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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
RENTAL SERVICE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED APRIL __, 1999
RENTAL SERVICE CORPORATION
6929 EAST GREENWAY PARKWAY, SUITE 200
SCOTTSDALE, ARIZONA 85254
CONSENT REVOCATION STATEMENT
BY THE BOARD OF DIRECTORS OF RENTAL SERVICE CORPORATION
IN OPPOSITION TO THE SOLICITATION OF CONSENTS
BY UNITED RENTALS, INC.
_____________, 1999
The Board of Directors (the "RSC Board") of Rental Service
Corporation, a Delaware corporation ("RSC"), is furnishing this Consent
Revocation Statement and the accompanying WHITE Consent Revocation Card to the
holders of the outstanding shares of RSC's common stock, par value $.01 per
share (the "Shares"), in opposition to the solicitation by United Rentals, Inc.
("United Rentals") of written consents from the stockholders of RSC.
United Rentals is conducting a consent solicitation to replace your
duly elected directors with nine hand-picked nominees of United Rentals. Six of
the nine United Rentals nominees are directors and/or officers of United
Rentals. The action by United Rentals follows the unsolicited tender offer for
all of the outstanding Shares at a price of $22.75 per share in cash by UR
Acquisition Corporation ("UR Acquisition"), a wholly owned subsidiary of United
Rentals (the "United Rentals Offer") and proposed a second-step merger (the
"Proposed Second-Step Merger") in which any Shares not acquired pursuant to the
tender offer would be converted into the right to receive the consideration paid
in the United Rentals Offer. THE RSC BOARD IS ASKING YOU TO JOIN IT IN OPPOSING
UNITED RENTALS' ATTEMPT TO ACQUIRE RSC AT AN INADEQUATE PRICE BY GAINING CONTROL
OF YOUR RSC BOARD.
Your RSC Board has determined that the United Rentals Offer is
inadequate and not in the best interests of RSC or its stockholders. We also
believe that the United Rentals nominees, most of whom are officers or directors
of United Rentals, will have numerous conflicts of interest if elected as RSC's
directors. We believe that your RSC Board, which is composed primarily of
independent directors, is in the best position to protect the interests of RSC's
stockholders. We also believe that your RSC Board is best qualified to evaluate
any developments in the attempt to acquire RSC, including any changes in United
Rentals' offer. We are therefore asking you to reject the United Rentals
solicitation. CONSEQUENTLY, YOUR RSC BOARD UNANIMOUSLY OPPOSES THE UNITED
RENTALS CONSENT SOLICITATION AND URGES YOU NOT TO SIGN THE BLUE CONSENT CARD
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SENT TO YOU BY UNITED RENTALS.
EVEN IF YOU PREVIOUSLY SIGNED AND RETURNED UNITED RENTALS' BLUE
CONSENT CARD, YOU CAN CHANGE YOUR CONSENT. WE URGE YOU TO SIGN, DATE AND MAIL
THE ENCLOSED WHITE CONSENT REVOCATION CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED. YOUR PROMPT ACTION IS IMPORTANT. PLEASE RETURN THE WHITE CONSENT
REVOCATION CARD TODAY.
This Consent Revocation Statement and the enclosed WHITE Consent
Revocation Card are first being mailed to stockholders on or about __________,
1999.
If you have any questions about giving your revocation of consent or require
assistance, please call:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
BANKS AND BROKERS CALL COLLECT: (212) 929-5500
ALL OTHERS CALL TOLL-FREE: (800) 322-2885
<PAGE>
REASONS YOUR RSC BOARD OPPOSES THE UNITED RENTALS SOLICITATION
We believe the United Rentals solicitation is an attempt to pressure the RSC
Board to accept United Rentals' inadequate offer.
We believe United Rentals is attempting to put pressure on the RSC
Board by soliciting consents to facilitate the United Rentals Offer. United
Rentals is seeking consents to three proposals (the "United Rentals Proposals").
The United Rentals Proposal Nos. 1 and 2, taken together, are designed to enable
United Rentals to take control of your RSC Board. United Rentals Proposal No. 3
is designed to nullify unspecified Bylaws which may be adopted by your RSC Board
in its efforts to act in and protect the interests of your company. Your RSC
Board also believes that the purpose of the United Rentals consent solicitation
is to pressure your RSC Board and limit its options and flexibility in fully
evaluating the United Rentals Offer. Such pressure by United Rentals, we
believe, has the potential to disadvantage RSC stockholders. Your RSC Board
opposes the solicitation by United Rentals. The reasons to oppose United
Rentals' solicitation include:
The United Rentals nominees have conflicts of interest since it is in
the interest of United Rentals to acquire RSC at the lowest possible price.
