stockholders called for such purpose. The NationsRent Merger
is also subject to the approval of a majority of the outstanding shares of
common stock of NationsRent. As described in the response to Item 2 above, RSC
will transmit separate proxy solicitation
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materials complying with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder in connection with the solicitation of
proxies for this special meeting of its stockholders, and this Schedule 14D-9
does not constitute a solicitation of proxies with respect to the NationsRent
Merger. The special meeting of RSC's stockholders in connection with the
NationsRent Merger will not occur before May 24, 1999, but has not been
scheduled at this time and no record date therefor has been set. The date of
this special meeting will depend upon, among other things, the time required
for RSC and NationsRent to complete their definitive proxy solicitation
materials for the meeting. Preliminary proxy solicitation materials have been
filed by RSC and NationsRent with the SEC on a confidential basis.
Limitations Concerning Third Party Proposals. Pursuant to the NationsRent
Merger Agreement, neither RSC nor any of its subsidiaries (nor any of their
respective officers or directors) will, and RSC will use its best efforts to
cause certain of its and its subsidiaries' representatives not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any Acquisition Proposal (as defined below), or to, directly
or indirectly have any discussion with or provide any confidential information
or data to any person relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal. Notwithstanding the
foregoing, nothing in the NationsRent Merger Agreement prevents RSC or the RSC
Board from:
(1) complying with Rules 14d-9 and 14e-2(a) under the Exchange Act;
(2) making any disclosure to its stockholders if, in the good faith
judgment of its board of directors (after consultation with outside
counsel), failure to so disclose would be inconsistent with its obligations
under applicable law;
(3) negotiating with, or furnishing information to, any person who has
made a bona fide written Acquisition Proposal that did not result from a
breach of the party's obligations under the NationsRent Merger Agreement,
if and only to the extent that such Acquisition Proposal is a Superior
Proposal (as defined below); or
(4) recommending an Acquisition Proposal that is a Superior Proposal to
the stockholders of RSC, and, in connection therewith, withdrawing or
modifying its approval or recommendation of the NationsRent Merger
Agreement or the other transactions contemplated thereby.
The preceding provisions with respect to Acquisition Proposals also apply to
NationsRent and its board of directors under the NationsRent Merger Agreement.
Under the NationsRent Merger Agreement, the term "Acquisition Proposal"
means, among other things, any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving
RSC or certain of its subsidiaries, or any purchase of, or offer to purchase,
all or substantially all of the equity securities of RSC or certain of its
subsidiaries, or all or substantially all of the assets of RSC or certain of
its subsidiaries. The Tender Offer and the Proposed Second-Step Merger
constitute an "Acquisition Proposal" under this definition.
The term "Superior Proposal" means an Acquisition Proposal by a third
party:
(1) on terms which the RSC Board determines in its good faith judgment
(after consultation with its financial advisors, whose advice must be
communicated to NationsRent) to be:
(A) more favorable from a financial point of view to the
stockholders of RSC than the NationsRent Merger, and
(B) more favorable to RSC than the NationsRent Merger after taking
into account any other relevant factors permitted to be considered
under applicable law, and after giving NationsRent at least 10 business
days to respond to the Acquisition Proposal from the third party, and
(2) which the RSC Board determines in its good faith judgment to
constitute a transaction that is reasonably likely to be consummated on the
terms set forth, taking into account all legal, financial, regulatory, and
other aspects of such proposal.
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Termination Payments. Under the following circumstances entitling
NationsRent to terminate the NationsRent Merger Agreement, RSC will be
obligated pursuant to the NationsRent Merger Agreement to pay NationsRent a
termination payment equal to $35 million as liquidated damages and to reimburse
NationsRent for its expenses in an amount of $5 million (collectively, the
"Termination Amounts"):
(1) a termination of the NationsRent Merger Agreement by NationsRent
because the requisite approval of RSC's stockholders is not obtained at any
meeting of RSC's stockholders called for such purpose;
(2) if the RSC Board withdraws or adversely modifies its approval or
recommendation to stockholders of RSC of the NationsRent Merger, or fails
to reconfirm such recommendation after the public announcement or
disclosure of an Acquisition Proposal or the intention of any person to
make an Acquisition Proposal with respect to RSC within 10 business days
after a written request by NationsRent to do so;
(3) RSC or the RSC Board recommends a Superior Proposal;
(4) the acquisition by any person or group of 40% or more of the
outstanding Shares; or
(5) a willful and intentional breach by RSC of its obligations under
the NationsRent Merger Agreement with respect to Acquisition Proposals.
NationsRent is also entitled to terminate the NationsRent Merger Agreement if
RSC negotiates with or furnishes information to any person who has made a bona
fide written Acquisition Proposal and fails to cease taking such actions within
5 business days of the commencement thereof, but NationsRent will not be
entitled to receive the Termination Amounts in the event of termination on such
basis.
The NationsRent Merger Agreement contains equivalent provisions with respect
to the circumstances under which NationsRent will be obligated to pay the
Termination Amounts to RSC following a termination of the NationsRent Merger
Agreement by RSC.
The Stock Option Agreements
Generally. In connection with the execution of the NationsRent Merger
Agreement, each of RSC and NationsRent executed a Stock Option Agreement, dated
as of January 20, 1999 (together the "Stock Option Agreements" and,
individually, the "RSC Option Agreement" and the "NationsRent Option
Agreement") in favor of the other party. Pursuant to the Stock Option
Agreements, each of RSC and NationsRent granted to the other an unconditional,
irrevocable option (with respect to the grant to RSC, the "RSC Option" and with
respect to the grant to NationsRent, the "NationsRent Option" and together, the
"Options") to purchase, subject to the terms thereof, a certain number of
shares of its common stock at a specified per share price.
Pursuant to the RSC Option Agreement and the RSC Option, RSC has the option
to purchase 11,067,986 shares of NationsRent common stock at an exercise price
equal to $6.5625 per share in cash, subject to adjustment as described in the
RSC Option Agreement (including to ensure a minimum value to RSC of $5 million
thereunder). The RSC Option is exercisable, in whole but not in part, within
180 days after the occurrence of an event which would entitle RSC to receive
the Termination Amounts, unless the Effective Time occurs prior to such
exercise, subject to extension in certain circumstances.
Pursuant to the NationsRent Option Agreement and the NationsRent Option,
NationsRent has the option to purchase 4,795,431 Shares at an exercise price
equal to $23.25 per share in cash, subject to adjustment as described in the
NationsRent Option Agreement (including to ensure a minimum value to
NationsRent of $5 million thereunder). The RSC Option is exercisable, in whole
but not in part, within 180 days after the occurrence of an event which would
entitle RSC to receive the Termination Amounts, unless the Effective Time
occurs prior to such exercise, subject to extension in certain circumstances.
Limitation on Profit from Option. Each Stock Option Agreement provides that,
notwithstanding any other provision of such Stock Option Agreement, in no event
will the grantee's "total profit" plus any Termination Amounts paid by the
issuer to the grantee exceed in the aggregate $35 million, and, if it otherwise
would exceed
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$35 million, the grantee, at its sole election, is required to (1) reduce the
number of shares subject to the Option, (2) deliver to the issuer for
cancellation shares previously purchased by the grantee pursuant to the Option,
(3) pay cash to the issuer, or (4) any combination thereof, so that the
grantee's actually realized "total profit" plus the Termination Amounts so paid
to the grantee does not exceed $35 million after taking into account the
foregoing actions. For purposes of the Stock Option Agreements, "total profit"
means the aggregate amount (before taxes) of the following: (A) the amount
received by the grantee pursuant to the issuer's repurchase of the option or
any shares granted pursuant to the Option, less, in the case of any repurchase
of such shares, the grantee's purchase price for such shares, and (B) the net
cash amounts or the fair market value of any property received by the grantee
pursuant to the sale of shares granted pursuant to the Option (or any other
securities into which such shares are converted or exchanged or any property,
cash or other securities received pursuant to adjustments made under the Stock
Option Agreements), but in no case less than the fair market value of such
shares, less the grantee's purchase price for such shares.
Each Stock Option Agreement also provides that, notwithstanding any other
provision therein to the contrary, the Option may not be exercised for a number
of shares as would, as of the date of exercise, result in a "notional total
profit" which, together with any Termination Amounts paid to the grantee (and
after giving effect to any election made by the grantee as described in the
immediately preceding paragraph), would exceed $35 million. For purposes of the
Stock Option Agreements, the term "notional total profit" means, with respect
to shares as to which the grantee may propose to exercise the Option, the
"total profit" determined as of the date of such proposal assuming that the
Option was exercised on such date for such number of shares and assuming that
(1) such shares (or any other securities into which such shares are converted
or exchanged) were sold for cash at the closing market price on the New York
Stock Exchange ("NYSE") for shares of the issuer's common stock as of the close
of business on the preceding trading day (less customary brokerage
commissions), and (2) any property, cash or other securities received pursuant
to adjustments made under the Stock Option Agreement is disposed of for fair
market value.
The Voting Agreement
As an inducement and condition to the willingness of RSC and NationsRent to
enter into the NationsRent Merger Agreement, certain stockholders of
NationsRent (the "Key NationsRent Stockholders") entered into a Voting
Agreement, dated January 20, 1999, with RSC (the "Voting Agreement"). Pursuant
to the Voting Agreement, each Key NationsRent Stockholder has agreed, at any
meeting of the stockholders of NationsRent with respect to the NationsRent
Merger Agreement, to vote all of the Key NationsRent Stockholder's shares of
common stock of NationsRent in favor of the NationsRent Merger and the adoption
of the NationsRent Merger Agreement, among other things, so long as the board
of directors of NationsRent has not withdrawn its recommendation of the
NationsRent Merger to its stockholders. The Voting Agreement will terminate
upon the earliest to occur of (1) the Effective Time, (2) the date that the
board of directors of NationsRent withdraws or adversely modifies its
recommendation to its stockholders of the NationsRent Merger, and (3) the date
of termination of the NationsRent Merger Agreement in accordance with its
terms.
Agreements with Mr. Reid
Employment Agreement. RSC and Mr. Reid are parties to an employment
agreement, dated as of January 14, 1998 (as amended, the "Reid Employment
Agreement"), pursuant to which Mr. Reid is employed as Chairman of the Board
and Chief Executive Officer. The term of the Reid Employment Agreement expires
on December 31, 2001, but will be automatically extended for one additional
year at the end of each calendar year, unless earlier terminated. The Reid
Employment Agreement provides for a base salary of no less than $500,000. Mr.
Reid is also eligible to receive a yearly bonus of up to $500,000, if specified
performance criteria are met. In addition, Mr. Reid is entitled to four weeks
vacation and all benefits generally available to other RSC executives.
The Reid Employment Agreement may be terminated by Mr. Reid or RSC at any
time, with or without cause. In addition, if requested by the RSC Board, Mr.
Reid will resign as Chief Executive Officer, but will remain as Chairman of the
Board and devote at least 50% of his time to RSC. Beginning with the first full
year after his resignation, Mr. Reid's base salary and corresponding bonus
opportunity would each be reduced to $250,000. The RSC Board may also request
that Mr. Reid step down as Chairman of the Board, and, in such
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circumstance, Mr. Reid would remain an RSC employee at a base salary not less
than $125,000, depending on the time he devotes.
Except where there has been a "change of control," if Mr. Reid's active
employment in all capacities is terminated by RSC without "cause" (as defined
in the Reid Employment Agreement), Mr. Reid will be entitled to receive
severance pay equal to his then-current base salary through the remaining term
of the Reid Employment Agreement plus the maximum bonus opportunity available
if he had continued in the position from which he was terminated. Additionally,
Mr. Reid will be entitled to immediate vesting of all his unvested options and
restricted stock. In addition, for the remainder of the term of the Reid
Employment Agreement, Mr. Reid will be treated as an active employee for
purposes of all benefits and will be entitled to health insurance coverage
until age 65. No severance pay or benefit continuation will be available if Mr.
Reid is terminated for cause or if he resigns (other than due to a breach of
the Reid Employment Agreement by RSC) or is asked by the RSC Board to resign as
Chief Executive Officer or step-down as Chairman of the Board. Under the Reid
Employment Agreement, a "change of control" includes (1) the acquisition by any
person (other than any employee benefit plan maintained by RSC) of beneficial
ownership of 50% or more of the Shares; (2) the disposition of all or
substantially all of the business of RSC pursuant to a merger, consolidation or
other transaction in which either RSC is not the surviving company or the
stockholders of RSC immediately prior to the transaction do not continue to own
at least 60% of the surviving corporation immediately after the transaction; or
(3) individuals who constituted the RSC Board as of January 14, 1998 cease for
any reason to constitute at least a majority of the RSC Board (provided that
any individual whose election or nomination to the RSC Board was approved by at
least two-thirds of the directors comprising the RSC Board as of the date of
the Reid Employment Agreement shall be considered as though such individual
were a member of the RSC Board as of January 14, 1998, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an election contest with respect to the election or removal of
directors or other actual or overtly and publicly threatened solicitation of
proxies or consents by or on behalf of a person or entity other than the RSC
Board).
Upon a change of control, all of Mr. Reid's unvested stock options and
restricted stock will vest. In addition, if within 24 months after a change of
control, Mr. Reid is terminated without cause or voluntarily terminates his
employment for "good reason" (as defined in the Reid Employment Agreement),
then, in place of other severance payments, he will receive a payment equal to
two and one-half times his highest base salary and annual bonus opportunity
during the term of the Reid Employment Agreement prior to the change of
control. RSC must also continue to provide Mr. Reid with health and life
insurance comparable to that in effect on the date of the change of control for
30 months or until he is re-employed and eligible for health and life insurance
benefits from a new employer that are at least as favorable as those provided
by RSC. In addition, Mr. Reid will either be fully vested in his account under
RSC's 401(k) plan (as described in Annex A attached hereto) upon the change of
control or receive payments equal to the unvested portion of that account. RSC
must also transfer to Mr. Reid the company-owned car he was using at the time
of the change of control or pay him two and one-half times his annual car
allowance.
During the term of the Reid Employment Agreement, and for four years after
any termination of employment for any reason, Mr. Reid cannot directly or
indirectly engage in any business that competes with RSC, whether as an owner,
director, officer, employee, consultant or otherwise, subject to limited
investments in public companies and a pre-existing loan to a family member.
If Mr. Reid's employment is terminated as a result of his death or
disability, all of his unvested options and restricted stock will vest, and he
or his estate will receive his unpaid base salary through the date of such
death or disability plus a pro rata portion of his maximum bonus opportunity
for that year.
In connection with the execution of the Reid Employment Agreement, RSC
accelerated the vesting of Mr. Reid's 200,000 then-outstanding options to
purchase Shares and those options became immediately exercisable.
Restricted Stock and Option Grants. On January 14, 1998, Mr. Reid was
granted options to purchase 190,000 Shares, vesting in equal installments over
four years (or earlier if certain performance criteria are met), and 10,000
shares of restricted stock, vesting in equal installments over four years.
However, the options will vest immediately if Mr. Reid presents a chief
executive officer succession plan that is approved by the RSC Board, but in no
event earlier than one year from the grant of such options. In addition, the
vesting of the
7
<PAGE>
restricted stock may be accelerated under certain circumstances, including a
"change of control" (as defined in the Reid Employment Agreement). On February
25, 1998, Mr. Reid surrendered to RSC options to purchase 57,000 Shares. On
April 29, 1998, Mr. Reid was granted options to purchase 40,411 Shares and
16,589 shares of restricted stock. These options and restricted stock are
subject to the same vesting as those granted in January 1998.
On October 9, 1998, RSC issued Mr. Reid an additional 235,000 shares of
restricted stock. The restricted stock is subject to vesting in equal
installments over four years; however, the vesting may be accelerated under
certain circumstances, including a "change of control" (as defined in the Reid
Employment Agreement). RSC also entered into an agreement to loan Mr. Reid the
amount of any tax liability resulting from this grant of restricted stock (up
to $1.4 million). The loan accrues interest at a rate equal to the current
rate on RSC's revolving credit facility (which, as of March 31, 1999 was equal
to 7.3%), with principal and interest due upon 100% vesting of the restricted
stock and in certain other circumstances. The loan is secured by the
restricted stock and will be forgiven based on the market price of the Shares
reaching certain levels, and in certain other circumstances if the vesting of
the restricted stock is accelerated. At March 31, 1999, Mr. Reid owed RSC $1.4
million, including accrued interest, under this loan agreement.
On January 4, 1999, Mr. Reid was granted options to purchase 200,000 Shares
at an exercise price of approximately $15.13 per Share and vesting in equal
installments over four years.
Severance Agreements
RSC has entered into severance agreements (collectively, the "Severance
Agreements") with Douglas A. Waugaman, Mr. Wilson, Ronald Halchishak, David G.
Ledlow, David B. Harrington and Milfred E. Howard providing for certain
benefits upon termination of employment either by RSC without cause or by the
executive officer due to a reduction in base salary and benefits (other than
across the board salary cuts for employees at the executive officer's level or
changes in benefits). These benefits include a lump sum severance payment
equal to 100% of the executive officer's base salary, plus a pro rata portion
of the current-year bonus opportunity, plus life, disability, accident and
group health insurance benefits substantially similar to those received by the
executive officer immediately prior to termination for a 12 month period. In
addition, all stock options granted prior to 1996, all stock options scheduled
to vest in the year of termination and one-third of all other stock options
held by such executive officer, if any, shall become vested and exercisable
effective as of the day immediately prior to the date of termination of the
executive officer. As consideration for these benefits, each of Messrs.
Wilson, Halchishak, Ledlow, Harrington and Howard agreed that during the term
of their Severance Agreement and for 12 months after termination of employment
for any reason they would not solicit any customers of RSC or hire or offer
employment to any of RSC's employees. Mr. Waugaman agreed that during the term
of his Severance Agreement and for 3 months after termination of employement
for any reason he would not solicit any customers of RSC or hire or offer
employment to any of RSC's employees. The Severance Agreements: (1) with
Messrs. Halchishak and Ledlow will continue in effect through December 31,
2001, (2) with Mr. Wilson will continue in effect through April 14, 2000, (3)
with Messrs. Harrington and Howard will continue in effect through May 30,
2000, and (4) with Mr. Waugaman will continue in effect through June 30, 2001.
In addition to the Severance Agreements, RSC has also entered into
executive severance agreements (collectively, the "Executive Severance
Agreements") with Messrs. Waugaman, Wilson, Halchishak, Ledlow and Harrington
providing that upon a "change of control," they will be entitled to certain
benefits upon the subsequent termination of their employment within two years
following the change of control, unless the termination is due to death or
disability or if the termination is by RSC for "cause" or by the officer other
than for "good reason" (each as defined in the Executive Severance
Agreements). The benefits under the Executive Severance Agreements include, in
lieu of any other severance obligation of RSC, severance payments equal to
200% of the executive officer's base salary, plus an additional lump sum
payment equal to the maximum bonus for the current year plus the following two
years, plus certain "gross-up" payments if any of the other payments would be
subject to "golden parachute" excise taxes. The benefits also include
continuation of health and life insurance for 18 months following termination
(unless earlier provided by another employer) and vesting of all 401(k) Plan
accounts. In addition, all stock options accelerate and become immediately
vested and exercisable,
8
<PAGE>
and all restricted stock immediately vests following a termination that gives
rise to the benefits under the Executive Severance Agreements. The Executive
Severance Agreements also provide that, for 12 months following a termination
that gives rise to the benefits thereunder, the executive officers will not
compete with RSC. Under the Executive Severance Agreements, the term "change
of control" has the same meaning given to such term in the Reid Employment
Agreement.
Indemnification Agreements
Each of the directors on the RSC Board has entered into an indemnification
agreement with RSC which supplements the indemnification provisions set forth
in RSC's bylaws (collectively, the "Indemnification Agreements"). The
Indemnification Agreements generally provide that RSC will indemnify each
director, subject to certain limitations and exclusions, for any damages,
judgments, fines, penalties, settlements and costs, attorneys' fees and other
amounts, including any expenses of establishing a right to indemnification
under the Indemnification Agreements, incurred by such director in connection
with any threatened, pending or completed claim, action, suit or other
proceeding brought against or involving such director by reason of the fact
that the director is or was an officer or director of RSC or arising out of
any action or inaction taken while serving as a director. The Indemnification
Agreements authorize the director to bring suit to enforce a claim or request
for indemnification thereunder and to recover the expenses of prosecuting such
suit if successful in whole or in part. RSC also agrees, at the request of the
director, to advance the expenses of any proceeding (other than the amount of
any settlement) giving rise to a claim for indemnification under the
Indemnification Agreements, subject to repayment to the extent the director
ultimately is not entitled to indemnification.
Certain Stock Ownership Information; Compensation of Directors and Executive
Officers
Certain information regarding securities of RSC owned beneficially or of
record by RSC's directors, executive officers and affiliates and certain
information with respect to the compensation of RSC's directors and executive
officers is set forth in Annex A attached hereto and is incorporated by
reference herein.
Other Employee Benefit and Compensation Plans
RSC maintains various other employee benefit and compensation plans,
including RSC's 401(k) Retirement Savings Plan, Stock Option Plan for Key
Employees, 1996 Equity Participation Plan, Management Incentive Compensation
Plan and executive incentive bonus plan, Executive Savings Plan, Survivor
Protection Program and Employee Qualified Stock Purchase Plan. Each of the
foregoing employee benefit and compensation plans are described in Annex A
attached hereto and are incorporated by reference herein.
Other Agreements with Affiliates
From time to time, Brentwood Buyout Partners, L.P. ("BBP") has received
investment banking fees from RSC in connection with certain acquisitions.
Investment banking fees paid to BBP totaled $388,000 in 1996, $1.1 million in
1997, $0 in 1998 and $0 to date in 1999. RSC's obligation to pay these
investment banking fees to BBP terminated upon the completion of RSC's initial
public offering in 1996. However, RSC, in its discretion, may utilize BBP's
investment banking services under the same fee arrangement. William M. Barnum,
Jr., a general partner of BBP who also serves as a director of RSC, does not
receive additional compensation from BBP for service as a director.
In connection with the acquisition of Center Rentals & Sales in December
1997 ("Center Rentals"), RSC entered into leases for certain of Center
Rentals' facilities with David P. Lanoha, a director of RSC, and certain
partnerships affiliated with Mr. Lanoha. The leases initially expire in 2002,
with options to extend for three periods of five years each. The aggregate
annual rent under such leases is $720,000. RSC believes the terms of these
leases are no less favorable than those that could be obtained from
unaffiliated third parties. Prior to the acquisition, these locations had been
leased by Center Rentals from Mr. Lanoha and his affiliates and, in connection
with the acquisition of Center Rentals, these leases were terminated.
The foregoing descriptions and those in Annex A attached hereto are
qualified in their respective entireties by reference to the texts of the
applicable, contracts, agreements, plans, policies, arrangements and other
documents, copies of which are filed as Exhibits 4 through 28 hereto and are
incorporated by reference herein.
9
<PAGE>
Item 4. The Solicitation or Recommendation.
(a) Recommendation and Background
THE RSC BOARD HAS DETERMINED THAT THE TENDER OFFER IS INADEQUATE AND NOT IN
THE BEST INTERESTS OF RSC OR ITS STOCKHOLDERS. ACCORDINGLY, THE RSC BOARD
RECOMMENDS THAT RSC'S STOCKHOLDERS REJECT THE TENDER OFFER AND NOT TENDER
THEIR SHARES PURSUANT TO THE TENDER OFFER.
On January 20, 1999, as a result of extensive negotiations and consistent
with the RSC Board's long-term growth strategy and desire to enhance long-term
value for RSC's stockholders, the RSC Board unanimously approved the
NationsRent Merger Agreement. Following the approval of their respective
boards of directors, RSC and NationsRent executed and delivered the
NationsRent Merger Agreement.
On April 5, 1999, UR Acquisition and United Rentals commenced the Tender
Offer.
On April 8, 1999, the RSC Board held a telephonic meeting. At that meeting,
the RSC Board discussed the Tender Offer and the litigation filed by the
Bidder in connection with the Tender Offer (as described in the response to
Item 8 below).
On April 13 and 14, 1999, the RSC Board met in person (on April 13) and
telephonically (on April 14). Latham & Watkins, outside legal counsel to RSC,
advised the RSC Board of its fiduciary and other legal duties under applicable
law in the circumstances. RSC's advisors reviewed for the RSC Board the
financial and legal terms and conditions of the Tender Offer. The RSC Board
also received presentations from management and its advisors regarding the
NationsRent Merger, including legal, financial, accounting and strategic
matters, and from management and its financial advisors as to the financial
position and prospects of RSC. RSC's advisors also made presentations
regarding the possible adoption of a stockholder rights plan. The RSC Board
engaged in extensive discussions with its advisors regarding these matters.
On April 15, 1999, the RSC Board met telephonically to review the matters
presented at the April 13 and 14 meetings. Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") expressed its oral opinion to the RSC
Board to the effect that the consideration being offered in the Tender Offer
is inadequate to RSC's stockholders (other than United Rentals and its
affiliates), from a financial point of view. The RSC Board concluded that, for
the reasons set forth in the response to Item 4(b) below, that the Tender
Offer was inadequate and not in the best interests of RSC or its stockholders,
and to recommend against stockholders tendering into the Tender Offer. The RSC
Board also concluded, for the reasons set forth in the response to Item 4(b)
below, that the Tender Offer was not "reasonably likely to be consummated" on
the terms proposed by United Rentals and therefore did not constitute a
"Superior Proposal" under the NationsRent Merger Agreement. In light of the
foregoing and based upon prior discussions and presentations by its legal and
financial advisors, the RSC Board then determined to adopt a stockholder
rights plan (the "Rights Plan") and in connection therewith authorized and
declared a dividend of rights thereunder, as described in the response to Item
8 below.
On April 16, 1999, Merrill Lynch delivered to the RSC Board its written
opinion dated such date as to the inadequacy of the consideration being
offered in the Tender Offer to RSC's stockholders (other than United Rentals
and its affiliates), from a financial point of view.
A copy of the letter to RSC's stockholders communicating the recommendation
of the RSC Board and the text of the press release related thereto are filed
as Exhibits 1 and 2, respectively, hereto and are incorporated by reference
herein. The full text of the opinion of Merrill Lynch, dated April 16, 1999,
setting forth the assumptions made, matters considered and limitations on the
review undertaken by Merrill Lynch, is filed as Exhibit 3 hereto and is
incorporated by reference herein.
(b) Reasons for the Recommendation
In reaching its determination and recommendation described above, the RSC
Board considered the following factors:
(1) The presentation by Merrill Lynch concerning RSC and the financial
aspects of the Tender Offer and the written opinion of Merrill Lynch, dated
April 16, 1999, to the effect that the consideration being offered in the
Tender Offer is inadequate to the stockholders of RSC (other than United
Rentals and its affiliates), from a financial point of view.
10
<PAGE>
(2) The financial position and prospects of RSC and whether the Tender
Offer was reflective thereof, including the following:
. RSC's reported first quarter revenues of $174.8 million, operating
income of $30.1 million and earnings per share of $0.32. These
results substantially exceeded analysts' expectations, and RSC's
reported earnings per share of $0.32 exceeded the First Call
consensus median estimate of $0.28 by $0.04. RSC's projected 1999 and
2000 earnings per share of $1.62 and $2.16 exceed First Call
consensus estimates of $1.57 and $1.92 by $0.05 and $0.24,
respectively. Additionally, RSC's projected five-year earnings per
share compound annual growth rate of 30% significantly exceeds the
First Call consensus estimate of 23%.
. United Rentals' offer is at a discount to RSC's historic trading
prices, which closed at $24.63 within the 30 trading days prior to
the Tender Offer--RSC's stock price closed above the $22.75 Tender
Offer price on every trading day but one in February. RSC's forward
price-to-earnings multiple of more than 15x consensus estimates
during that period is also in excess of the 14.5x multiple implied by
the $22.75 per share Tender Offer.
. The 14.5x 1999 estimated price-to-earnings multiple implied by the
$22.75 per share price being offered in the Tender Offer represents a
discount of approximately 24% to United Rentals' fully-distributed
trading multiple of 19.1x 1999 estimated earnings per share on April
15, 1999.
. Acquisitions of companies of comparable size to RSC have been at
multiples considerably higher than the multiples implied by the
Tender Offer. In comparison with the two most recent comparable
acquisitions in RSC's industry, the Tender Offer represents a 47%
discount to the equity valuation of RSC implied by Atlas Copco AB's
acquisition of Prime Services, and a 42% discount to the equity
valuation of RSC that United Rentals' own merger with U.S. Rentals
implies, in each case based upon multiples of trailing 12-month
earnings before interest, taxes, depreciation and amortization
("EBITDA"), pro forma to include the full year effect of current year
acquisitions. In specific, Atlas Copco paid 8.4x latest twelve months
pro forma EBITDA and 7.4x current-year pro forma EBITDA for Prime
Services, and United Rentals paid 7.9x latest twelve months pro forma
EBITDA and 6.4x current-year pro forma EBITDA in its merger with U.S.
Rentals. These multiples significantly exceed the 6.1x latest twelve
months pro forma EBITDA and 4.6x current-year pro forma EBITDA
multiples implied by the $22.75 per share consideration being offered
by United Rentals in the Tender Offer. Equity valuations of RSC were
implied by applying the relevant multiples to RSC's pro forma EBITDA
and then deducting therefrom RSC's debt.
. The RSC Board estimates that a merger or other business combination
between RSC and United Rentals would be as much as three times more
accretive to United Rentals' earnings than the $0.10 per share
indicated by United Rentals in public statements regarding the Tender
Offer. This estimate is based on RSC's five-year business forecast
and assumes (1) United Rentals will obtain $10 million of synergies
in 1999, $20 million of synergies in 2000 and 3% annual synergy
growth thereafter, (2) transaction-related expenses of $64 million,
(3) financing fees of $35 million, (4) the financing contemplated by
the Commitment Letter having interest rates for the revolver, Term
Loan A and Term Loan B facilities of 7.0%, 7.0% and 7.5%,
respectively, and (5) payment of the Termination Amounts.
(3) The significant uncertainties and contingencies associated with the
Tender Offer. As described in the response to Item 2 above, the Tender
Offer is highly conditional and includes, among other things, the Financing
Condition, the United Rentals Merger Agreement Condition, the NationsRent
Merger Agreement Termination Condition, the Stock Option Cancellation
Condition and the Termination Fee Cancellation Condition. Absent
NationsRent's consent or the occurrence of certain events not within the
control of RSC or United Rentals, certain of the conditions to the Tender
Offer are incapable of being, or are unlikely to be, satisfied. Pursuant to
the terms of the Tender Offer, however, United Rentals could unilaterally
waive, amend or reduce the conditions to the Tender Offer and could improve
the consideration offered.
(4) The RSC Board's conclusion that, in light of the uncertainties in
and conditionality of the Tender Offer, the RSC Board would not take any
action which would permit NationsRent to terminate the NationsRent Merger
Agreement and collect the Termination Amounts and/or have the right to
exercise the NationsRent Option.
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<PAGE>
(5) The RSC Board's continuing belief that the NationsRent Merger
represents an attractive transaction for RSC's stockholders, consistent
with the RSC Board's long-term growth strategy and desire to enhance long-
term value for RSC's stockholders, and with significant strategic benefits
that will create a more competitive national equipment rental company than
either RSC or NationsRent would be individually, with a higher potential
for earnings growth, better cost savings and operating efficiencies, a more
diversified national customer base, as well as beneficial overlap in
operations and management, in overall business strategies and in key
geographic regions. The RSC Board made no decision to sell RSC at the time
RSC entered into the NationsRent Merger Agreement.
(6) The RSC Board's commitment to protecting the best interests of RSC's
stockholders.
The foregoing discussion of the information and factors considered by the
RSC Board is not intended to be exhaustive. In view of the variety of factors
considered, the RSC Board did not find it practicable to and did not provide
specific assessments of, quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination and recommendation.
The determination of the RSC Board to recommend that the stockholders of RSC
reject the Tender Offer and the Proposed Second-Step Merger was made after
consideration of all of the factors taken as a whole. In addition, individual
members of the RSC Board may have given different weight to different factors.
Five-Year Business Forecast
RSC does not as a matter of course make public forecasts as to its future
financial performance or operations. However, RSC's management provided
Merrill Lynch with a business forecast for the years ended 1999, 2000, 2001,
2002 and 2003 in connection with Merrill Lynch's evaluation of the Tender
Offer. A summary of the five-year business forecast is set forth below and is
included in this Schedule 14D-9 solely because it was provided by RSC to
Merrill Lynch and because it constitutes one of the reasons for the RSC
Board's recommendation set forth in the response to Item 4(a) above.
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
======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
RENTAL SERVICE CORPORATION
Five-Year Business Forecast for the Years Ended 1999-2003 (Continued)
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------
1999 2000 2001 2002 2003
------- ------- ------- ------- -------
(in millions, except per Share data)
<S> <C> <C> <C> <C> <C>
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 SEC
or the guidelines established by the American Institute of Certified Public
Accountants regarding prospective financial information nor was the
information prepared with the assistance of, or reviewed, compiled or examined
by, independent accountants. The inclusion of the five-year business forecast
in this Schedule 14D-9 should not be regarded as an indication that RSC or any
of its representatives considers forecasted financial results to be
achievable, and none of such persons or entities assumes any responsibility
for the validity, reasonableness, accuracy or completeness of the five-year
business forecast.
While presented with numerical specificity, the five-year business forecast
is based on and reflects the following material assumptions:
. The five-year business forecast assumes the continuation of RSC as an
independent publicly-traded company, without taking into account any
acquisition or merger involving RSC, including the NationsRent Merger.
. The five-year business forecast assumes that, during all relevant time
periods, RSC (1) does not raise capital in the equity or debt markets,
and (2) there is sufficient availability under RSC's revolving credit
facility for working capital and other purposes and that interest rates
under RSC's revolving credit facility remain at current levels.
. Revenues are assumed to grow at a rate of approximately 25% annually.
. The five-year business forecast assumes that RSC makes sufficient capital
expenditures for rental and non-rental equipment to (1) grow same store
sales by approximately 15% to 20% annually; (2) fund an additional 30
startup locations per year; and (3) maintain a rental fleet with an
average age of 2-3 years.
. Equipment utilization is assumed to remain constant in the range of 56%-
60% throughout all relevant periods.
. The five-year business forecast assumes a decrease in rental profit
margin over the course of the time periods set forth in the five-year
business forecast from 29.5% to 28%.
. The five-year business forecast assumes that profit margins on sales of
parts, supplies, and equipment (new and used) remain constant at
approximately current levels throughout all relevant periods.
. Selling, general and administrative expense as a percentage of total
revenue is assumed to range between 6.6%-7% for all relevant periods in
the five-year business forecast.
. During all relevant periods, all taxes recorded assume a constant
effective tax rate of 43% and all tax expense is assumed to have been
paid in the current year.
13
<PAGE>
The foregoing assumptions are subject to significant uncertainties and
contingencies, all of which are difficult to quantify and many of which are
beyond the control of RSC. Accordingly, the five-year business forecast is
inherently imprecise and there can be no assurance that forecasted financial
results set forth in, or the assumptions made in preparing, the five-year
business forecast will prove accurate, and actual results may be materially
greater or less than those contained in the five-year business forecast. RSC
does not presently intend to update or publicly revise the five-year business
forecast to reflect circumstances existing or developments occurring after the
preparation of such information or to reflect the occurrence of unanticipated
events.
Item 5. Persons Retained, Employed or to be Compensated.
Merrill Lynch serves as RSC's financial advisor in connection with the
NationsRent Merger. In connection with the commencement of the Tender Offer,
RSC supplemented and modified its engagement of Merrill Lynch such that the
terms and conditions of Merrill Lynch's engagement as RSC's co-financial
advisor in all circumstances are as follows:
(1) Merrill Lynch has received a retention fee in an amount equal to $2
million;
(2) a fee equal to $8 million (against which the fee paid under clause
(1) above will be credited) will be payable if, during the period of
Merrill Lynch's engagement or within 2 years thereafter, any merger,
consolidation or other business combination or alternative restructuring or
acquisition transaction involving RSC, including the Tender Offer (but
excluding the NationsRent Merger), is consummated or any person acquires
more than 40% of RSC's voting capital stock or a substantial portion of
RSC's assets or RSC enters into a definitive agreement which subsequently
results in such an acquisition transaction, which fee will be payable upon
the closing of such acquisition transaction (or, in the case of the Tender
Offer, upon the first purchase of Shares pursuant to the Tender Offer);
(3) a fee equal to $6 million (against which the fee paid under clause
(1) above will not be credited) will be payable if the NationsRent Merger
is consummated; and
(4) a fee equal to $8 million (against which the fee paid under clause
(1) above will be credited) will be payable in the event, among other
things, RSC has not consummated any acquisition transaction described in
clause (2) or (3) above by April 5, 2000, which fee will be payable in cash
on April 5, 2000.
RSC has also engaged Morgan Stanley & Co. Incorporated ("Morgan Stanley") as
its co-financial advisor in connection with the Tender Offer. RSC has agreed to
pay Morgan Stanley an aggregate fee equal to $5 million, comprised of (1) a
retention fee equal to $1 million, which has been paid, and (2) an additional
fee equal to $4 million payable upon the earlier of April 5, 2000, or the
consummation of, among other things, any merger, consolidation or other
business combination involving RSC (including the NationsRent Merger) or any
acquisition of a majority of the voting stock of RSC or all or substantially
all of its assets.
Pursuant to the engagements of Merrill Lynch and Morgan Stanley, RSC has
also agreed to reimburse each of Merrill Lynch and Morgan Stanley,
respectively, for certain reasonable out-of-pocket expenses (including the
reasonable fees and disbursements of legal counsel) and to indemnify each of
Merrill Lynch and Morgan Stanley and certain respective related parties from
and against certain liabilities, including liabilities under the federal
securities laws, arising out of their respective engagements.
RSC has retained MacKenzie Partners, Inc. ("MacKenzie Partners") to, among
other things, assist RSC in connection with its communications with and to its
stockholders with respect to, and to provide other services to RSC in
connection with, the Tender Offer and related matters. RSC will pay MacKenzie
Partners reasonable and customary compensation for their services and will
reimburse MacKenzie Partners for their reasonable out-of-pocket expenses
incurred in connection therewith. RSC has also agreed to indemnify MacKenzie
Partners against certain liabilities and expenses arising from or in connection
with its engagement.
RSC has retained Kekst & Co. ("Kekst") as its public relations advisor in
connection with the Tender Offer and related matters. RSC will pay Kekst
reasonable and customary compensation for its services plus reimbursement for
reasonable out-of-pocket expenses. RSC has also agreed to indemnify Kekst
against certain liabilities and expenses arising from or in connection with its
engagement.
14
<PAGE>
Other than as set forth in the response to this Item 5, neither RSC nor any
person acting on its behalf currently intends to employ, retain or compensate
any other person to make solicitations or recommendations to stockholders of
RSC on its behalf concerning the NationsRent Merger or the Tender Offer.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) Except as described in the response to this Item 6(a) or in Annex A
attached hereto or as incorporated by reference herein, during the past 60
days there have been no transactions in Shares which were effected by RSC or
any subsidiary of RSC, or to the best knowledge of RSC, by any executive
officer, director or affiliate of RSC. On February 22, 1999, Mr. Ledlow sold
4,000 Shares at a price of approximately $24.63 per Share, which transaction
was reported on a Form 4 filed with the SEC for the month of February 1999. On
March 4, 1998, Mr. Halchishak sold 5,000 Shares, 3,000 of which were sold at a
price of $21.25 per Share, 1,000 of which were sold at approximately $21.19
per Share and the remaining 1,000 of which were sold at approximately $21.38
per Share.
(b) To the best knowledge of RSC, (1) none of its executive officers,
directors, affiliates or subsidiaries presently intends to tender Shares
pursuant to the Tender Offer, and (2) none of its executive officers,
directors, affiliates or subsidiaries presently intends to sell any Shares
which are held of record or beneficially owned by such persons. The foregoing
does not include Shares over which, or with respect to which any such
executive officer, director or affiliate or subsidiary acts in a fiduciary or
representative capacity or is subject to instructions from a third party with
respect to such tender.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) The Bidder. Neither RSC nor the RSC Board has engaged in discussions or
negotiations with the Bidder with respect to the Tender Offer and the Proposed
Second-Step Merger. Such discussions and negotiations are not permitted by the
terms of the NationsRent Merger Agreement unless and until the RSC Board
determines that the Tender Offer constitutes a Superior Proposal within the
meaning of the NationsRent Merger Agreement.