The United Rentals nominees, if elected, would have certain obligations
under the Delaware General Corporation Law (the "DGCL") to RSC. If United
Rentals' hand-picked nominees are elected as your directors, we believe they
would have conflicts of interest which can only be detrimental to the interests
of RSC and its stockholders, since it is in United Rentals' interest to acquire
RSC at the lowest possible price for RSC's shares, a price which your RSC Board
has already determined is inadequate.
Given United Rentals' attempt to acquire RSC, we believe it is
contrary to the interests of United Rentals to allow any United Rentals-
designated directors to take any further steps to enhance the value of the
Shares. In this connection it is significant that, as disclosed in United
Rentals' consent solicitation materials, the United Rentals director nominees,
if elected to the RSC Board, will be indemnified by United Rentals "to the
fullest extent permitted by the DGCL and other applicable law" if they breach
their fiduciary duties to RSC and its stockholders. Such indemnification
appears to indicate United Rentals' awareness that conflicts of interest can
cause its director nominees to be unable to fulfill their duties to United
Rentals and also fulfill their fiduciary duties to RSC and its stockholders.
Furthermore, unless and until United Rentals acquires control over RSC, United
Rentals has no obligation to protect the interests of RSC's stockholders; its
sole obligation is to the stockholders of United Rentals. Additionally, because
United Rentals competes directly with RSC in the equipment rental business, we
believe that the United Rentals nominees would be subject to conflicts of
interest in serving as directors of RSC.
While three of the nine United Rentals director nominees are neither
officers or directors of United Rentals, United Rentals has also stated in its
consent solicitation materials that the "primary purpose" in seeking to elect
its director nominees to the RSC Board is to facilitate the completion of the
United Rentals Offer and the Proposed Second-Step Merger. The RSC Board
believes there is a conflict in the indication that a nominee is purportedly
independent of United Rentals when United Rentals has said that its goal in
nominating its director nominees is to effect the United Rentals Offer and the
Proposed Second-Step Merger.
The current RSC Board is composed primarily of independent directors.
The RSC Board believes that RSC stockholders should continue to be
represented by directors who are not employees of United Rentals, who are not
committed to achieving only United Rentals' goals, and who will not act in
furtherance of United Rentals' interests. At this critical time for the future
of RSC, when RSC is already a party to a merger agreement with NationsRent, Inc.
(the "NationsRent Merger Agreement") which the RSC Board has approved and
recommended to RSC stockholders, it is vital that RSC continue to have in place
a board of directors that is committed to continuing to act in the best
interests of RSC and its stockholders.
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Your RSC Board believes the United Rentals nominees may deprive RSC
stockholders of the protection of the DGCL and the RSC stockholder rights plan.
As you know, on January 20, 1999, RSC entered into the NationsRent
Merger Agreement. We believe the United Rentals nominees may take actions which
would facilitate the United Rentals Offer and Proposed Second-Step Merger rather
than the merger with NationsRent. These actions could include (i) voting to
redeem the rights issued to RSC stockholders pursuant to the RSC stockholder
rights plan recently adopted by the RSC Board (the "Rights Plan") and (ii)
voting to exempt RSC from the provisions of Section 203 of the DGCL, which were
designed to protect stockholders by limiting the ability of acquirors to effect
business combinations with corporations in which they hold a significant
interest. The RSC Board adopted the Rights Plan as a supplement to the
protections of Section 203 of the DGCL, and the RSC Board urges you not to vote
for nominees committed to depriving you of the benefits of the Rights Plan and
the protections of Section 203 of the DGCL.
The United Rentals Offer is contingent upon a number of significant
conditions, which are not within the control of RSC or United Rentals.
The United Rentals Offer is highly conditional. Several of the
conditions are not within the control of either RSC or United Rentals, such as:
(1) the termination of the NationsRent Merger Agreement, (2) the invalidation or
termination of existing agreements with NationsRent to pay NationsRent a
termination payment equal to $35 million as liquidated damages and to reimburse
NationsRent for its expenses in an amount of $5 million (collectively, the
"Termination Amounts") and (3) the termination or invalidation of the option
granted by RSC to NationsRent to purchase up to 4,795,431 Shares (subject to
certain adjustments), or approximately 19.9% of RSC's issued and outstanding
Shares on January 19, 1999 (the "NationsRent Option") in connection with the
proposed merger with NationsRent (the "NationsRent Merger"). If the United
Rentals director nominees are elected, but United Rentals does not complete its
tender offer because the conditions are not fulfilled or waived, we believe that
the RSC stockholders will not receive the tender offer consideration and will no
longer have a board of directors composed primarily of independent directors
committed to protecting the best interests of RSC and its stockholders. If the
United Rentals director nominees were elected, the new RSC Board could, among
other things, withdraw or adversely modify its recommendation in favor of the
merger with NationsRent, which would allow NationsRent to terminate the
NationsRent Merger Agreement and exercise the NationsRent Option and would
require RSC to pay the Termination Amounts. If the NationsRent Merger Agreement
were terminated, the new RSC Board could then cause RSC to enter into a merger
agreement with United Rentals at a price lower than that of the current United
Rentals Offer. We also believe the United Rentals nominees have conflicts of
interest because United Rentals competes directly with RSC in the equipment
rental business.