The RSC Board has concluded that the Tender Offer does not constitute a
Superior Proposal for purposes of the NationsRent Merger Agreement since the
Tender Offer is not "reasonably likely to be consummated" on the terms
proposed by the Bidder. Specifically, consummation of the Tender Offer is
subject to a number of conditions, including the NationsRent Merger Agreement
Termination Condition, the Stock Option Cancellation Condition and the
Termination Fee Cancellation Condition. As to the Stock Option Cancellation
Condition and the Termination Fee Cancellation Condition, RSC has no reason to
believe, and does not believe, that NationsRent will voluntarily forfeit its
contractual rights to the Termination Amounts or the NationsRent Option or
that such rights will be invalidated or terminated in the Delaware litigation
described in the response to Item 8 below. Accordingly, the RSC Board
concluded that the Stock Option Cancellation Condition and the Termination Fee
Cancellation Condition were not likely to be satisfied. Similarly, the RSC
Board concluded that the NationsRent Merger Agreement Termination Condition
was unlikely to be satisfied because, among other things, (1) RSC has no
independent right to terminate the NationsRent Merger Agreement prior to
August 31, 1999, unless and until the stockholders of RSC vote not to approve
the NationsRent Merger, and (2) NationsRent has not indicated that it intends
(nor does it presently have the right) to terminate the NationsRent Merger
Agreement.
Accordingly, the RSC Board concluded it cannot engage in discussions with
United Rentals regarding the Tender Offer and the Proposed Second-Step Merger
at this time, or seek to improve the consideration offered or address the
conditions to consummation of the Tender Offer.
NationsRent. Pursuant to its obligations under the Merger Agreement, RSC
has notified NationsRent of the Tender Offer. The RSC Board received a letter
on April 12, 1999 from James L. Kirk, Chairman of the Board and Chief
Executive Officer of NationsRent, a copy of which is filed as Exhibit 29
hereto and is incorporated by reference herein. In response to this letter,
RSC has engaged in discussions with NationsRent and its financial and legal
advisors with respect to the NationsRent Merger in light of the commencement
of the Tender Offer and anticipates engaging in such discussions in the
future.
15
<PAGE>
Other than as set forth or referenced in this Item 7(a) or in the responses
to Items 3(b) or 4 above or in the response to Item 8 below, no negotiation is
being undertaken or is underway by RSC in response to the Tender Offer which
relates to or would result in: (1) an extraordinary transaction such as a
merger or reorganization, involving RSC or any subsidiary of RSC; (2) a
purchase, sale or transfer of a material amount of assets by RSC or any
subsidiary of RSC; (3) a tender offer for or other acquisition of securities
by or of RSC; or (4) any material change in the present capitalization or
dividend policy of RSC.
(b) As described in the response to Item 8 below, pursuant to resolutions
of the RSC Board, RSC entered into a Rights Agreement (the "Rights
Agreement"), dated as of April 15, 1999, with ChaseMellon Shareholder
Services, L.L.C., as Rights Agent. Other than as set forth in this Item 7(b)
or in the responses to Items 4 or 7(a) above or in the response to Item 8
below, there are no transactions, board resolutions, agreements in principle
or signed contracts in response to the Tender Offer which relate to or would
result in one of more of the matters referred to in Item 7(a) above.
Item 8. Additional Information to be Furnished.
Executive Officers and Executive Committee
RSC has established an Executive Committee of the RSC Board on which
directors John M. Sullivan, as chairman, and Britton H. Murdoch will serve.
The Executive Committee will work with and supervise the executive management
of RSC on a daily basis, including Mr. Wilson and Mr. Waugaman during the
absence of Mr. Reid. Mr. Reid, upon the advice of his physicians, has
requested and been granted a medical leave to complete evaluation and pursue
treatment of a heart condition.
On April 13, 1999, the RSC Board appointed Mr. Waugaman as President and
Chief Operating Officer of RSC. Mr. Waugaman had previously served as a Senior
Vice President of Operations of RSC since April 1997 and from January 1994
through April 1997, he served as Vice President, Chief Financial Officer,
Secretary and Treasurer of RSC. Prior to joining RSC, he served as Operations
Manager for Plastiglide Manufacturing Corporation, a subsidiary of Illinois
Tool Works, and as Vice President of Finance for Knapp Communications
Corporation. Mr. Waugaman, a Certified Public Accountant, received his degree
from Miami University in 1982.
Adoption of Rights Plan
On April 15, 1999, the RSC Board adopted the Rights Plan.
In connection with the Rights Plan, the RSC Board declared a dividend of
one preferred share purchase right (the "Rights") for each Share outstanding
at the close of business on April 30, 1999 (the "Record Date"). Each Right
will entitle the registered holder thereof, after the Rights become
exercisable and until April 16, 2009 (or the earlier redemption, exchange or
termination of the Rights), to purchase from RSC one one-thousandth
(1/1,000th) of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Preferred Shares"), at a price of $150.00 per one
one-thousandth (1/1,000th) of a Preferred Share, subject to certain anti-
dilution adjustments (the "Purchase Price"). Until the earlier to occur of (1)
10 days following a public announcement that a person or group of affiliated
or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 10% or more of the Shares (an "Acquiring Person"), or
(2) the occurrence of the tenth business day (or such later date as may be
determined by action of the RSC Board prior to such time as any person or
group of affiliated persons becomes an Acquiring Person) following the
commencement or announcement of an intention to make a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 10% or more of the Shares (the earlier of
(1) and (2) being called the "Distribution Date"), the Rights will be
evidenced, with respect to any certificate representing Shares outstanding as
of the Record Date, by such certificate.
No person would become an Acquiring Person solely as the result of any one
or more of the following: (1) an acquisition of Shares by RSC which, by
reducing the number of Shares outstanding, increases the proportionate number
of Shares beneficially owned by such person to 10% or more of the Shares then
outstanding; (2) the holding or acquisition by NationsRent (or any officer,
director, affiliate or associate of
16
<PAGE>
NationsRent) of beneficial ownership of Shares pursuant to the grant by RSC to
NationsRent of the NationsRent Option Agreement or the issuance of Shares to
NationsRent under the NationsRent Option Agreement; (3) the acquisition by any
person of beneficial ownership of Shares issued or to be issued pursuant to the
NationsRent Merger Agreement; or (4) the acquisition by any director or officer
of NationsRent or any person who may be deemed an affiliate or an associate of
NationsRent of beneficial ownership of Shares issued or the issuance of Shares
pursuant to NationsRent Options (as defined in the Rights Agreement) under the
terms of the NationsRent Merger Agreement until, in the case of each of clauses
(1) through (4) above, such time after April 16, 1999 as any of such persons
shall become the beneficial owner (other than pursuant to a dividend or
distribution paid or made by RSC on the outstanding Shares or pursuant to a
split or subdivision of the outstanding Shares) of any additional Shares (other
than any such additional Shares acquired in a transaction which is the subject
of any of the exceptions described in clauses (1) through (4) above) and shall
thereby become the beneficial owner of 10% or more of the Shares then
outstanding (other than as a consequence of clause (1) above). The Rights will
be transferred with and only with the Shares until the Distribution Date or
earlier redemption or expiration of the Rights. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
(the "Right Certificates") will be mailed to holders of record of Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights. The Rights will at no time have
any voting rights. The RSC Board has determined to delay the distribution of
the Rights until the earlier of the date on which an Acquiring Person becomes
such and such date as may be determined by action of the RSC Board prior to the
time any person or group becomes an Acquiring Person.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly
dividend payment of $1.00 per share but will be entitled to an aggregate
dividend of 1,000 times the dividend, if any, declared per Share. In the event
of liquidation, dissolution or winding up of RSC, the holders of the Preferred
Shares will be entitled to a preferential liquidation payment of $1,000 per
share plus any accrued but unpaid dividends but will be entitled to an
aggregate payment of 1,000 times the payment made per Share. Each Preferred
Share will have 1,000 votes and will vote together with the Shares. Finally, in
the event of any merger, consolidation or other transaction in which Shares are
exchanged, each Preferred Share will be entitled to receive 1,000 times the
amount received per Share. Preferred Shares will not be redeemable. The Rights
are protected by customary anti-dilution provisions. Because of the nature of a
Preferred Share's dividend, liquidation and voting rights, the value of one
one-thousandth of a Preferred Share purchasable upon exercise of each Right
should approximate the value of one Share.
In the event that a person becomes an Acquiring Person or if RSC were the
surviving corporation in a merger with an Acquiring Person or any affiliate or
associate of an Acquiring Person and the Shares were not changed or exchanged,
each holder of a Right, other than Rights that are or were acquired or
beneficially owned by the Acquiring Person (which Rights will thereafter be
void), will thereafter have the right to receive upon exercise that number of
Shares having a market value of two times the then current Purchase Price of
one Right. In the event that, after a person has become an Acquiring Person,
RSC were acquired in a merger or other business combination transaction or more
than 50% of its assets or earning power were sold, proper provision shall be
made so that each holder of a Right shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction would have a market value of two times the then current
Purchase Price of one Right.
At any time after a person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence in the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of the
then outstanding Shares, the RSC Board may cause RSC to exchange the Rights
(other than Rights owned by an Acquiring Person which have become void), in
whole or in part, for Shares at an exchange rate of that number of Shares
having an aggregate value equal to the Spread (as defined in the Rights
Agreement) (with such value being based on the current per Share market price
(as determined pursuant to the Rights Agreement)) on the date of the occurrence
of a Trigger Event (as defined in the Rights Agreement) per Right (subject to
adjustment).
The Rights may be redeemed in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price") by the RSC Board at any time prior to the time
that an Acquiring Person has become such. The redemption of the Rights may be
made effective at such time, on such basis and with such conditions as the
17
<PAGE>
RSC Board in its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption
Price.
The Rights will expire on April 16, 2009 or, as required by the NationsRent
Merger Agreement, on the earlier of (1) the 60th day following termination of
the NationsRent Merger Agreement or (2) the 60th day following the closing of
any merger or other acquisition transaction involving RSC pursuant to certain
types of agreements. ChaseMellon Shareholder Services, L.L.C. is the Rights
Agent.
The Purchase Price payable, and the number of one one-thousandths of a
Preferred Share or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (1) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (2) upon the grant to holders of
the Preferred Shares of certain rights or warrants to subscribe for or
purchase Preferred Shares or convertible securities at less than the current
market price of the Preferred Shares, or (3) upon the distribution to holders
of the Preferred Shares of evidences of indebtedness, cash, securities or
assets (excluding regular periodic cash dividends at a rate not in excess of
125% of the rate of the last regular periodic cash dividend theretofore paid
or, in case regular periodic cash dividends have not theretofore been paid, at
a rate not in excess of 50% of the average net income per Share for the four
quarters ended immediately prior to the payment of such dividend, or dividends
payable in Preferred Shares (which dividends will be subject to the adjustment
described in clause (1) above)) or of subscription rights or warrants (other
than those referred to above).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of RSC beyond those as an existing stockholder,
including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement may be amended by the RSC
Board for so long as the Rights are then redeemable, and after the Rights are
no longer redeemable, RSC may amend or supplement the Rights Agreement in any
manner that does not adversely affect the interests of the holder of the
Rights.
One Right will be distributed to stockholders of RSC for each Share owned
of record by them on April 30, 1999. As long as the Rights are attached to the
Shares, RSC will issue one Right with each new Share so that all such Shares
will have attached Rights. RSC has agreed that, from and after the
Distribution Date, RSC will reserve 40,000 Preferred Shares initially for
issuance upon exercise of the Rights.
The RSC Board adopted the Rights Agreement after considering (1) the
inadequacy of the price offered to RSC's stockholders in the Tender Offer, (2)
the risk that the Tender Offer will not be consummated, and (3) RSC's plan to
complete the NationsRent Merger pursuant to the NationsRent Merger Agreement.
The rights are designed to assure that all of RSC's stockholders receive fair
and equal treatment in the event of any proposed takeover of RSC and to guard
against partial tender offers, open market accumulations and other abusive
tactics to gain control of RSC without paying all stockholders a control
premium. The Rights will cause substantial dilution to a person or group that
acquires 10% or more of the Shares on terms not approved by the RSC Board. The
Rights should not interfere with any merger or other business combination
approved by the RSC Board at any time prior to the first date that a person or
group has become an Acquiring Person.
The Rights Agreement specifying the terms of the Rights is filed as Exhibit
30 attached hereto and is incorporated by reference herein. The foregoing
description of the Rights is qualified in its entirety by reference to such
exhibit.
Certain Litigation
The Delaware Litigation. On April 5, 1999, the Bidder filed a complaint
against RSC, NationsRent and RSC's directors in the Court of Chancery of the
State of Delaware (the "Delaware Chancery Court") styled UR Acquisition
Corporation and United Rentals, Inc. v. Martin R. Reid, et al., C.A. No. 17090
(the "Delaware
18
<PAGE>
Litigation"). In the Delaware Litigation, the Bidder alleges, among other
things, that (1) in providing for the Termination Amounts and in granting the
NationsRent Option, the defendants breached their fiduciary duties to RSC's
stockholders, (2) in entering into the NationsRent Merger Agreement, the
defendants failed to obtain a transaction offering the best value available to
all RSC stockholders, (3) the conduct of the defendants was unreasonable in
relation to any "threat" posed by United Rentals and was not undertaken in
good faith after reasonable investigation, and (4) in failing to take actions
necessary to render Section 203 of the DGCL inapplicable to the Tender Offer,
including approving the Tender Offer, the defendants breached their fiduciary
duties to RSC's stockholders. The Bidder seeks, among other things, a
determination that the Termination Amounts and the NationsRent Option are
unlawful and invalid and an order requiring RSC to provide the Bidder with a
fair and equal opportunity to acquire RSC. The Bidder also seeks to enjoin the
defendants from taking any further action with respect to such Termination
Amounts or the NationsRent Option or to adopt any defensive measures.
On April 8, 1999, the Delaware Chancery Court granted the Bidder's
application for expedited discovery in the Delaware Litigation and scheduled a
hearing on the Bidder's application for a preliminary injunction for May 17,
1999. On April 16, 1999, RSC answered the Bidder's complaint in the Delaware
Litigation.
A copy of the complaint filed in the Delaware Litigation is filed as
Exhibit 31 hereto and is incorporated by reference herein.
The Connecticut Litigation. On April 7, 1999, the Bidder filed a verified
complaint against James L. Kirk, RSC and NationsRent in the United States
District Court for the District of Connecticut styled as UR Acquisition
Corporation and United Rentals, Inc. v. James L. Kirk, et al., C. A. No.
399CV00625 (DJS) (the "Connecticut Litigation"). In the Connecticut
Litigation, the Bidder alleges, among other things, certain violations by the
defendants of the federal securities laws, specifically Section 14(a) of the
Exchange Act and Rule 14a-3(a) and Rule 14a-9 promulgated thereunder, Section
14(d) of the Exchange Act and Rule 14d-9 promulgated thereunder and Section
14(e) of the Exchange Act. The Bidder seeks declaratory relief that the
defendants violated Sections 14(a), 14(d) and 14(e) of the Exchange Act and
requests an order requiring the defendants to make all appropriate disclosures
and correct allegedly false and misleading statements and omissions of
material fact made by NationsRent regarding the superiority of the NationsRent
Merger to the Tender Offer and by RSC regarding the anticipated schedule for
the special meeting of RSC's stockholders in connection with the NationsRent
Merger. In addition, the Bidder seeks injunctive relief enjoining the
defendants and certain other persons from, among other things, (1) soliciting
from any stockholder of RSC any proxy, consent or authorization to vote any
Shares at any meeting to be held in connection with the NationsRent Merger,
and (2) soliciting any stockholder of RSC with respect to whether or not to
tender Shares in the Tender Offer, in either case, unless and until the
defendants comply in full with all applicable provisions of the federal
securities laws.
On April 8, 1999, the plaintiffs' in the Connecticut Litigation filed
applications for expedited discovery and a preliminary injunction with the
court.
On April 16, 1999, RSC answered the complaint in the Connecticut Litigation
and filed a counterclaim against the Bidder seeking declaratory and injunctive
relief. Defendants counterclaim alleged, among other things, that United
Rentals violated Sections 14(d) and 14(e) of the Exchange Act by misstating,
concealing and failing to adequately disclose certain material terms of the
Tender Offer relating to the Financing Condition.
Copies of the complaint and the answer and counterclaim filed in the
Connecticut Litigation are filed as Exhibits 32 and 33 hereto and are
incorporated by reference herein.
Item 9. Material to be Filed as Exhibits.
<TABLE>
<C> <S>
1 Letter to stockholders from John M. Sullivan on behalf of the Board of
Directors of RSC dated April 16, 1999.*/**
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
2 Press Release issued by RSC dated April 16, 1999.**
3 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
April 16, 1999.*/**
4 Agreement and Plan of Merger, dated as of January 20, 1999, between
Rental Service Corporation and NationsRent, Inc. (1)
5 Stock Option Agreement, dated as of January 20, 1999, between
NationsRent, Inc. and Rental Service Corporation. (1)
6 Stock Option Agreement, dated as of January 20, 1999, between Rental
Service Corporation and NationsRent, Inc. (1)
7 Voting Agreement, dated as of January 20, 1999, among Kirk Holdings
Limited Partnership, H. Family Investments, Inc., Huizenga Investments
Limited Partnership and Rental Service Corporation. (1)
8 Employment Agreement dated January 14, 1998 between Rental Service
Corporation and Martin R. Reid. (2)
9 Restricted Stock Agreement dated January 14, 1998 between Rental Service
Corporation and Martin R. Reid. (3)
10 Restricted Stock Agreement dated April 29, 1998 between Rental Service
Corporation and Martin R. Reid. (4)
11 Restricted Stock Agreement dated October 9, 1998 between Rental Service
Corporation and Martin R. Reid, including the related Promissory Note
and Pledge Agreement. (5)
12 Form of 1997 Executive Severance Agreement between Rental Service
Corporation and certain executive officers. (6)
13 Form of 1998 Executive Severance agreement between Rental Service
Corporation and certain executive officers. (4)
14 Form of Indemnification Agreement. (7)
15 Stock Option Plan for Key Employees. (7)
16 Form of Incentive Stock Option Agreement for Directors. (7)
17 Form of Amended Incentive Stock Option Agreement for Corporate Office
Personnel. (7)
18 Form of Amendment to Amended Incentive Stock Option Agreement for
Corporate Office Personnel. (7)
19 1996 Equity Participation Plan of Rental Service Corporation. (8)
20 Amendment to the 1996 Equity Participation Plan of Rental Service
Corporation, dated as of April 29, 1998. (9)
21 Form of Incentive Stock Option Agreement for Employees. (10)
22 Form of Non-Qualified Stock Option Agreement for Directors. (10)
23 First Amended and Restated Employee Qualified Stock Purchase Plan of
Rental Service Corporation. (11)
24 Amendment to the First Amended and Restated Employee Qualified Stock
Purchase Plan of Rental Service Corporation, dated as of April 29, 1998.
(5)
25 Second Amendment to the First Amended and Restated Employee Qualified
Stock Purchase Plan of Rental Service Corporation, dated September 14,
1998. (5)
</TABLE>
20
<PAGE>
<TABLE>
<C> <S>
26 Management Incentive Compensation Plan. (12)
27 Executive Savings Plan. (6)
28 Form of Survivor Protection Program Agreement between Rental Service
Corporation and certain executive officers. (6)
29 Letter to the Board of Directors of Rental Service Corporation from
James L. Kirk dated April 12, 1999.**
30 Rights Agreement, dated as of April 16, 1999 between Rental Service
Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent. (13)
31 Complaint filed on April 5, 1999 with the Court of Chancery of the State
of Delaware in UR Acquisition Corporation and United Rentals, Inc. v.
Martin R. Reid, et al., C.A. No. 17090.**
32 Verified Complaint filed on April 7, 1999 with the United States
District Court for the District of Connecticut in UR Acquisition
Corporation and United Rentals, Inc. v. James L. Kirk, et al., C.A. No.
399CV00625 (DJS).**
33 Answer, Counterclaim and Jury Demand filed on April 15, 1999 with the
United States District Court for the District of Connecticut in UR
Acquisition Corporation and United Rentals, Inc. v. James L. Kirk, et
al., C.A. No. 399CV00625 (DJS).**
34 Letter from Robert M. Wilson and Douglas A. Waugaman to Rental Service
Corporation employees dated April 16, 1999.**
35 Form of Letter from Stores/Regional Managers to Customers.**
36 Form of Letter from Stores/Regional Managers to Suppliers.**
</TABLE>
- --------
* Included in materials being distributed to stockholders of RSC.
** Filed herewith.
(1) Filed as an Exhibit to the Current Report on Form 8-K dated April 8, 1999
and incorporated by reference herein.
(2) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the three
months ended March 31, 1998 and incorporated by reference herein.
(3) Filed as an Exhibit to the Registration Statement on Form S-4
(Registration No. 333-56653, effective August 20, 1998) and incorporated
by reference herein.
(4) Filed as an Exhibit to the Registration Statement on Form S-1
(Registration No. 333-59519, effective August 13, 1998) and incorporated
by reference herein.
(5) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the three
months ended September 30, 1998 and incorporated by reference herein.
(6) Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 and incorporated by reference herein.
(7) Filed as an Exhibit to the Registration Statement on Form S-1
(Registration No. 333-05949, effective September 18, 1996) and
incorporated by reference herein.
(8) Filed as an Exhibit to the Registration Statement on Form S-8
(Registration No. 333-22403, dated February 26, 1997) and incorporated by
reference herein.
(9) Filed as an Exhibit to the Registration Statement on Form S-8
(Registration No. 333-59679, dated July 23, 1998) and incorporated by
reference herein.
(10) Filed as an Exhibit to the Registration Statement on Form S-1
(Registration No. 333-26753, effective May 29, 1997) and incorporated by
reference herein.
(11) Filed as an Exhibit to the Registration Statement on Form S-8
(Registration No. 333-29579, dated June 19, 1997) and incorporated by
reference herein.
(12) Filed with the Proxy Statement on Schedule 14A filed March 30, 1998 and
incorporated by reference herein.
(13) Filed as an Exhibit to the Current Report on Form 8-K dated April 16,
1999 and incorporated by reference herein.
21
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 16, 1999 Rental Service Corporation
By: /s/ Robert M. Wilson
---------------------------------
Name: Robert M. Wilson
Title: Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer
22
<PAGE>
ANNEX A
This Annex A sets forth certain information in response to Items 3(b) and 6
of this Schedule 14D-9 regarding (1) securities of RSC owned beneficially or
of record by RSC's directors, executive officers and affiliates; (2) the
compensation of RSC's directors and certain of its executive officers; (3)
grants of stock options to, and exercises of stock options by, certain of its
executive officers; and (4) certain employee benefit and compensation plans.
Security Ownership
The following table sets forth certain information regarding the beneficial
ownership of Shares outstanding as of March 31, 1999 by (1) any person known
to RSC to beneficially own 5% or more of any class of voting securities of
RSC; (2) each director and executive officer of RSC; and (3) all directors and
executive officers of RSC as a group. Except as otherwise indicated, each
stockholder listed below has informed RSC that such stockholder has (A) sole
voting and investment power with respect to such Shares, except to the extent
that authority is shared by spouses under applicable law, and (B) record and
beneficial ownership with respect to such Shares.
<TABLE>
<CAPTION>
Beneficial Ownership
As of March 31, 1999(1)
---------------------------
Name of Beneficial Owner Shares Percent
- ------------------------ -------------- ------------
<S> <C> <C>
Capital Research and Management Company (2)......... 1,600,000 6.5%
Pilgrim Baxter & Associates, Ltd. (3)............... 1,384,000 5.6
Martin R. Reid (4)(5)(6)............................ 538,545 2.2
Douglas A. Waugaman (4)(6).......................... 112,469 *
Robert M. Wilson (4)(6)............................. 24,653 *
Ronald Halchishak (4)(6)............................ 53,340 *
David G. Ledlow (4)(6).............................. 49,761 *
John Markle (4)(6).................................. 62,906 *
Milfred E. Howard (4)(6)............................ 7,616 *
David B. Harrington (4)(6).......................... 8,382 *
William M. Barnum, Jr. (4)(7)....................... 455,317 1.8
James R. Buch (4)(6)................................ 6,525 *
David P. Lanoha (4)(8).............................. 149,855 *
Christopher A. Laurence (4)(7)...................... 7,261 *
Eric L. Mattson (4)(9).............................. 5,625 *
Britton H. Murdoch (4)(10).......................... 7,625 *
John M. Sullivan (4)(6)............................. 3,125 *
All directors and executive officers as a group (15
individuals)....................................... 1,493,005 6.0%
</TABLE>
- --------
* Beneficial ownership does not exceed 1% of the outstanding Shares.
(1) A person is deemed as of any date to have "beneficial ownership" of any
security that such person has a right to acquire within 60 days after
such date. Shares that each identified stockholder has the right to
acquire within 60 days of the date of the table set forth above are
deemed to be outstanding in calculating the percentage ownership of such
stockholder, but are not deemed to be outstanding as to any other person.
(2) Based on a Schedule 13G for the year ended December 31, 1998 and filed on
February 8, 1999. In that Schedule 13G, Capital Research and Management
Company reported that it beneficially owned a total of 1,600,000 Shares.
Of those Shares, it had sole investment discretion with respect to all of
the Shares and had voting authority with respect to none of the Shares.
The address of Capital Research and Management Company is 333 S. Hope
Street, Los Angeles, California 90071.
(3) Based on a Schedule 13G for the year ended December 31, 1998 and filed on
February 5, 1999. In that Schedule 13G, Pilgrim Baxter & Associates, Ltd.
reported that it beneficially owned a total of 1,384,000 Shares. Of those
Shares, it had sole investment discretion with respect to all of the
Shares and had voting
A-1
<PAGE>
authority with respect to 965,800 of the Shares. The address of Pilgrim
Baxter & Associates, Ltd. is 825 Duportail Road, Wayne, Pennsylvania
19087.
(4) Excludes Shares issuable upon exercise of options that are not
exercisable within 60 days of the date of the table set forth above, as
follows: Mr. Reid--330,058 Shares; Mr. Waugaman--112,000 Shares; Mr.
Wilson--118,250 Shares; Mr. Halchishak--70,750 Shares; Mr. Ledlow--70,750
Shares; Mr. Markle--67,771 Shares; Mr. Harrington--40,143 Shares; Mr.
Howard--47,848 Shares; Mr. Barnum--6,875 Shares; Mr. Buch--5,975 Shares;
Mr. Lanoha--9,375 Shares; Mr. Laurence--6,875 Shares; Mr. Mattson--6,875
Shares; Mr. Murdoch-- 6,875 Shares; and Mr. Sullivan--9,375 Shares.
(5) Includes Shares subject to vesting that may be repurchased by RSC if they
fail to vest.
(6) The address of this person is c/o Rental Service Corporation, 6929 E.
Greenway Parkway, Suite 200, Scottsdale, Arizona 85254.
(7) Mr. Barnum, a director of RSC, is a general partner of BBP, the general
partner of Brentwood RSC Partners, L.P., which owns 417,972 Shares.
Accordingly, Mr. Barnum may be deemed to be the beneficial owner of the
Shares owned by BBP and for purposes of this table they are included. Mr.
Barnum disclaims beneficial ownership of such Shares. The address of
Brentwood RSC Partners, L.P., Mr. Barnum and Mr. Laurence is 11150 Santa
Monica Boulevard, Suite 1200, Los Angeles, California 90025.
(8) The address of this person is c/o Rental Service Corporation, 11250 East
40th Avenue, Denver, Colorado 60239.
(9) The address of this person is c/o Baker Hughes Incorporated, 3900 Essex
Lane, Suite 1200, Houston, Texas 77027.
(10) The address of this person is c/o V-Span, 1100 First Avenue, Suite 400,
King of Prussia, Pennsylvania 19406.
Executive Officer Compensation
The following table provides summary information concerning compensation
paid or accrued by RSC to or on behalf of its Chief Executive Officer and each
of its four other most highly compensated executive officers for all services
rendered in all capacities to RSC during the year ended December 31, 1998:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------- -------------------------
Number of
All Restricted Securities
Name and Principal Salary Other Stock Underlying
Business ($) Bonus ($)(1) Compensation ($)(2) Awards ($) Options (3)
------------------ ------ ------------ ------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Martin R. Reid......... $516,704 $500,000 $10,500 $3,466,057(4) 173,411(5)
Chairman and Chief
Executive Officer
Douglas A. Waugaman
(6)................... 179,216 149,960 1,887 -- 16,000
President and Chief
Operating Officer
Robert M. Wilson....... 180,796 103,185 4,209 -- 16,000
Executive Vice
President, Chief
Financial Officer,
Secretary and
Treasurer
Ronald Halchishak...... 173,193 123,058 2,128 -- 16,000
Senior Vice President
of Operations
David G. Ledlow........ 154,274 120,000 522 -- 16,000
Senior Vice President
of Operations
</TABLE>
- -------
(1) The amount of any bonus earned in each fiscal year is paid, and accounted
for in the preceding table, in the next succeeding fiscal year. As a
result, the preceding table does not include bonuses earned with respect
to fiscal year 1998, which were paid on March 31, 1999 as follows: Mr.
Reid--$500,000; Mr. Waugaman--$156,490; Mr. Wilson--$137,981; Mr.
Halchishak--$146,250; and Mr. Ledlow--$143,774.
A-2
<PAGE>
(2) Consists of one or more of the following: (1) an automobile allowance, (2)
relocation expenses reimbursed by RSC, and (3) insurance premiums paid by
RSC for life insurance and disability policies covering the officer.
(3) The preceding table does not include options granted on January 4, 1999 as
follows: Mr. Reid--200,000; Mr. Waugaman--50,000; Mr. Wilson--50,000; Mr.
Halchishak--25,000; and Mr. Ledlow--25,000. Each of these options was
granted at an exercise price of approximately $15.13 per Share.
(4) At December 31, 1998, Mr. Reid held 261,589 shares of restricted stock
with an aggregate market value of $4.1 million (based on the market price
of the Shares as reported on the NYSE on December 31, 1998). This
restricted stock is subject to vesting in equal installments over four
years from the respective dates of grant; however, the vesting may be
accelerated under certain circumstances, including a change of control.
(5) In January 1998, Mr. Reid entered into an employment agreement with RSC.
In connection with this agreement, Mr. Reid's 200,000 then-outstanding
options to purchase Shares became immediately exercisable. Additionally,
Mr. Reid was granted stock options to purchase 190,000 Shares vesting in
equal installments over four years (or earlier if certain performance
criteria are met, or upon a change of control). On February 25, 1998, Mr.
Reid surrendered options to purchase 57,000 Shares. These surrendered
options are not included in this table. On April 29, 1998, Mr. Reid was
granted stock options to purchase 40,411 Shares vesting in equal
installments over four years (or earlier if certain performance criteria
are met, or upon a change of control).
(6) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
Director Compensation
RSC reimburses the directors on the RSC Board for their out-of-pocket
expenses incurred in connection with attending meetings of the RSC Board. In
addition to reimbursement for out-of-pocket expenses, all non-employee members
of the RSC Board receive $10,000 per year (payable $2,500 per quarter) as
compensation for serving on the RSC Board, plus $1,500 for attendance at each
RSC Board meeting and $500 for attendance at each committee meeting. Each
committee chairman receives an additional $1,500 per year. All non-employee
directors also receive non-qualified stock options under one of RSC's stock
option plans. In addition, members of the Executive Committee receive a fee of
$40,000 per month for their services.
A-3
<PAGE>
Stock Options
Options Granted to Certain Executive Officers. The following table sets
forth information concerning individual grants of stock options made by RSC
during the year ended December 31, 1998 to its Chief Executive Officer and
each of its four other most highly compensated executive officers:
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option
Individual Grants Term
---------------------------------------------------------------- --------------
Percent of Total
Number of Options Granted Exercise or
Securities Underlying to Employees in Base Price Expiration
Options Granted (1)(2) Fiscal Year 1998 per Share ($) Date 5% ($) 10% ($)
---------------------- ---------------- ------------- ---------- ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid.......... 190,000(3) 32.9% $20.19 1/14/08 $2,412 $6,113
Chairman and Chief 40,411 7.0% 28.56 4/29/08 726 1,840
Executive Officer
Douglas A. Waugaman (4). 13,656 2.4% 22.88 2/25/08 196 498
President and Chief
Operating Officer 1,344 0.2% 26.38 4/15/08 22 56
1,000 0.2% 28.56 4/29/08 18 46
Robert M. Wilson........ 13,656 2.4% 22.88 2/25/08 196 498
Executive Vice
President, 1,344 0.2% 26.38 4/15/08 22 56
Chief Financial
Officer, 1,000 0.2% 28.56 4/29/08 18 46
Secretary and Treasurer
Ronald Halchishak....... 13,656 2.4% 22.88 2/25/08 196 498
Senior Vice President
of 1,344 0.2% 26.38 4/15/08 22 56
Operations 1,000 0.2% 28.56 4/29/08 18 46
David G. Ledlow......... 13,656 2.4% 22.88 2/25/08 196 498
Senior Vice President
of 1,344 0.2% 26.38 4/15/08 22 56
Operations 1,000 0.2% 28.56 4/29/08 18 46
</TABLE>
- --------
(1) All options granted vest equally over four years from the date of grant;
however, those granted to Mr. Reid may vest earlier if certain performance
criteria are met or upon a "change of control" (as defined in the Reid
Employment Agreement).
(2) The preceding table does not include options granted on January 4, 1999 as
follows: Mr. Reid--200,000; Mr. Waugaman--50,000; Mr. Wilson--50,000; Mr.
Halchishak--25,000; and Mr. Ledlow--25,000. Each of these options was
granted at an exercise price of approximately $15.13 per Share.
(3) Includes options to purchase 57,000 Shares surrendered by Mr. Reid on
February 25, 1998.
(4) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
A-4
<PAGE>
Options Exercised by Certain Executive Officers. The following table sets
forth information (on an aggregated basis) concerning each exercise of stock
options made during the year ended December 31, 1998 by RSC's Chief Executive
Officer and each of its four other most highly compensated executive officers
and the year-end value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at Fiscal Year- "In-the-Money" Options
Shares End at Fiscal Year-End (2)
Acquired on Value ------------------------- ---------------------------------
Exercise (1) Realized ($) Exercisable Unexercisable Exercisable ($) Unexercisable ($)
------------ ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid.......... -- -- 200,000 173,411 -- --
Chairman and Chief
Executive Officer
Douglas A. Waugaman (3). -- -- 25,000 91,000 -- --
President and Chief
Operating Officer
Robert M. Wilson........ -- -- 18,750 72,250 -- --
Executive Vice
President,
Chief Financial
Officer,
Secretary and Treasurer
Ronald Halchishak....... 11,150 $247,387 37,510 49,750 $11,988 $5,916
Senior Vice President
of
Operations
David G. Ledlow......... 6,006 150,090 37,500 49,750 11,831 5,916
Senior Vice President
of
Operations
</TABLE>
- --------
(1) As of March 31, 1999, none of the foregoing individuals had exercised any
options since December 31, 1998.
(2) Options are "in-the-money" at the fiscal year end if the fair market value
(based on the closing price of the Shares on the NYSE on December 31, 1998
of $15.69 per Share) of the underlying securities on such date exceeds the
exercise or base price of the option.
(3) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
401(k) Plan
RSC maintains a 401(k) Retirement Savings Plan (the "401(k) Plan") to
provide retirement and other benefits to its employees and to permit its
employees a means to save for their retirement. The 401(k) Plan is intended to
be a tax-qualified plan under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code").
RSC's employees become eligible to participate in the 401(k) Plan, and to
have salary deferral contributions made on their behalf, after they complete
six months of service and attain the age of 18.
Subject to legal limitations, participants may elect, by salary reduction,
to have 401(k) Plan contributions of 2% to 16% of their compensation made to
their accounts. Under the 401(k) Plan, RSC may make discretionary profit
sharing contributions on behalf of participants who have completed 1,000 hours
of service during the plan year or 6 months of continuous employment and are
employed on the last day of the plan year (or have retired after attaining age
65, died or incurred a disability in a plan year), based on compensation. RSC
made discretionary contributions of $150,000 in 1996, $436,000 in 1997 and
$990,000 in 1998 under the 401(k) Plan.
Participants in the 401(k) Plan always have a 100% vested and
nonforfeitable interest in the value of their contributions. Participants
become vested in RSC's profit sharing and matching contributions based on a
graded five year vesting schedule (or upon a participant's retirement after
attaining age 65, death or disability, if earlier). Participants are entitled
to receive the vested amounts in their accounts in a single lump-sum payment
on death, disability, retirement or termination of employment. In certain
circumstances, participants may receive loans and hardship withdrawals from
their 401(k) Plan accounts.
A-5
<PAGE>
Stock Option Plans
RSC currently maintains two plans, the Stock Option Plan for Key Employees
(the "1995 Plan") and the 1996 Equity Participation Plan (the "1996 Plan"),
pursuant to which specified employees or directors may obtain options or other
awards enabling them to participate in RSC's equity. The RSC Board adopted the
1996 Plan on December 5, 1996, and it was approved by RSC's stockholders on
February 5, 1997. The principal purposes of the 1996 Plan are to provide
incentives for RSC's officers, directors, key employees and consultants
through the granting of options, restricted stock and other awards, thereby
stimulating their personal and active interest in RSC's development and
financial success, and inducing them to remain in RSC's service. In addition
to awards made to officers, key employees or consultants, the 1996 Plan
provides for the granting of options ("Directors Options") to RSC's non-
employee directors pursuant to a formula. The 1995 Plan is maintained for the
benefit of certain of RSC's employees for a similar purpose.
The 1995 Plan. The 1995 Plan provides that the RSC Board, or a committee
appointed by the RSC Board (in either case, the "1995 Plan Committee"), may
grant non-transferable incentive stock options ("ISOs") and non-qualified
stock options ("NQSOs") to key employees. The 1995 Plan Committee has the full
authority and discretion, subject to the terms of the 1995 Plan, to determine
those individuals who are eligible to be granted options and the amount and
type of these options. Terms and conditions of options are set forth in
written option agreements. An aggregate of up to 324,000 Shares are issuable
under the 1995 Plan, however, as of March 31, 1999, none of these Shares were
available for future stock option grants.
The 1996 Plan. The 1996 Plan is administered by the Compensation Committee
of the RSC Board, or a subcommittee thereof (the "Compensation Committee"),
with respect to grants to RSC's employees or consultants, and by the RSC Board
with respect to Director Options. Subject to the terms and conditions of the
1996 Plan, the Compensation Committee or the RSC Board, as applicable, has the
authority to select the persons to whom awards are to be made, to determine
the number of Shares to be subject thereto and the terms and conditions
thereof, and to make all other determinations and to take all other actions
necessary or advisable for the administration of the 1996 Plan.
The 1996 Plan provides that the Compensation Committee may grant or issue
stock options, stock appreciation rights ("SARs"), restricted stock, deferred
stock, dividend equivalents, performance awards, stock payments and other
stock-related benefits or awards (collectively, "Awards"), or any combination
thereof. Each Award is set forth in a separate written agreement with the
person receiving the Award. Under the 1996 Plan, not more than 2,000,000
Shares (or the equivalent in other equity securities) are authorized for
issuance upon exercise or vesting of any Awards. As of March 31, 1999, 160,048
Shares were available for future Awards. Furthermore, the maximum number of
Shares that may be subject to options or SARs granted under the 1996 Plan to
any individual in any calendar year cannot exceed 200,000.
Awards under the 1996 Plan may be granted to (1) individuals who are then
officers or other employees of RSC or any of its present or future
subsidiaries who are determined by the Compensation Committee to be key
employees, and (2) consultants of RSC selected by the Compensation Committee
for participation in the 1996 Plan. Approximately 200 officers and other
employees are currently eligible to participate in the 1996 Plan. During the
term of the 1996 Plan and pursuant to a formula, (A) each non-employee
director is automatically granted an NQSO to purchase 10,000 Shares on the
date of such director's initial election to the RSC Board, and (B) each then-
current non-employee director is automatically granted an NQSO to purchase
2,500 Shares at each subsequent annual meeting at which such director is
reelected to the RSC Board.
Management Incentive Compensation Plan
RSC maintains an annual bonus plan (the "Management Incentive Compensation
Plan") under which the chief executive officer and certain other executives
(the "Covered Employees") are eligible to receive bonus payments. The
Management Incentive Compensation Plan is intended to provide an incentive for
superior work, to motivate Covered Employees toward even higher achievement
and business results, to tie their goals and interests to those of RSC and its
stockholders and to enable RSC to attract and retain highly qualified senior
employees.
A-6
<PAGE>
The Management Incentive Compensation Plan is administered by a committee
consisting of at least two members of the RSC Board who qualify as "outside
directors" under Section 162(m) of the Code (the "Bonus Committee"). The Bonus
Committee currently consists of the members of the Compensation Committee. The
Bonus Committee has the sole discretion and authority to administer and
interpret the Management Incentive Compensation Plan.
A Covered Employee may receive a bonus payment based upon the attainment of
performance objectives established by the Bonus Committee and related to one
or more of the following corporate business criteria, which may be limited,
where applicable with respect to any Covered Employee, to store-level or
regional operations: pre-tax income, operating income, cash flow, earnings per
share, EBITDA, return on equity, return on invested capital or assets, cost
reductions and savings, return on revenues, collection of accounts receivable
or productivity. The actual amount of future bonus payments under the
Management Incentive Compensation Plan is not presently determinable. However,
the Management Incentive Compensation Plan provides that the maximum bonus for
a Covered Employee shall not exceed $1,000,000 with respect to any fiscal
year.
The Management Incentive Compensation Plan is designed to ensure the annual
bonuses paid to Covered Employees are deductible by RSC, without limit under
Section 162(m) of the Code. Section 162(m) of the Code places a limit of
$1,000,000 on the amount of compensation that may be deducted in any tax year,
however, certain performance-based compensation is not subject to the
deduction limit. The Management Incentive Compensation Plan is designed to
provide this type of performance-based compensation.
Bonuses paid to Covered Employees are based upon bonus formulas that tie
bonuses to one or more objective performance standards. Bonus formulas for
Covered Employees are adopted in each performance period by the Bonus
Committee no later than the latest time permitted by Section 162(m) of the
Code. No bonuses are paid to Covered Employees unless and until the Bonus
Committee makes a certification in writing with respect to the attainment of
the objective performance standards as required by Section 162(m) of the Code.
The Bonus Committee may in its sole discretion reduce a bonus payable to a
Covered Employee, however, the Bonus Committee has no discretion to increase
the amount of a Covered Employee's bonus. The Bonus Committee has the
discretion to apply or not apply the foregoing provisions to bonuses paid to
eligible employees who have not been designated as Covered Employees.
Executive Savings Plan and Survivor Protection Program
In January 1998, the RSC Board approved (1) an Executive Savings Plan (the
"ESP") pursuant to which RSC's senior executives may defer portions of their
cash compensation, and (2) a Survivor Protection Program (the "SPP") pursuant
to which RSC would pay survivor benefits to the beneficiaries of deceased
senior executives and certain other members of RSC's senior management.
The ESP. RSC's senior executives may defer the receipt of a portion of
their cash compensation pursuant to the ESP, whereby amounts, while deferred,
earn interest at a rate of (1) for the first five years of the program, the
greater of 10% or the average long-term bond yield, and (2) after the first
five years of the program, the average of the long-term bond yield. In
addition, an annual deferral incentive rate will be determined each year,
beginning with the third year of the program, which rate will be added to the
rates described in the previous sentence. Participants in the ESP will receive
payments under the ESP upon the later of retirement or upon reaching age 55
with at least seven years of service to RSC. If RSC terminates a participant's
employment, that participant will receive payments under the ESP upon reaching
age 62. The payments will be made over a 15 year period, subject to the one-
time right of participants to elect to receive 90% of their ESP account
balance and forfeit the remainder. The trust administering the ESP may
purchase life insurance policies to fund future payments under the ESP.
The SPP. To date, RSC has not executed any agreements to implement or fund
potential obligations under the SPP. The contemplated benefit under the SPP is
three times annual base salary (less $100,000) for senior executives and two
times base salary (less $100,000) for other senior management participants,
with a maximum
A-7
<PAGE>
benefit of $500,000 for both groups. RSC may purchase life insurance benefits
under the SPP, and benefits would continue after a participant's retirement,
with eligibility to begin upon the earlier of (1) the participant reaching age
62 or (2) the participant reaching age 55 with at least seven years of service
to RSC.
Employee Qualified Stock Purchase Plan
In 1997, RSC adopted the Employee Qualified Stock Purchase Plan (the "QSP
Plan"). In general, the QSP Plan authorizes RSC's employees to purchase
Shares, through payroll deductions, at a purchase price of 85% of the fair
market value of such Shares. The QSP Plan is intended to help RSC attract and
retain experienced and capable persons who can make significant contributions
to RSC's growth and success and to align their interests with those of RSC's
stockholders.
The QSP Plan provides for the issuance of up to 250,000 Shares. The QSP
Plan also provides for appropriate adjustments in the number and kind of
Shares subject to the QSP Plan and to outstanding purchase rights in the event
of a stock split, stock dividend or certain other similar changes in the
Shares and in the event of a merger, reorganization, consolidation or certain
other types of recapitalizations.
Each employee who has been employed by RSC for not less than 6 months and
who is customarily employed for more than 20 hours per week and more than 5
months per calendar year is eligible to participate in the QSP Plan. RSC
presently has approximately 2,800 employees who are eligible to participate in
the QSP Plan.
The per Share exercise price of each purchase right under the QSP Plan
shall be an amount equal to the lesser of 85% of the fair market value of a
Share on the first day of the offering period in which the eligible employee
began participating in the QSP Plan or 85% of the fair market value of a Share
on the date of exercise of an installment of the purchase right. The QSP Plan
commenced on July 1, 1997. As of March 31, 1999, 203,474 Shares remain
available under the QSP Plan.
A-8
<PAGE>
Exhibit 1
LOGO OF RENTAL SERVICE CORPORATION April 16, 1999
To Our Stockholders:
On April 5, 1999, United Rentals, Inc. commenced an unsolicited tender offer
for all of the outstanding shares of common stock of Rental Service Corporation
at a price of $22.75 per share in cash.
Your Board of Directors has determined that United Rentals' tender offer is
inadequate and not in the best interests of RSC or its stockholders.
Accordingly, we recommend that you reject the United Rentals tender offer and
not tender your shares to United Rentals.
As previously announced, RSC and NationsRent, Inc. have agreed to combine in
a stock-for-stock strategic merger. On January 20, 1999, your Board approved a
merger agreement with NationsRent and declared the terms of the merger with
NationsRent fair and advisable to RSC and its stockholders.
Our recommendation that you reject United Rentals' tender offer is based
upon our determination that:
. The consideration being offered by United Rentals is inadequate to RSC's
stockholders from a financial point of view; and
. The tender offer contains numerous and significant conditions, certain
of which cannot be satisfied by United Rentals or RSC alone.
In reaching its determination as to the financial inadequacy of United
Rentals' offer, your Board relied, among other things, upon the opinion of our
financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, that the
$22.75 per share consideration being offered in the tender offer is inadequate
to Rental Service's stockholders (other than United Rentals and its
affiliates), from a financial point of view.
Your Board's recommendation recognized that:
. RSC has continued to achieve record financial performance, including
first quarter results;
. RSC's internal forecasts exceed financial analyst estimates for the next
five years;
. United Rentals' offer represents a discount to RSC's historic trading
prices and multiples;
. United Rentals' offer contains no acquisition premium;
. Recent comparable acquisitions have been at considerably higher
multiples; and
. United Rentals' public statements have significantly understated the
highly accretive nature of its offer.
United Rentals' Offer is Financially Inadequate
Our first quarter results as well as our forecasts for 1999 and the
following four years substantially exceed Wall Street analyst expectations.
Today we reported first quarter revenues of $174.8 million, operating income of
$30.1 million and earnings per share of $0.32. These results substantially
exceeded Wall Street analyst expectations, and our reported earnings per share
of $0.32 exceeded the First Call consensus median estimate of $0.28 by $0.04.
<PAGE>
We have also provided you with our management's five-year business forecast
in our Schedule 14D-9 for United Rentals' offer. Our projected 1999 and 2000
earnings per share of $1.62 and $2.16 exceed First Call consensus estimates of
$1.57 and $1.92 by $0.05 and $0.24, respectively. Additionally, our projected
five-year earnings per share compound annual growth rate of 30% significantly
exceeds the First Call consensus estimate of 23%.
United Rentals' offer represents a discount to RSC's historic trading
prices and market multiples. Rather than being a "premium" offer, United
Rentals' offer is at a discount to your company's historic trading prices,
which closed at $24.63 within the 30 trading days prior to the United Rentals
offer--in fact, our stock price closed above the offer price on every trading
day but one in February. RSC's forward price-to-earnings multiple of more than
15x consensus estimates during that period is also in excess of the 14.5x
multiple implied by United Rentals' $22.75 per share offer for RSC. United
Rentals' offer clearly takes unfair advantage of the recent decline in RSC's
stock price.
United Rentals' offer does not contain any acquisition premium. The 14.5x
1999 estimated price-to-earnings multiple implied by United Rentals' offer for
RSC represents a discount of approximately 24% to United Rentals' fully-
distributed trading multiple of 19.1x 1999 estimated earnings per share on
April 15, 1999.
Multiples paid in recent comparable acquisitions have been considerably
higher. Industry acquisitions of companies of comparable size to RSC have been
at multiples considerably higher than the multiples implied by United Rentals'
offer. In comparison with the two most recent comparable acquisitions in our
industry, United Rentals' offer represents a 47% discount to the equity
valuation implied by Atlas Copco's acquisition of Prime Services, and a 42%
discount to the equity valuation of RSC that United Rentals' own merger with
U.S. Rentals implies, in each case based upon multiples of trailing 12-month
EBITDA, pro forma for acquisitions.
United Rentals has significantly understated the potential accretion to its
earnings that would result from an acquisition of RSC. We estimate a merger
with RSC would be approximately three times more accretive to United Rentals'
earnings per share than the $0.10 per share they have indicated in their
public statements.
We explain certain of the analyses above, including the assumptions and
qualifications for our forecasts, in greater detail in our Schedule 14D-9,
which you are urged to review carefully.
The United Rentals Offer is Contingent upon a Number of Significant
Conditions.
We have determined that the tender offer is not reasonably likely to be
consummated on the terms proposed by United Rentals because consummation of
the tender offer is subject to significant conditions not within RSC's or
United Rentals' control. These include:
. the termination of the merger agreement with NationsRent; and
. the invalidation or termination of existing agreements with NationsRent
as to the payment by RSC of certain termination fees to NationsRent and
the cancellation of the stock option granted by RSC to NationsRent in
connection with the proposed NationsRent transaction.
United Rentals has also conditioned payment for your shares upon receiving
financing for the offer pursuant to a commitment letter that itself is subject
to numerous conditions.
Further, the merger agreement with NationsRent only permits us to have
discussions with or negotiate with United Rentals if we determine that its
acquisition proposal constitutes a "Superior Proposal" to the proposed merger
with NationsRent. To do so, we must determine that the tender offer is, among
other things, "reasonably likely to be consummated" on the terms proposed by
United Rentals, which we have been unable to conclude in light of the
significant conditions of the United Rentals offer. United Rentals may
unilaterally waive, amend or reduce the conditions to its tender offer and may
improve the consideration offered. In such circumstances, we would reconsider
whether the tender offer constitutes a "Superior Proposal" under the merger
agreement with NationsRent. Additional significant conditions to the tender
offer are more fully described in our Schedule 14D-9.
2
<PAGE>
After considering, among other things, the inadequacy of United Rentals'
offer, the risks that United Rentals' offer will not be consummated and your
Company's plans to complete its strategic merger with NationsRent, your Board
determined to adopt a stockholder rights plan. The Board also adopted the
rights plan to assure that all Rental Service Corporation stockholders receive
fair and equal treatment in the event of any proposed takeover of your company
and to guard against abusive tactics to gain control of your company without
paying all stockholders a control premium. Accordingly, your Board today
announced it has declared a dividend of one Preferred Share Purchase Right on
each share of Rental Service Corporation common stock.
United Rentals' offer does not reflect RSC's strong performance and
excellent prospects, and is an attempt to take advantage of current low
trading levels, without paying any real premium.
Do not let United Rentals gain the value of your investment for its
shareholders.
We urge you to carefully read the Company's attached Schedule 14D-9 in its
entirety, including the discussion of the reasons for your Board's
recommendation and the opinion of Merrill Lynch.
You should be aware of a separate development. The Company has established
an Executive Committee of the Board, of which I will serve as Chairman and
which includes my fellow director, Britton H. Murdoch. The Committee will work
with and supervise the executive management of the Company, including Robert
M. Wilson, Executive Vice President and Chief Financial Officer, and Douglas
A. Waugaman, newly appointed Chief Operating Officer, during the absence of
Martin R. Reid, our Chairman and Chief Executive Officer. Mr. Reid, upon the
advice of his physicians, has requested and been granted a medical leave to
complete evaluation and pursue treatment of a heart condition.
We again urge you to reject United Rentals' inadequate offer. Any shares
tendered into the United Rentals tender offer may be withdrawn at any time
before its expiration. If you have any questions or need any assistance in
withdrawing your shares from the tender offer, please contact MacKenzie
Partners, Inc. at (800) 322-2885 (toll-free) or at (212) 929-5500 (collect).
Your Board of Directors thanks you for your continued support.
Sincerely,
/s/ John M. Sullivan
John M. Sullivan
Chairman of the Executive Committee
of the Board
On behalf of the Board of Directors
3
<PAGE>
Exhibit 2
FOR IMMEDIATE RELEASE
---------------------
RENTAL SERVICE CORPORATION BOARD OF DIRECTORS
REJECTS UNITED RENTALS OFFER AS INADEQUATE
Company Files Counterclaim to United Lawsuit; Institutes Shareholder Rights Plan
Executive Committee of the Board to Work with Senior Management
During Chairman and CEO Martin R. Reid's Medical Leave
SCOTTSDALE, AZ, April 16, 1999 -- Rental Service Corporation (NYSE: RSV) today
announced that its Board of Directors has determined that the unsolicited cash
tender offer by United Rentals, Inc. for all of the outstanding shares of RSC at
a price of $22.75 per share is inadequate and not in the best interests of RSC
or its stockholders, and therefore recommends that RSC's stockholders reject the
United Rentals tender offer and not tender their shares to United Rentals.
The Board's recommendation to reject United Rentals' tender offer is based upon
its determination that:
. The consideration being offered by United Rentals is inadequate to RSC's
stockholders from a financial point of view; and
. The Tender Offer contains numerous and significant conditions, certain
of which cannot be satisfied by United Rentals or RSC alone.
The Board's recommendation recognized that:
. RSC has continued to achieve record financial performance, including
first quarter results;
. RSC's internal forecasts exceed financial analyst estimates for the next
five years;
. United Rentals' offer represents a discount to RSC's historic trading
prices and multiples;
. United Rentals' offer contains no acquisition premium;
. Recent comparable acquisitions have been at considerably higher
multiples; and
. United Rentals' public statements have significantly understated the
highly accretive nature of its offer.
In reaching its determination as to the financial inadequacy of United Rentals'
offer, the Board relied upon, among other things, the opinion of its financial
advisor, Merrill, Lynch, Pierce, Fenner & Smith Incorporated, that the $22.75
per share consideration being offered in the tender offer is inadequate to RSC's
stockholders (other than United Rentals and its affiliates) from a financial
point of view.
<PAGE>
RSC also announced today that it is filing with the Securities and Exchange
Commission, and will mail to its stockholders, a Solicitation/Recommendation
Statement on Schedule 14D-9 setting forth the Board's formal recommendation to
reject the United Rentals offer. Additional information with respect to the
Board's decision to recommend that stockholders reject the United Rentals offer
and the matters considered by the Board in reaching such decision is contained
in the Schedule 14D-9.
Counterclaim Says United Misstated and Concealed Offer's Financing Condition
RSC also announced today that it will file a counterclaim for violations of the
federal securities laws against United Rentals and its Chief Executive Officer,
Bradley Jacobs, in the United States District Court for the District of
Connecticut. RSC's counterclaim alleges, among other things, that United Rentals
misstated and concealed the fact that its offer is subject to a financing
condition, and that there is "no assurance" that it will obtain financing for
its offer, in both public statements by Jacobs as well as public filings by
United Rentals with the Securities and Exchange Commission.
Executive Committee of the Board Formed; Chairman and CEO Reid Granted Medical
Leave; Douglas A. Waugaman Promoted to Chief Operating Officer
RSC also announced today that Martin R. Reid, Chairman and Chief Executive
Officer, has been granted a medical leave of absence due to a heart condition.
Mr. Reid's leave is based upon the advice of his physicians, and will last until
evaluation and comprehensive treatment of his medical condition have been
completed.
RSC further said that it has established an Executive Committee of the Board
comprised of directors John M. Sullivan and Britton H. Murdoch, with Mr.
Sullivan to serve as Chairman of the Committee. The Committee will work with and
supervise the executive management of the Company, including Robert M. Wilson,
Executive Vice President and Chief Financial Officer, and Douglas A. Waugaman,
newly appointed Chief Operating Officer, during Mr. Reid's absence.
Mr. Waugaman, age 40, has served as Senior Vice President of Operations for the
Midwest Region since April 1997. During this time, he guided the development of
the Company's Midwest operations from its first acquisition to the current 57
stores. In November 1998, the Company also added its Western operations to his
responsibilities.
From January 1994 to April 1997, which included the Company's initial public
offering in 1996, Mr. Waugaman served as Vice President, Chief Financial
Officer, Secretary and Treasurer of RSC. Prior to joining RSC, he served as
Operations Manager for Plastiglide Manufacturing Corporation, a subsidiary of
Illinois Tool Works, and as Vice President of Finance for Knapp Communications
Corporation. Mr. Waugaman, a Certified Public Accountant, received his degree in
accounting from Miami University in 1982.
Board Adopts Shareholder Rights Plan
RSC also announced today that the Board of Directors has declared a dividend
distribution of one Preferred Share Purchase Right on each outstanding share of
Rental Service Corporation common stock. The terms and conditions of the Rights
and related Rights Agreement are the subject of RSC's Form 8-K being filed today
with the Securities and Exchange Commission.
<PAGE>
The Company has not yet mailed its annual report to stockholders pending
completion of the SEC's review of the Company's Form 10-K. The Company will
furnish a copy of the 10-K upon stockholder request.
Rental Service Corporation is a leader in the rapidly growing equipment rental
industry, serving the needs of a wide variety of industrial, manufacturing and
construction markets. Headquartered in Scottsdale, Arizona, RSC operates 249
locations throughout the United States and Canada.
[Complete text of Letter to Stockholders follows]
Contacts:
Rental Service Corporation Kekst and Company
Robert M. Wilson, 480/905-3300 Thomas Davies or David Kronfeld, 212/521-4800
www.rentalservice.com
THIS PRESS RELEASE AND THE ACCOMPANYING LETTER DO NOT CONSTITUTE A SOLICITATION
OF PROXIES WITH RESPECT TO THE PROPOSED MERGER OF RENTAL SERVICE CORPORATION AND
NATIONSRENT, INC. OR A SOLICITATION TO REVOKE CONSENTS IN CONNECTION WITH THE
CONSENT SOLICITATION OF UNITED RENTALS. ANY SUCH SOLICITATION BY RENTAL SERVICE
CORPORATION WILL BE MADE ONLY BY MEANS OF SEPARATE PROXY OR CONSENT SOLICITATION
MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
<PAGE>
Exhibit 3
[MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED LETTERHEAD]
April 16, 1999
Board of Directors
Rental Service Corporation
6929 E. Greenway Parkway
Suite 200
Scottsdale, AZ 85254
Members of the Board of Directors:
On April 5, 1999, UR Acquisition Corporation (the "Purchaser"), a wholly
owned subsidiary of United Rentals, Inc. ("Parent" and together with Purchaser,
the "Bidders"), commenced a tender offer for all outstanding shares of common
stock, par value $.01 per share (the "Company Shares"), of Rental Service
Corporation (the "Company"), at a price of $22.75 per share (the "Offer
Price"), net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated April 5,
1999, and the related letter of transmittal (collectively, the "Offer").
You have asked us whether, in our opinion, the Offer Price is adequate to
the shareholders of the Company (other than Parent and its affiliates), from a
financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and Parent that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of the Company, furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning the matters described in clauses 1 (as to the Company) and 2
above;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded
companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them
with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Offer with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Reviewed the Agreement and Plan of Merger, dated as of January 20,
1999, between NationsRent, Inc. (the "Merger Partner") and the Company,
pursuant to which the Merger Partner will be merged with and into the
Company (the "Proposed NationsRent Merger");
(8) Reviewed the Offer and the related Tender Offer Statement on Schedule
14D-1 filed by the Bidders with the Securities and Exchange Commission
on April 5, 1999; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, including the
information in the Offer, and we have not assumed any responsibility for
independently verifying
<PAGE>
such information or undertaken an independent evaluation or appraisal of any
of the assets or liabilities of the Company or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the
Company. With respect to the financial forecast information furnished to or
discussed with us by the Company, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's management as to the expected future financial
performance of the Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available
to us as of, the date hereof.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third party indications of interest for the acquisition of all or
any part of the Company.
We are acting as financial advisor to the Company in connection with the
Proposed NationsRent Merger and will receive a fee from the Company for our
services, a significant portion of which is contingent upon the consummation
thereof. In addition, we are providing financing services to the Company and
the Merger Partner and will receive a fee from the combined company for our
services, a significant portion of which is contingent upon consummation of
the Proposed NationsRent Merger. We are also acting as financial advisor to
the Company in connection with the Offer and will receive a fee from the
Company for our services. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagements. We have, in the past,
provided financing services to the Company, including acting as lead
underwriter in connection with an offering of the Company Shares in August
1998, and financial advisory and financing services to the Parent and may
continue to do so and have received, and may receive, fees for the rendering
of such services. In addition, in the ordinary course of our business, we may
actively trade the Company Shares and other securities of the Company, and
securities of the Parent for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not constitute a recommendation to any shareholder
of the Company as to whether or not such shareholder should tender Company
Shares pursuant to the Offer or vote in favor of any proposal presented to
shareholders in connection therewith.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Offer Price is inadequate to the shareholders of
the Company (other than Parent and its affiliates), from a financial point of
view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
Exhibit 29
[NATIONSRENT LETTERHEAD]
April 12, 1999
Board of Directors
Rental Service Corporation
6929 East Greenway Parkway
Scottsdale, Arizona 85254
Dear RSC Directors:
I understand that you will be meeting shortly to consider a
recommendation on the unsolicited tender offer launched by United Rentals on
April 5. In advance of that meeting we want to reconfirm to you our strong
commitment to the completion of our merger of equals transaction. We believe
this merger is in the best interests of all our shareholders, employees,
suppliers and customers. It is for that reason that I write to you today.
We continue to believe that our proposed tax free transaction offers
the better value to your shareholders, who will have the opportunity to
participate in the future growth of a combined RSC NationsRent. We also believe
the transaction will offer superior opportunities for all of our employees by
giving them the opportunity to participate in the growth of the premier
equipment rental company in the United States. We are prepared to work closely
with you to do whatever is necessary to successfully effect our business
combination and defeat this attempt to deprive your shareholders not only of the
fair value of their current investment but also of the value of our proposed
combination.
I remain personally committed to this merger and am at your
disposal for any and all assistance you may require.
All best regards,
/s/ James L. Kirk
James L. Kirk
Chairman and Chief Executive Officer
<PAGE>
Exhibit 31
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
UR ACQUISITION CORPORATION, a Delaware :
corporation, and UNITED RENTALS, INC., a :
Delaware corporation, :
:
Plaintiffs, :
: Civil Action No. 17090
:
v. :
:
MARTIN R. REID, WILLIAM M. BARNUM, JR., :
JAMES R. BUCH, DAVID P. LANOHA, :
CHRISTOPHER A. LAURENCE, ERIC L. MATTSON, :
BRITTON H. MURDOCH, JOHN M. SULLIVAN, :
RENTAL SERVICE CORPORATION, a Delaware :
corporation, and NATIONSRENT, INC., :
a Delaware corporation, :
:
Defendants. :
COMPLAINT
Plaintiffs UR Acquisition Corporation ("UR Acquisition") and United
Rentals, Inc. ("URI"), as and for their Complaint herein, by and through their
undersigned attorneys, allege, upon knowledge as to themselves and their own
acts and upon information and belief as to all other matters, as follows:
NATURE OF THIS ACTION
1. Plaintiff UR Acquisition, a wholly owned subsidiary of plaintiff
URI, has today commenced a tender offer (the "Tender Offer" or the "URI Tender
Offer") for all of the outstanding shares of defendant Rental Services
Corporation ("RSC") at $22.75 per share in cash, representing a 32% premium over
the market price for URI's shares (as of the close of trading on the New York
Stock Exchange on April 1, 1999).
2. In an agreement dated as of January 20, 1999 (the "Merger
Agreement"), RSC and defendant NationsRent, Inc. ("NationsRent") agreed to merge
in a stock-for-stock exchange. The RSC board approved the Merger Agreement less
than one week after RSC's Chief Executive Officer rebuffed an offer from URI to
discuss a possible acquisition by URI, stating in substance that RSC was not for
sale.
3. Unlike RSC, the shares of which are owned by a large number of
unaffiliated stockholders, approximately 48% of the outstanding common stock of
NationsRent is controlled by its three founding stockholders (the "NationsRent
Founding Stockholders"). Two of the NationsRent Founding Stockholders, H. Family
Investments, Inc. and James L. Kirk (NationsRent's chairman and chief executive
officer), collectively own approximately 46.1% of NationsRent's common stock and
have entered into a voting agreement with RSC in which they have agreed to vote
their shares together
<PAGE>
in favor of the NationsRent merger. The effect of the proposed NationsRent/RSC
merger would thus be to transfer control of RSC from a disparate unaffiliated
group of stockholders to an entity effectively controlled by the NationsRent
Founding Stockholders.
4. According to the limited information that is currently publicly
available, RSC and NationsRent agreed in their Merger Agreement to a breakup fee
of more than 11% of the value of the merger consideration (calculated as a
percentage of the value of the proposed transaction contemplated by the Merger
Agreement) (the "Breakup Fee"), as well as a "lock-up" cross-stock option (the
"Lockup Option") which permits NationsRent and RSC to purchase approximately
19.9% of each other's common stock. The Lockup Option becomes exercisable upon
the occurrence of any event that would result in NationsRent becoming entitled
to the Breakup Fee.
5. Despite the RSC directors' (the "Individual Defendants")
fiduciary duty to act to maximize the value obtained for all RSC stockholders,
the Breakup Fee and Lockup Option are designed to preclude, and have the effect
of precluding, among other things, a superior offer for RSC from URI.
6. Plaintiffs' Tender Offer is non-discriminatory, non-coercive, and
provides a substantial premium to the stockholders of RSC in exchange for their
RSC shares. Through the Tender Offer and a proposed second-step merger,
plaintiffs intend to acquire control of, and ultimately the entire equity
interest in, RSC. However, the Tender Offer is conditioned upon, among other
things, setting aside of the Breakup Fee contained in RSC's Merger Agreement
with NationsRent and the attendant Lockup Option.
7. Accordingly, plaintiffs seek declaratory and injunctive relief,
among other things, enjoining the triggering or enforcement of the Breakup Fee
and Lockup Option.
THE PARTIES
8. Plaintiff URI is a Delaware corporation with its principal
executive offices in Connecticut. URI, an owner of RSC stock, is primarily
engaged in the equipment rental business, as are RSC and NationsRent.
9. Plaintiff UR Acquisition is a Delaware corporation with its
principal executive offices in Connecticut. UR Acquisition is a wholly owned
subsidiary of URI.
10. Defendant RSC is a Delaware corporation with its principal place
of business in Scottsdale, Arizona.
11. Defendant Martin R. Reid is the Chairman and Chief Executive
Officer of RSC.
12. Defendant Daniel P. Lanoha is Senior Vice President of Operations
and a director of RSC.
13. Defendants William M. Barnum, Jr., James R. Buch, Christopher A.
Laurence, Eric L. Mattson, Britton H. Murdoch and John M. Sullivan are directors
of RSC. According to RSC's filing on Form 10-K for the year ended December 31,
1998, its board of directors "presently consists of eight members, including
four independent directors." Thus, by RSC's own admission, a majority of its
directors are not independent.
<PAGE>
14. Defendant NationsRent is a Delaware corporation with its
principal executive offices in Ft. Lauderdale, Florida.
THE MERGER AGREEMENT
15. In December 1998, a representative of URI's financial advisor
telephoned defendant Martin Reid, RSC's Chairman of the Board and Chief
Executive Officer, to arrange a meeting between them. While Reid stated he did
not believe it was a good time to sell RSC, he agreed to meet in January 1999.
16. On January 15, 1999, such a meeting took place with Reid and
Robert M. Wilson, RSC's Executive Vice President, Secretary and Treasurer. At
the meeting, Reid was asked whether RSC was interested in discussing a business
combination with URI, and Reid stated that his company was not for sale.
17. Six days later, NationsRent and RSC announced that they had
entered into the Merger Agreement, pursuant to which RSC would merge with
NationsRent in a stock-for-stock transaction valued at approximately $360
million when the agreement was announced.
18. According to the current report on Form 8K of RSC filed on
January 28, 1999, pursuant to the Merger Agreement, each share of NationsRent
would be converted into 0.355 share of RSC common stock. According to public
sources, pursuant to the Merger Agreement, NationsRent would have the right to
nominate five of the nine directors of the combined companies.
19. Under the circumstances presented here, the aggregate effect of
the structural barriers to an alternative transaction, created by the
NationsRent transaction, is both preclusive and coercive. Pursuant to the Merger
Agreement, a termination by either party under certain specified circumstances
requires the terminating party to pay the other party $35 million as a Breakup
Fee, and up to an additional $5 million in expenses. As of the date of the
Merger Agreement, the up to $40 million total Breakup Fee (including expenses)
represented approximately 11% of the value of the NationsRent transaction.
20. RSC and NationsRent have also each granted to the other the
Lockup Option to purchase approximately 19.9% of the stock of their respective
corporations pursuant to a "stock option agreement" dated on or about January
20, 1999. The Lockup Option becomes exercisable upon the occurrence of any event
that would result in the holder of the option being entitled to receive payment
of the Breakup Fee under the Merger Agreement. Among other things, the Lockup
Option is designed (i) to ensure that the only transaction that RSC stockholders
are permitted to consider is between RSC and NationsRent; (ii) deter URI from
seeking to acquire RSC upon terms that are economically superior to the
NationsRent/RSC Merger Agreement; and (iii) penalize either party to the Merger
Agreement should it attempt to secure a better transaction for its stockholders.
Thus, should RSC decide to accept an offer for a different business combination
transaction from URI no matter how advantageous to RSC's stockholders RSC would
be forced to allow NationsRent to purchase approximately 19.9% of the common
equity of RSC at an undisclosed price, as well as being forced to pay
NationsRent up to $40 million.
URI TAKES ITS CASE
DIRECTLY TO RSC'S STOCKHOLDERS
21. On April 5, 1999, plaintiffs announced the commencement of a
tender offer to purchase all of the outstanding common stock of RSC at
<PAGE>
$22.75 per share in cash a 32% premium over RSC's last closing price.
22. Among other things, consummation of the offer is conditioned upon
the Breakup Fee and the Lockup Option's having been terminated or invalidated
without any funds having been paid or stock having been issued thereunder. Based
upon plaintiffs' understanding of the terms of the Lockup Option attendant to a
Merger Agreement which, to plaintiffs' knowledge, has never been publicly filed
or disclosed the cost to plaintiffs of their Tender Offer if NationsRent were to
exercise the Lockup Option and then to tender its shares in plaintiffs' Tender
Offer would be increased significantly.
23. On April 5, 1999, URI's chairman and chief executive officer sent
a letter to Mr. Reid of RSC advising him of the Tender Offer and the benefits of
a combination between URI and RSC, and offering to meet with him and RSC
directors to discuss the URI proposal and answer relevant questions.
IRREPARABLE INJURY
24. Defendants' conduct has irreparably harmed and, unless enjoined,
will continue to irreparably harm plaintiffs by depriving them of the unique
opportunity to acquire RSC. The actions of the Individual Defendants constitute
a breach of the fiduciary duties owed by the Individual Defendants to RSC's
stockholders. Plaintiffs' resulting injury is not compensable in monetary
damages and they, therefore, have no adequate remedy at law.
COUNT I
25. Plaintiffs repeat and reallege each of the foregoing allegations
as if fully set forth herein.
26. By virtue of their positions as directors of RSC, the Individual
Defendants owe fiduciary duties to RSC and its stockholders. These duties
include, but are not limited to, the obligation to consider and fairly evaluate
all offers for RSC, the obligation to act reasonably to seek a transaction
offering the highest value reasonably available to RSC's stockholders in the
sale or merger of RSC, and the obligation not to put self-interests and
personal considerations, or any other considerations, ahead of the interests of
RSC's stockholders. The Individual Defendants are also obligated to conduct the
affairs of RSC with due care.
27. The agreement of the Individual Defendants to the Breakup Fee and
Lockup Option demonstrates a lack of good faith, could not have been based upon
a reasonable inquiry, and unreasonably precludes any possibly superior offer for
RSC such as the Tender Offer.
28. In engaging in the foregoing conduct, the RSC directors breached
their fiduciary duties by, among other things, failing to act in a manner that
was entirely fair to all RSC stockholders. The Individual Defendants have also
failed to obtain a transaction offering the best value available to all RSC
stockholders. Further, the conduct of the Individual Defendants was wholly
unreasonable in relation to any "threat" posed by URI and was not undertaken in
good faith and after reasonable investigation.
29. Unless enjoined by this Court, the Individual Defendants will
continue to breach their fiduciary duties, to the detriment of RSC and its
stockholders, including URI.
30. Plaintiffs have no adequate remedy at law.
<PAGE>
COUNT II
31. Plaintiffs repeat and reallege each of the foregoing allegations
as if fully set forth in this paragraph.
32. The Tender Offer is non-coercive and non-discriminatory. It is
fair to RSC stockholders, poses no threat to RSC's corporate policy and
effectiveness, and represents a substantial premium over both the market price
of RSC common stock prior to the announcement of the Tender Offer and the
implied value of RSC's proposed Merger Agreement with NationsRent.
33. Section 203 of the Delaware General Corporation Law, 8 Del. C.
section 203, entitled "Business Combinations with Interested Stockholders",
applies to any Delaware corporation, including RSC, that has not opted out of
such statute's coverage.
34. Among other things, Section 203, which was designed to impede
coercive and inadequate tender and exchange offers, provides that if a person
acquires 15% or more of a corporation's stock (thereby becoming an "interested
stockholder"), such interested stockholder may not engage in a "business
combination" with the corporation (defined to include a merger or consolidation)
for three years after the person becomes an interested stockholder, unless (i)
prior to the 15% acquisition, the board of directors has approved either the
acquisition or the business combination; (ii) the interested stockholder
acquires 85% of the corporation's voting stock in the transaction in which it
crosses the 15% threshold; or (iii) on or subsequent to the date of the 15%
acquisition, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders (and not by written
consent) by the affirmative vote of at least 66-2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
35. Section 203 may not properly be used by the RSC Board to obstruct
RSC's stockholders from considering URI's non-coercive, non-discriminatory, all
cash offer, which offer is superior to that implied in the Merger Agreement with
NationsRent, nor may it be used to prevent substantive negotiations between URI
and RSC that could lead to an even more advantageous deal between URI and RSC.
Section 203 was designed to allow a board of directors to ensure that their
stockholders received the highest possible value for their shares, not to allow
the board to refuse to consider all possible alternatives to their chosen deal
or to deny stockholders the right to vote on any other deal.
36. Pursuant to Section 203, the Individual Defendants can render the
statute inapplicable to the URI Tender Offer by approving it. The Individual
Defendants' presumptive failure to approve the URI Tender Offer for purposes of
Section 203 and to take any other steps necessary to render Section 203
inapplicable (presumed based upon the conduct of RSC and the Individual
Defendants towards URI to this point) constitutes a breach of the fiduciary duty
owed by the Board to RSC's stockholders.
37. Plaintiffs have no adequate remedy at law.
COUNT III
38. Plaintiffs repeat and reallege each of the foregoing allegations
as if fully set forth herein.
39. The Individual Defendants have breached their fiduciary duties to
RSC and its stockholders.
<PAGE>
40. NationsRent has aided and abetted and Individual Defendants in
their breaches of fiduciary duty. As a direct participant in the Merger
Agreement between NationsRent and RSC, NationsRent knew of the breaches of
fiduciary duty set forth herein, and in fact actively encouraged and
participated in said breaches of fiduciary duty. NationsRent induced the
Individual Defendants' breaches in order to obtain the substantial financial
benefits that the Merger Agreement between NationsRent and RSC would provide it
at the expense of RSC's stockholders.
41. Plaintiffs have no adequate remedy at law.
WHEREFORE, Plaintiffs UR Acquisition and URI respectfully request that
this Court:
A. Declare and decree that (i) the Breakup Fee provisions of the
Merger Agreement, and (ii) the Lockup Option were approved in breach of the
fiduciary duties of the Individual Defendants and that each of them is unlawful
and invalid, null and void and of no further effect;
B. Temporarily, preliminarily and permanently enjoin NationsRent,
RSC, and their respective employees, agents and all persons acting on their
behalf from taking further steps of any actions with respect to (i) the Lockup
Option and/or (ii) the Breakup Fee and/or (iii) any other unlawful provisions of
the Merger Agreement;
C. Temporarily, preliminarily and permanently enjoin RSC and the
Individual Defendants to render SEction 203 inapplicable to the URI Tender Offer
by approving the URI Tender Offer for purposes of Section 203;
D. Temporarily, preliminarily and permanently enjoin the adoption or
exercise of any measures by RSC or the Individual Defendants which have the
effect of impeding, thwarting, frustrating or interfering with the URI Tender
Offer;
E. Require RSC and the Individual Defendants to take all steps
necessary to provide plaintiffs with a fair and equal opportunity to acquire
RSC, including furnishing to URI the same information and access to information
as was provided to NationsRent;
F. Temporarily, preliminarily and permanently enjoin NationsRent,
and its employees, agents and all persons acting on its behalf, from aiding and
abetting the Individual Defendants' breach of their fiduciary duties to RSC and
its stockholders, including with respect to the Merger Agreement, the Breakup
Fee, the Lockup Option, or the Tender Offer Commenced by plaintiffs; and
G. Grant such other and further relief as the Court may deem just
and proper, including the costs and disbursements of this action and reasonable
plaintiffs' attorneys' fees.
/s/ EDWARD P. WELCH
---------------------------
Edward P.Welch
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Attorneys for Plaintiffs,
UR Acquisition Corporation and
United Rentals, Inc.
OF COUNSEL:
Jay B. Kasner
Steven J. Kolleeny
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
Dated: April 5, 1999
================================================================================
<PAGE>
Exhibit 32
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
UR ACQUISITION CORPORATION :
and UNITED RENTALS, INC., :
:
Plaintiffs, :
: CIVIL ACTION NO. 399CV00625(DJS)
-against- :
:
JAMES L. KIRK, RENTAL SERVICES :
CORPORATION and NATIONSRENT, :
INC., :
:
Defendants. : April 7, 1999
VERIFIED COMPLAINT
Plaintiffs UR Acquisition Corporation ("UR Acquisition") and United
Rentals, Inc. ("URI"), by their attorneys, allege for their complaint for
declaratory, injunctive and other relief against James L. Kirk ("Kirk"), Rental
Services Corporation ("RSC") and NationsRent, Inc. ("NationsRent") upon
knowledge as to themselves and upon information and belief as to all other
matters, as follows:
NATURE OF THIS ACTION
1. This is an action for injunctive, declaratory and other relief
for violations of Sections 14(a), 14(d) and 14(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), 15 U.S.C. sections 78n (a), (d), (e), and the
rules and regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC").
2. By agreement dated January 20, 1999 (the "Merger Agreement"),
defendant RSC agreed to merge with defendant NationsRent in a stock-for-stock
exchange. Pursuant to that transaction --which according to public sources was
valued at approximately $360 million --NationsRent shareholders will receive
.355 share of RSC stock for each share of NationsRent stock. The Merger
Agreement was entered into less than one week after URI representatives were
advised by RSC's Chairman and Chief Executive Officer that RSC was not "for
sale."
3. The proposed RSC/NationsRent transaction is subject to approval
by both RSC and NationsRent shareholders. RSC and NationsRent have filed
preliminary proxy materials with the SEC on a confidential basis in
contemplation of soliciting shareholder votes on the proposed merger. However,
these proxy materials have not been disseminated or made available, even in
preliminary or draft form, to RSC or NationsRent shareholders. RSC's counsel
stated yesterday that RSC does not anticipate being in position to disseminate
final proxy materials for a two to three week time period. In fact, defendants
have not made even the Merger Agreement itself public.
4. On April 5, 1999, plaintiffs commenced a tender offer (the
"Tender Offer") to purchase all of the outstanding shares of RSC common
<PAGE>
stock at $22.75 per share, for a total of $553 million. That same day, RSC
issued a press release announcing that its board would meet and issue a
recommendation on the Tender Offer by April 16, and stating that RSC
shareholders should do nothing until the board has had an opportunity to
evaluate the offer.
5. RSC's message that its shareholders should "stop, look and
listen" was a facade. Beginning on April 5, the very day on which the Tender
Offer was announced, defendants began to make public statements designed to
encourage RSC shareholders to vote in favor of the proposed RSC/NationsRent
merger and to refrain from tendering their shares into the Tender Offer. Among
other things, defendant NationsRent and its Chairman and CEO Kirk, respectively,
stated that the NationsRent/RSC transaction was "far superior" and a superior
transaction" to the Tender Offer.
6. In addition, RSC's Chief Financial Officer stated ambiguously
that his company "had intended" to schedule a vote on the RSC/NationsRent merger
"sometime between May 15 and May 31, 1999," without disclosing that the vote is
not now anticipated to occur until mid June at the earliest.
7. Under the federal securities laws, defendants and their
affiliates may not lawfully engage in a "solicitation" of proxies at this time.
Similarly, RSC or persons acting on its behalf may not lawfully solicit or make
recommendations to shareholders with respect to the Tender Offer until a
Solicitation/Recommendation Statement on Schedule 14D-9 has been filed.
8. Moreover, defendants' statements were materially misleading and,
therefore, violate Sections 14(a) and 14(e) of the Exchange Act in connection
with the proxy solicitations and the Tender Offer, and applicable rules and
regulations thereunder. Among other things, defendants' statement fails to
disclose material information necessary for RSC shareholders to truthfully and
fully evaluate the position that the NationsRent/RSC transaction was "far
superior" to the $22.75 tender offer. RSC also falsely suggests that the
shareholders meeting on the NationsRent/RSC proposed merger transaction will
occur by the end of May.
9. Plaintiffs, as well as RSC's shareholders and the investing
public, have been and, unless defendants are enjoined from continuing their
illegal activities, will continue to suffer immediate and irreparable injury, in
that, among other things, they will continue to be deprived of the protections
Congress and the SEC have determined they should be afforded in connection with
proxy solicitations and tender offers.
JURISDICTION
10. This Court has jurisdiction over this action pursuant to Section
27 of the Exchange Act, 15 U.S.C. section 78aa, and 28 U.S.C. section 1331. The
claims alleged herein arise under Sections 14(a), 14(d) and 14(e) of the
Exchange Act and the rules and regulations of the SEC thereunder. In connection
with the unlawful conduct complained of herein, defendants have directly and
indirectly used the means and instrumentalities of interstate commerce and the
mails.
THE PARTIES
11. Plaintiff URI is a Delaware corporation with its principal
executive offices in Greenwich, Connecticut. URI, an owner or RSC stock, is
primarily engaged in the equipment rental business, as are RSC and
<PAGE>
NationsRent.
12. Plantiff UR Acquisition is a Delaware corporation with its
principal executive offices in Greenwich, Connecticut. UR Acquisition is a
wholly owned subsidiary of URI.
13. Defendant RSC is a Delaware corporation with its principal place
of business in Arizona.
14. Defendant NationsRent is a Delaware corporation with its
principal place of business in Florida.
15. Defendant Kirk is Chairman and Chief Executive Officer of
NationsRent.
BACKGROUND
A. The Merger Agreement
16. On January 21, 1999, RSC and NationsRent announced that they had
entered into a Merger Agreement, pursuant to which RSC would merge with
NationsRent in a stock-for-stock transaction valued, according to public
reports, at approximately $360 million when the Agreement was announced.
According to a current report on Form 8-K of RSC filed on January 28, 1999,
pursuant to the Merger Agreement each share of NationsRent would be converted
into 0.355 share of RSC common stock.
17. The complete terms of the Merger Agreement and related documents
remain unknown to the investing public because the document has not been
publicly filed or disclosed.
18. The Merger Agreement is subject to approval by votes of the
shareholders of both RSC and NationsRent. Moreover, while RSC and NationsRent
have filed preliminary proxy materials on a confidential basis, those materials
have not been made publicly available to RSC or NationsRent shareholders. To
date, RSC has not scheduled or announced the date of any shareholders meeting.
In a statement made on April 5, 1999, however, RSC indicated that it had
intended to schedule the vote sometime between May 15 and may 31, 1999.
B. The Tender Offer
19. On April 5, 1999, plaintiffs commenced a Tender Offer to acquire
100% of RSC's outstanding common stock at an all-cash price of $22.75 per share
- -- or a total of $553 million. The Tender Offer is scheduled to expire on April
30, 1999.
20. The RSC board of directors has not yet met to consider its
recommendation to shareholders concerning the Tender Offer. On April 5, RSC
announced that its board would meet and issue such a recommendation by April 16,
the last date it is legally permitted to do so. RSC also issued a press release
in which it ostensibly urged that RSC shareholders do nothing until the board
had an opportunity to evaluate the Tender Offer.
C. Defendants' Unlawful Solicitation
21. Notwithstanding its professed attitude that shareholders should
"stop, look and listen" until the RSC board made and publicized its
recommendation, RSC and NationsRent appropriately recognized that RSC
shareholders, if given a free choice, would decisively prefer United
<PAGE>
Rentals $22.75 all-cash tender to the stock-for-stock merger with NationsRent
under the Merger Agreement that is the RSC board's preferred transaction.
Therefore, defendants almost immediately began to make public statements that
were reasonably calculated to influence RSC shareholders with respect to their
votes on the RSC/NationsRent transaction and their positions with respect to the
Tender Offer, in advance of the time that the RSC board would analyze and make a
recommendation concerning the Tender Offer. These statements constituted
"solicitations" within the meaning of the SEC Rules governing both proxy
materials and target company responses to tender offers.
22. Specifically, according to a press release issued by Nations-Rent
and publicly disseminated on the PR News Wire via Dow Jones and elsewhere:
NationsRent Reaffirms Commitment to Complete 'Superior' Merger Transaction
with Rental Service Corporation
PR News Wire via Dow Jones
FORT LAUDERDALE, Fla., April 5/PRNewswire/ NationsRent, Inc. (NYSE: NRI)
said it remains committed to completing its tax-free merger with Rental
Service Corporation, calling it "far superior to United Rentals'
unsolicited taxable $22.75 cash offer for RSC."
James L. Kirk, Chairman of Chief Executive Officer of NationsRent, said,
"The combination of NationsRent and Rental Service Corporation, approved by
the boards of both companies, is intended to create the preeminent company
in the equipment rental industry. NationsRent is prepared to work with
RSC's board and shareholders to ensure the completion of our merger. We
believe that our tax-free merger of equals with RSC is superior to United
Rentals' taxable offer and will allow shareholders of Rental Service to
participate in the substantial growth opportunities of the combined
companies."
23. These statements, made by Kirk and NationsRent but under
circumstances which strongly indicate that the statements were made in RSC's
interest and on RSC's behalf as well, constitute both (i) unlawful solicitations
of RSC shareholders' proxies with respect to the upcoming merger vote in
advance of RSC's having made the proxy disclosures required by law and
regulation; and (ii) unlawful solicitation of RSC shareholders with respect to
the Tender Offer in advance of the RSC board's having made a recommendation to
RSC shareholders and disseminated the materials concerning that recommendation
required by law and regulation.
24. In addition, it was reported that RSC's Chief Financial Officer
had said that RSC "had planned to schedule the shareholder meeting some time
between May 15 and May 31, after the [SEC] had approved the merger documents."
However, RSC failed to advise its shareholders that (according to statements
made by its counsel) they now do not expect the SEC to approve the proxy
statement for at least another two or three weeks, and do not expect to schedule
a meeting until mid-June, if not later.
AS AND FOR A
FIRST CLAIM FOR RELIEF
[For Violations of Section 14 (a) of the Exchange Act
and Sec Rule 14a-3(a)]
25. Plaintiffs incorporate the preceding paragraphs as if fully set
forth herein.
26. SEC Rule 14a-1(1) broadly defines "solicit" and "solicitation" as
including any "communication to security-holders under
<PAGE>
circumstances reasonably calculated to result in the procurement, withholding or
revocation of a proxy." 17 CFR section 240.14a-1(1)(iii).
27. Defendants' solicitation, effected through NationsRent both on
its own behalf and as agent for RSC, including the statement that the proposed
NationsRent/RSC merger is far superior for RSC shareholders to the Tender Offer,
were disseminated under circumstances reasonably calculated to result in the
procurement or withholding of a proxy in connection with the RSC shareholder
meeting to vote on the NationsRent/RSC transaction.
28. Rule 14a-3(a) mandates that no solicitation "shall be made unless
each person solicited is concurrently furnished or has previously been furnished
with a publicly-filed preliminary or definitive written proxy statement
containing the information specified in Schedule 14A...." 17 CFR section
240.14a-3(a).
29. Defendants' solicitations have violated the proxy rules adopted
by the SEC in that, among other things, persons solicited were not concurrently
or previously furnished with a publicly-filed preliminary or definitive written
proxy statement containing the information specified in section 240.14a-3(a).
30. Plaintiffs have no adequate remedy at law.
AS AND FOR A
SECOND CLAIM FOR RELIEF
[For Violations of Section 14(a) of the Exchange Act
and SEC Rule 14a-9]
31. Plaintiffs incorporate the preceding paragraphs as if fully set
forth herein.
32. Section 14(a) of the Exchange Act and Rule 14a-9 were adopted to
ensure that the proxy solicitation process is truthful and to enable
shareholders to evaluate the information provided in proxy materials fully. Rule
14a-9 provides that:
No solicitation subject to this regulation shall be made by means of
any proxy statement... or other communication, written or oral,
containing any statement which at the time and in the light of the
circumstances under which it is made, is false or misleading with
respect to any material fact, or which omits to state any material
fact necessary in order to make the statements therein not false or
misleading...
17 CFR section 240.14a-9.
33. Defendants' solicitations were materially misleading in stating
that NationsRent believed that the proposed merger between RSC and NationsRent
is "far superior," from the point of view of RSC's shareholders, to the Tender
Offer without having also disclosed information necessary for shareholders to
fully evaluate the basis for this statement including, among other things, all
of the bases for defendants' assertion.
34. In addition, the statement alleged in paragraph 24 was materially
false and misleading for the reasons stated.
35. Plaintiffs have no adequate remedy at law.
<PAGE>
AS AND FOR A
THIRD CLAIM FOR RELIEF
[For Violations of Section 14(d) of the Exchange Act
and Rule 14d-9]
36. Plaintiffs incorporate the preceding paragraphs as if fully set
forth herein.
37. SEC Rule 14d-9, promulgated by the SEC pursuant to Section 14(d)
of the Exchange Act, prohibits the target corporation (here, RSC) from making
any solicitation or recommendation concerning a tender offer to the target
company shareholders unless, as soon as practicable on the date any such
solicitation or recommendation is made, a Schedule 14D-9 is filed with the SEC
and a copy is delivered to the offeror. The Schedule 14D-9 must contain the
information requested in Rule 14d-9, including among other things the nature of
the solicitation or recommendation, particularized reasons for the solicitation
or recommendation, and recent transactions in respect of the target company's
securities by the target company or by its officers and directors.
38. The statements made by NationsRent and Kirk, on behalf of RSC,
constitute solicitations with respect to the Tender Offer, without a Schedule
14D-9 being on file, in violation of Section 14(d) and Rule 14d-9.
39. Plaintiffs have no adequate remedy at law.
AS AND FOR A
FOURTH CLAIM FOR RELIEF
[For Violations of Section 14(d) and 14(e) of the Exchange Act]
40. Plaintiffs incorporate the preceding paragraphs as if fully set
forth herein.
41. Section 14(e) of the Exchange Act, 15 U.S.C. section 78n(e),
makes it unlawful for any person to make any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made, not
misleading, or to engage in any fraudulent, deceptive, or manipulative acts or
practices, in connection with any tender, or any solicitation of security
holders in opposition to or in favor of any such officer, request, or
invitation.
42. Defendants' statements as alleged above were materially false or
misleading.
43. Plaintiffs have no adequate remedy at law.
IRREPARABLE HARM
44. By virtue of defendants' failure to comply with federal
securities laws, United Rentals, as well as all of RSC's other shareholders and
the investing public, are being deprived of the protections and of the accurate
and truthful information to which Sections 14(a), 14(d) and 14(e) of the
Exchange Act and the applicable SEC rules and regulations entitles them. Unless
defendants are ordered to make corrective disclosure and are enjoined from such
further actions, RSC shareholders will be forced to exercise their voting rights
and to make decisions with respect to the Tender Offer based on information that
does not comply with --indeed, was discriminated in violation of --the federal
regulatory scheme.
WHEREFORE, plaintiffs demand judgment against the defendants as
follows:
I. Declaring that defendants have violated Sections 14(a),
<PAGE>
14(d) and 14(e) of the Exchange Act and the rules and regulations promulgated
thereunder.
II. Ordering defendants to make all appropriate disclosures and
correct all false or misleading statements and omissions of material fact
heretofore made by them regarding the proposed merger and/or the Tender Offer.
III. Temporarily, preliminarily and permanently enjoining defendants,
their officers, employees, agents, nominees and affiliates, and all other
persons acting in concert with them or on their behalf, directly or indirectly,
from taking any steps to, or in connection with:
(a) soliciting from any RSC shareholder any proxy, consent or
authorization to vote any shares of RSC stock at the shareholder vote to be
held in connection with the proposed RSC/NationsRent merger, unless and
until defendants comply, in full, with all applicable provisions of the
federal securities laws; and unless and until such time in the future as
the Court may determine that the effects of defendants' unlawful conduct
have disseminated; and
(b) soliciting any RSC shareholder with respect to whether or not
to tender shares into the Tender Offer, unless and until defendants comply,
in full, with all applicable provisions of the federal securities laws; and
unless and until such time in the future as the Court may determine that
the effects of defendants' unlawful conduct have dissipated.
IV. Granting plaintiffs such other and further relief as this
Court may deem just and proper, including reasonable attorneys' fees, costs
and disbursements of this action.
PLAINTIFFS,
UR ACQUISITION CORPORATION and
UNITED RENTALS, INC.
By: /s/ Thomas J. Groark, Jr.
-------------------------------
Thomas J. Groark, Jr. (ct04245)
Richard M. Reynolds (ct06124)
Philip S. Wellman (ct09636)
DAY, BERRY & HOWARD LLP
CityPlace I
Hartford, Connecticut 06103
(806) 275-0100
Their Attorneys
OF COUNSEL:
Jay B. Kasner
Steven J. Kolleeny
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
<PAGE>
VERIFICATION
Bradley S. Jacobs, declares as follows:
I am the Chairman and Chief Executive Officer of United Rentals, Inc.,
one of the plaintiffs in this action.
I have reviewed the foregoing Complaint; its contents are true, except
insofar as matters are stated to be pleaded upon information and belief; and as
to those matters I believe it to be true.
I declare under penalty of perjury that the foregoing is true and
correct.
/s/ Bradley S. Jacobs
----------------------
BRADLEY S. JACOBS
Executed on April 7, 1999
==============================================================================
<PAGE>
Exhibit 33
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
UR ACQUISITION CORPORATION and
UNITED RENTALS, INC.,
Plaintiffs,
CIVIL ACTION NO. 399CV00625 (DJS)
-against-
April 16, 1999
JAMES L. KIRK, RENTAL SERVICES
CORPORATION and NATIONSRENT,
INC.,
Defendants.
ANSWER, COUNTERCLAIM AND JURY DEMAND
-------------------------------------
OF RENTAL SERVICE CORPORATION
------------------------------------
Rental Service Corporation ("RSC") answers the verified complaint of
UR Acquisition Corporation and United Rentals, Inc. (collectively,
"Plaintiffs"), as follows:
1. RSC denies that Plaintiffs have properly alleged any claim for
relief or any violation of Sections 14(a), 14(d) or 14(e) of the Securities
Exchange Act of 1934, 15 U.S.C. (SS) 78n(a), (d), (e) or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC").
2. In response to the allegations regarding the content and effect
of the Merger Agreement, RSC respectfully refers the Court to the Merger
Agreement which speaks for itself. RSC denies the remaining allegations of
paragraph 2.
3. RSC admits that the Merger Agreement with NationsRent, Inc.
("NRI") is
<PAGE>
subject to approval by the stockholders of RSC and NRI, and that RSC has filed
preliminary proxy materials with the SEC. RSC also admits that it has not
distributed its preliminary proxy materials to its stockholders or the public.
RSC denies all other allegations of paragraph 3.
4. RSC admits that on April 5, 1999, Plaintiffs commenced a highly
conditional tender offer and RSC issued a press release. In response to the
allegations regarding the content and effect of Plaintiffs' tender offer and
RSC's press release, RSC respectfully refers the Court to those documents, which
speak for themselves.
5. RSC admits that news media reported comments by James L. Kirk and
NRI, stating that the proposed merger is superior to Plaintiffs' tender offer.
RSC denies the remaining allegations of paragraph 5.
6. RSC denies the allegations of paragraph 6.
7. The allegations of paragraph 7 state legal conclusions to which
no response is necessary.
8. RSC denies the allegations of paragraph 8.
9. RSC denies the allegations of paragraph 9.
10. RSC admits that this Court has jurisdiction over this action. RSC
denies all remaining allegations of paragraph 10.
11. RSC admits that RSC and NRI engage in the equipment rental
business. RSC is without sufficient information and knowledge to form a belief
as to the truth of the remaining allegations of paragraph 11, and therefore
denies those allegations.
12. RSC is without sufficient information and knowledge to form a
belief as to the truth of the allegations of paragraph 12, and therefore denies
those allegations.
13. RSC admits the allegations of paragraph 13.
14. RSC admits the allegations of paragraph 14.
15. RSC admits the allegations of paragraph 15.
16. RSC admits that on January 21, 1999, RSC and NRI announced that
they entered into a Merger Agreement. RSC also admits that it filed a Form 8-K
with the SEC on January 28, 1999. In response to the allegations regarding the
content and effect of the Merger
<PAGE>
Agreement and RSC's 8-K, RSC respectfully refers the Court to the Merger
Agreement and the 8-K, which speak for themselves.
17. RSC denies the allegations of paragraph 17.
18. RSC admits that the proposed merger between RSC and NRI is
subject to the approval of the stockholders of RSC and NRI, and that RSC has
filed preliminary proxy materials with the SEC. RSC denies the remaining
allegations of paragraph 18.
19. RSC admits that on April 5, 1999, Plaintiffs announced a highly
conditional tender offer to acquire RSC's outstanding common stock. In response
to the allegations regarding the content and effect of Plaintiffs' tender offer,
RSC respectfully refers the Court to Plaintiffs' April 5, 1999 tender offer,
which speaks for itself.
20. RSC admits that it issued a press release on April 5, 1999. In
response to the allegations regarding the content and effect of RSC's April 5,
1999 press release, RSC respectfully refers the Court to the April 5, 1999 press
release, which speaks for itself. RSC further admits that its board has not yet
issued a recommendation regarding Plaintiffs' tender offer. RSC is taking all
necessary and legally required steps in response to Plaintiffs' April 5, 1999
tender offer. The remaining allegations of paragraph 20 are denied.
21. RSC denies the allegations of paragraph 21.
22. The allegations of paragraph 22 concern a press release
purportedly issued by NRI which was not written or authorized by RSC. In
response to the allegations regarding the content and effect of the NRI's press
release, RSC respectfully refers the Court to the press release, which speaks
for itself.
23. RSC denies the allegations of paragraph 23.
24. RSC denies the allegations of paragraph 24.
25. RSC incorporates by reference its responses to paragraphs 1
through 24 as if fully set forth herein.
26. The allegations of paragraph 26 state legal conclusions to which
no response is necessary.
27. RSC denies the allegations of paragraph 27.
<PAGE>
28. The allegations of paragraph 28 state legal conclusions to which
no response is necessary.
29. RSC denies the allegations of paragraph 29.
30. RSC denies the allegations of paragraph 30.
31. RSC incorporates by reference its responses to paragraphs 1
through 30 as if fully set forth herein.
32. The allegations of paragraph 32 state legal conclusions to which
no response is necessary.
33. RSC denies the allegations of paragraph 33.
34. RSC denies the allegations of paragraph 34.
35. RSC denies the allegations of paragraph 35.
36. RSC incorporates by reference its responses to paragraphs 1
through 35 as if fully set forth herein.
37. The allegations of paragraph 37 state legal conclusions to which
no response is necessary.
38. RSC denies the allegations of paragraph 38.
39. RSC denies the allegations of paragraph 39.
40. RSC incorporates by reference its responses to paragraphs 1
through 39 as if fully set forth herein.
41. The allegations of paragraph 41 state legal conclusions to which
no response is necessary.
42. RSC denies the allegations of paragraph 42.
43. RSC denies the allegations of paragraph 43.
44. RSC denies the allegations of paragraph 44.
ADDITIONAL DEFENSES
45. RSC pleads, as additional and affirmative defenses, each of the
following:
<PAGE>
First Additional Defense
(Failure to State a Claim)
46. Plaintiffs' complaint and each claim for relief fail to allege
facts sufficient to state a claim upon which relief may be granted.
Second Additional Defense
(Unclean Hands)
47. Plaintiffs' claims are barred by the equitable doctrine of
unclean hands.
Third Additional Defense
(Fault of Third Parties)
48. To the extent that URI has suffered any alleged injury, such
injury was proximately caused by the actions or conduct of parties other than
RSC.
Fourth Additional Defense
(Independent Action)
49. NRI was not RSC's agent in connection with making the statements
alleged in Plaintiffs' complaint. NRI's alleged statements were not made on
behalf of RSC.
Fifth Additional Defense
(Materiality)
50. Plaintiffs' claims against RSC must fail because RSC's alleged
actions or omissions were not material.
<PAGE>
COUNTERCLAIM
------------
As a counterclaim against UR Acquisition Corporation, United Rentals,
Inc. and Bradley Jacobs (collectively, "URI"), Rental Service Corporation
("RSC") alleges as follows:
INTRODUCTION
------------
1. RSC has filed this counterclaim to obtain declaratory and
injunctive relief halting URI's unlawful scheme to mislead RSC stockholders by
concealing the financing condition in URI's April 5, 1999 tender offer.
Concurrently with its tender offer, URI's chairman and chief executive officer
stated publicly that URI's offer was "fully financed" and offered "certainty."
URI's summary advertisement and press release concerning the offer described
several conditions of the offer, but never mentioned any need to secure
financing or any financing condition. URI's voluminous Securities and Exchange
Commission filing similarly failed to set forth the financing condition in its
summary of the conditions to the offer; instead, URI set forth this key
condition at the very end of a boilerplate description of the conditions to the
offer at the back of its filing. By misstating and concealing the material terms
of its tender offer, URI has violated federal laws and regulations; only prompt
injunctive relief requiring curative disclosure can ensure that RSC's
stockholders will not be mislead.
JURISDICTION AND VENUE
----------------------
2. The Court has jurisdiction over this action pursuant to 15 U.S.C.
(S) 78aa and 28 U.S.C. (S) 1331. Venue in this Court is proper pursuant to 15
U.S.C. (S) 78aa and 28 U.S.C. (S) 1391(b).
THE PARTIES
-----------
3. Counterclaimant RSC is a Delaware corporation with its principal
executive offices in Scottsdale, Arizona. RSC rents construction and industrial
equipment. RSC's common stock is registered pursuant to Section 12(g) under the
Securities Exchange Act of 1934 (the "Exchange Act") and is traded on the
American Stock Exchange.
4. Counterdefendant UR Acquisition Corporation is a Delaware
corporation and is a wholly owned subsidiary of Counterdefendant United Rentals,
Inc.
5. Counterdefendant United Rentals, Inc. is a Delaware corporation
with its
<PAGE>
principal executive offices in Greenwich, Connecticut.
6. Counterdefendant Bradley Jacobs is the Chairman and Chief
Executive Officer for United Rentals, Inc.
URI'S MISLEADING PUBLIC STATEMENTS AND TENDER OFFER
---------------------------------------------------
7. On April 5, 1999, URI announced an unsolicited, highly
conditional tender offer for all of the outstanding shares of RSC common stock
(the "Offer"). URI announced the Offer through several media, including: (a) an
interview given by Bradley Jacobs to Reuters, a major news agency; (b) a formal
press release; (c) a summary advertisement in the Wall Street Journal; and (d)
filings with the SEC.
8. In his interview with Reuters, Jacobs asserted that URI had
secured the financing required to purchase RSC, stating:
"We're prepared to move quickly, it's all cash and it's all fully
financed. . . . We offer certainty and no lingering doubts because
it's a cash offer" (emphasis added)
9. URI's April 5, 1999 press release stated:
"United Rentals has a firm commitment from Goldman, Sachs & Co. to
provide $2 billion in financing to complete the transaction and for
other corporate purposes."
URI's press release also stated that the Offer was subject to certain
conditions:
"The offer is conditioned on, among other things, the tender to United
Rentals of a majority of Rental Service shares on a fully-diluted
basis, the termination of the merger agreement between Rental Service
and NationsRent Inc., the agreement by the board of directors of
Rental Service to enter into a merger agreement for the acquisition of
Rental Service by United Rentals, the expiration or termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, and the termination or invalidation of a 19.9% lock-up option
and break-up fee provided to NationsRent in its merger agreement with
Rental Service."
10. In a Summary Advertisement for the Offer, published in the Wall
Street Journal on April 5, 1999, URI again described the conditions to the
Offer:
"The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the
Offer that number of Shares which constitutes a majority of the Shares
outstanding on a fully diluted basis (the "Minimum Condition"), (2)
the stockholders of the Company not having approved the Agreement and
Plan of Merger, dated as of January 20, 1999 (the "NationsRent Merger
Agreement"), between the
<PAGE>
Company and NationsRent, Inc., a Delaware corporation ("NationsRent"),
(3) Purchaser being satisfied, in its sole discretion, that the
NationsRent Merger Agreement has been terminated in accordance with
its terms, and the Company having entered into a definitive merger
agreement with Parent and Purchaser, to provide for the acquisition of
the Company pursuant to the Offer and the proposed merger described in
the Offer to Purchase, (4) Purchaser being satisfied, in its sole
discretion, that the provisions of Section 203 of the Delaware General
Corporation Law, as amended, are inapplicable to the Offer and the
proposed merger described in the Offer to Purchase, (5) the Company
not having entered into or effectuated any agreement or transaction
with any person or entity having the effect of impairing Purchaser's
ability to acquire the Company or otherwise diminishing the expected
economic value to Purchaser of the acquisition of the Company, (6) any
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, having expired or been
terminated prior to the expiration of the Offer, and (7) the option
held by NationsRent to purchase up to 19.9% of the outstanding Shares
having been terminated or invalidated without any Shares having been
issued thereunder. The Offer is also subject to other terms and
conditions set forth in the Offer to Purchase."
Securing financing was not one of the listed conditions.
11. Also, on April 5, 1999, URI filed with the SEC a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), which provided further
information regarding the Offer, including URI's Offer to Purchase. The first
page of the Offer to Purchase again listed a number of conditions of the Offer,
but did not mention any financing condition. In the introduction of the Offer to
Purchase, under the heading "CERTAIN CONDITIONS TO THE OFFER," URI described the
eight conditions of the Offer. Once again, no financing condition was set
forth.
12. Buried deep within the Offer to Purchase, URI revealed that it can
elect not to proceed with the purchase of RSC stock, if, in its sole judgment,
certain conditions arise that make it inadvisable to proceed with the purchase.
(Offer to Purchase, pp. 27-30, (P) 14(a)-(j).) The tenth and last of the listed
conditions was URI's failure to obtain the requisite financing. (Offer to
Purchase, p. 30, (P) 14(j).) Even more troubling, the Offer to Purchase states:
"Although [URI] expects that the [financing] will be available to
provide funds for the consummation of the Offer . . . there can be no
assurance that the [financing] will be consummated." (Offer to
Purchase, p. 20.)
<PAGE>
13. The Offer to Purchase also reveals that Goldman, Sachs' financing
is subject to many conditions, including: (a) the completion of loan documents,
(b) Goldman, Sachs' determination of whether there has been any adverse change
to URI's or RSC's general affairs, management, prospects or financial
position, (c) no disruption of financial or capital markets, and (d) no
litigation that may have a material impact on URI's or RSC's general affairs,
management, prospects or financial position.
FIRST COUNTERCLAIM FOR RELIEF
-----------------------------
(Violation of Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e))
14. RSC realleges and incorporates by reference each and every
allegation contained in paragraphs 1-13, inclusive, as though fully set forth
herein.
15. Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e), makes it
unlawful for any person to make any untrue statement or to engage in any
fraudulent, deceptive, or manipulative acts in connection with any tender offer.
16. In connection with the Offer, URI has violated Section 14(e) in
at least the following ways:
(a) URI has publicly asserted in the financial press that the
Offer is "fully financed" and "all cash," when in fact, URI has no assurances
that its financing will be consummated;
(b) Jacobs asserted in his Reuters' interview, and URI asserted
in its Press Release and Summary Advertisement, that the Offer does not include
a financing condition, when in fact, buried deep within the Offer to Purchase,
URI has reserved the right to withdraw or abandon the Offer if it cannot obtain
satisfactory financing; and
(c) URI has publicly stated that the Offer provides "certainty"
and is "fully financed," when in fact, the Offer is subject to multiple
conditions that cannot possibly be fulfilled before the expiration of the Offer.
17. Through the above described acts and omissions, URI engaged in
fraudulent, deceptive, or manipulative practices in connection with its Offer in
violation of Section 14(e).
<PAGE>
18. The provisions of Section 14(e) of the Exchange Act were designed
to protect stockholders by ensuring that they have adequate and accurate
information on which to base their decisions whether to sell, tender or hold
their shares. URI's effort to conceal its financing condition and financing
uncertainty is depriving RSC, its stockholders and the investing public of the
protections of Section 14(e). URI's conduct has harmed RSC's and the public's
interest in full disclosure in connection with tender offers and sound financial
markets.
19. Unless URI is ordered to make corrective disclosures and is
enjoined from such further actions, RSC and its stockholders will be forced to
make decisions with respect to the Offer based on inaccurate and misleading
information that does not comply with the federal regulatory scheme. RSC has no
adequate remedy at law.
SECOND COUNTERCLAIM FOR RELIEF
------------------------------
(Violation of Section 14(d) of the Exchange Act, 15 U.S.C. (S) 78n(d))
20. RSC realleges and incorporates by reference each and every
allegation contained in paragraphs 1-13, inclusive, as though fully set forth
herein.
21. Section 14(d) of the Exchange Act, 15 U.S.C. (S) 78n(d) and the
SEC's rules promulgated thereunder, mandate that a tender offer must disclose
certain specified information to investors, and the offeror must file such
information with the SEC on a Schedule 14D-1. Pursuant to Section 14(d), the
offeror must disclose all known material information regarding financing for the
tender offer.
22. In connection with the Offer, URI has violated Section 14(d)
because it has failed to adequately disclose all material information regarding
the financing for the Offer known to URI at the time of the Offer.
23. The provisions of Section 14(d) of the Exchange Act were designed
to protect stockholders by ensuring that they have adequate and accurate
information on which to base their decisions to sell, tender or hold
their shares. URI's effort to conceal its financing condition and uncertainty is
depriving RSC, its stockholders and the investing public of the protections of
Section 14(d). URI's conduct has harmed RSC's and the public's interest in full
disclosure in connection with tender offers and sound financial markets.
<PAGE>
24. Unless URI is ordered to make corrective disclosures and is
enjoined from such further actions, RSC and its stockholders will be forced to
make decisions with respect to the Offer based on inaccurate and misleading
information that does not comply with the federal regulatory scheme. RSC has no
adequate remedy at law.
JURY DEMAND
-----------
25. RSC hereby demands a jury trial as provided by Rule 38(a) of the
Federal Rules of Civil Procedure.
PRAYER FOR RELIEF
-----------------
WHEREFORE, RSC prays for judgment against URI as follows:
1. Dismissing Plaintiffs' claims and granting judgment in favor of
RSC;
2. Declaring that URI has violated Sections 14(e) and 14(d) of the
Exchange Act and the rules promulgated thereunder;
3. Ordering URI to make all appropriate disclosures and to correct
all false or misleading statements and omissions of material fact regarding its
Offer;
4. Temporarily, preliminarily and permanently enjoining URI from
proceeding with its Offer or any future tender offer for the purchase of RSC's
outstanding shares, unless and until URI complies with all applicable provisions
of the federal securities laws and the effects of URI's unlawful conduct have
dissipated;
5. Awarding RSC its costs and attorneys' fees incurred in this
action; and
<PAGE>
6. Granting all further relief as the Court may deem just and
proper.
Dated: April 16, 1999
DEFENDANT AND COUNTERCLAIMANT
RENTAL SERVICE CORPORATION
By /s/ William H. Champlin III
-------------------------------------
William H. Champlin III
CT04202
TYLER COOPER & ALCORN LLP
City Place, 35th Floor
Hartford, CT 06103-3488
(860) 725-6200
(Fax)(860) 278-3802
Its Attorneys
OF COUNSEL
Marc W. Rappel
James J. Farrell
LATHAM & WATKINS
633 W. 5th Street, Suite 4000
Los Angeles, CA 90071
(213) 485-1234
(213) 891-8763
<PAGE>
Exhibit 34
To: All Employees
From: Rob Wilson
Doug Waugaman
Date: April 16, 1999
Subj: Important Company Announcements
Today, Rental Service Corporation announced several important events that you
should know about.
Of particular note, this morning we announced that Marty Reid, our Chairman and
Chief Executive Officer, has taken a medical leave of absence upon the advice of
his physicians, due to a heart condition. Marty will undergo a complete
evaluation of his condition and pursue a comprehensive treatment program.
For all of us, Marty's tremendous energy and enthusiasm has always been a vital
source of leadership and inspiration. Please join us in wishing him a speedy
recovery and return to RSC.
In Marty's absence, an Executive Committee of the Board of Directors has been
established to work with RSC executives on a daily basis. The committee will be
chaired by John M. Sullivan, and will also include Britton H. Murdoch, both of
whom are experienced members of our Board. Jack and Britt are both very familiar
with our operations and well acquainted with our company's unique and personal
culture.
Reporting directly to the Executive Committee will be Rob Wilson, Executive Vice
President and Chief Financial Officer, and Doug Waugaman, who has been promoted
to the newly created position of Chief Operating Officer. Doug will also
continue to be directly responsible for the Midwest and Western operations.
In other announcements today, the Company's Board of Directors issued its
recommendation to shareholders regarding the United Rentals tender offer.
The Board determined that the offer was inadequate from a financial point of
view and was not in the best interests of the company or its shareholders. As a
result, the Board recommended that shareholders reject the United Rentals offer.
The Board's determination was based upon several financial considerations, among
which was RSC's continued outstanding performance.
Just this morning, we announced that RSC again achieved record first quarter
earnings results, which reflect your hard work and dedication. We are very proud
of the
<PAGE>
achievements of our company, and of all the many people who have made our
company's success possible.
These are interesting and changing times at RSC. One thing, however, will not
change, and that is our dedication to provide quality service to our customers.
During this period, we will continue to keep you informed of important
developments. For your part, the most valuable contribution you can make to the
company is to continue to focus on performing your job to the best of your
abilities, and on pursuing the goals of our business.
That is the best way to continue to ensure a bright and prosperous future for
our company.
THIS LETTER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES WITH RESPECT TO THE
PROPOSED MERGER OF RENTAL SERVICE CORPORATION AND NATIONSRENT, INC. OR A
SOLICITATION TO REVOKE CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION OF
UNITED RENTALS. ANY SUCH SOLICITATION BY RENTAL SERVICE CORPORATION WILL BE MADE
ONLY BY MEANS OF SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH
THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
<PAGE>
Exhibit 35
To Our Customers:
I am writing to inform you about several important developments at Rental
Service Corporation.
On Friday, April 16, we announced that Marty Reid, our Chairman and Chief
Executive Officer, has taken a medical leave of absence on the advice of his
physicians, due to a heart condition. Marty's tremendous energy has always been
a force of excitement and vitality throughout our Company. Please join us in
wishing him a speedy recovery and return.
In his absence, the Board of Directors has established an Executive Committee to
work with our senior management on a daily basis. This Committee will be chaired
by Jack Sullivan and will also include Britton Murdoch, both experienced members
of the Board.
The Company has also promoted Doug Waugaman to the new position of Chief
Operating Officer. Doug has held several key positions at RSC since joining in
1994, and has been a major force in our recent expansion in the Midwest. If you
haven't met Doug yet, we hope that you will soon have that opportunity. Rob
Wilson, Executive Vice President and CFO, and Doug will be responsible for daily
operations and will report to the Executive Committee.
These and other changes at RSC - including a recent unsolicited offer from
United Rentals - make these interesting times at our Company. One thing has
never changed, which is our commitment to you and to your business needs. We
continue to appreciate and value the relationship we share, and we are dedicated
to providing you with the best service available anywhere.
If you have any questions, please feel free to contact me, or to call your
regular customer representative.
Sincerely,
[Store/Regional Manager]
THIS LETTER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES WITH RESPECT TO THE
PROPOSED MERGER OF RENTAL SERVICE CORPORATION AND NATIONSRENT, INC. OR A
SOLICITATION TO REVOKE CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION OF
UNITED RENTALS. ANY SUCH SOLICITATION BY RENTAL SERVICE CORPORATION WILL BE MADE
ONLY BY MEANS OF SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH
THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
<PAGE>
EXHIBIT 36
Dear Supplier:
I am writing to inform you about several important developments at Rental
Service Corporation.
On Friday, April 16, we announced that Marty Reid, our Chairman and Chief
Executive Officer, has taken a medical leave of absence on the advice of his
physicians, due to a heart condition. Marty's tremendous energy has always been
a force of excitement and vitality throughout our Company. Please join us in
wishing him a speedy recovery and return.
In his absence, the Board of Directors has established an Executive Committee to
work with our senior management on a daily basis. This Committee will be chaired
by Jack Sullivan and will also include Britton Murdoch, both experienced members
of the Board.
The Company has also promoted Doug Waugaman to the new position of Chief
Operating Officer. Doug has held several key positions at RSC since joining in
1994, and has been a major force in our recent expansion in the Midwest. If you
haven't met Doug yet, we hope that you will soon have that opportunity. Rob
Wilson, Executive Vice President and CFO, and Doug will be responsible for daily
operations and will report to the Executive Committee.
These and other changes at RSC - including a recent unsolicited offer from
United Rentals - make these interesting times at our Company.
We also continue to appreciate and value our relationship with you, which has
been so instrumental in maintaining RSC's excellent business prospects and its
ongoing success.
If you have any questions, please feel free to contact me, or to call your
regular company contact.
Sincerely,
[Store/Regional Manager]
THIS LETTER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES WITH RESPECT TO THE
PROPOSED MERGER OF RENTAL SERVICE CORPORATION AND NATIONSRENT, INC. OR A
SOLICITATION TO REVOKE CONSENTS IN CONNECTION WITH THE CONSENT SOLICITATION OF
UNITED RENTALS. ANY SUCH SOLICITATION BY RENTAL SERVICE CORPORATION WILL BE MADE
ONLY BY MEANS OF SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH
THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