Your RSC Board has determined the United Rentals Offer is inadequate
and has recommended you reject the United Rentals Offer.
RSC has filed with the Securities and Exchange Commission a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which contains the RSC Board's recommendation that RSC stockholders reject the
United Rentals Offer and not tender Shares into the United Rentals Offer. The
Schedule 14D-9 discloses that the RSC Board determined that the United Rentals
Offer is inadequate and not in the best interests of RSC's stockholders. In
reaching its determination and recommendation, the RSC Board considered the
following factors:
(1) The presentation by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") concerning RSC and the financial
aspects of the United Rentals Offer and the written opinion of
Merrill Lynch, dated April 16, 1999, to the effect that the
consideration being offered in the United Rentals Offer is
inadequate to the stockholders of RSC (other than United Rentals
and its affiliates), from a financial point of view.
(2) The financial position and prospects of RSC and whether the United
Rentals Offer was reflective thereof, including the following:
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. RSC's reported first quarter revenues of $174.8 million, operating
income of $30.1 million and earnings per share of $0.32. These results
substantially exceeded analysts' expectations, and RSC's reported
earnings per share of $0.32 exceeded the First Call consensus median
estimate of $0.28 by $0.04. RSC's projected 1999 and 2000 earnings per
share of $1.62 and $2.16 exceed First Call consensus estimates of
$1.57 and $1.92 by $0.05 and $0.24, respectively. Additionally, RSC's
projected five-year earnings per share compound annual growth rate of
30% significantly exceeds the First Call consensus estimate of 23%.
. United Rentals' offer is at a discount to RSC's historic trading
prices, which closed at $24.63 within the 30 trading days prior to the
United Rentals Offer--RSC's stock price closed above the $22.75 United
Rentals Offer price on every trading day but one in February. RSC's
forward price-to-earnings multiple of more than 15x consensus
estimates during that period is also in excess of the 14.5x multiple
implied by the $22.75 per share United Rentals Offer.
. The 14.5x 1999 estimated price-to-earnings multiple implied by the
$22.75 per share price being offered in the United Rentals Offer
represents a discount of approximately 24% to United Rentals' fully-
distributed trading multiple of 19.1x 1999 estimated earnings per
share on April 15, 1999.
. Acquisitions of companies of comparable size to RSC have been at
multiples considerably higher than the multiples implied by the United
Rentals Offer. In comparison with the two most recent comparable
acquisitions in RSC's industry, the United Rentals Offer represents a
47% discount to the equity valuation of RSC implied by Atlas Copco
AB's acquisition of Prime 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 United Rentals Offer. Equity valuations of
RSC were implied by applying the relevant multiples to RSC's pro forma
EBITDA and then deducting therefrom RSC's debt.
. The RSC Board estimates that a merger or other business combination
between RSC and United Rentals would be as much as three times more
accretive to United Rentals' earnings than the $0.10 per share
indicated by United Rentals in public statements regarding the United
Rentals Offer. This estimate is based on RSC's five-year business
forecast and assumes (1) United Rentals will obtain $10 million of
synergies in 1999, $20 million of synergies in 2000 and 3% annual
synergy growth thereafter, (2) transaction-related expenses of $64
million, (3) financing fees of $35 million, (4) the financing
contemplated by the commitment letter, which was issued to United
Rentals (North America), Inc., a wholly owned subsidiary of United
Rentals ("UR North America"), by Goldman Sachs Credit Partners L.P.
(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
United Rentals Offer. The United Rentals Offer is highly conditional
and includes, among other things, the receipt by UR North America of
financing for the United Rentals Offer and the Proposed Second-Step
Merger pursuant to the Commitment Letter (the "Financing Condition");
RSC having entered into a definitive merger agreement with United
Rentals and UR Acquisition (together, the "Bidder") that would provide
for the acquisition of RSC pursuant to the United Rentals Offer and the
Proposed Second-Step Merger; UR Acquisition being satisfied, in its
sole discretion, that the NationsRent Merger Agreement has been
terminated; the termination or invalidation of the NationsRent Option
without any Shares having been
4
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issued thereunder; and the invalidation of the Termination Amounts or
the termination of the obligation to pay the Termination Amounts,
without any amount or portion thereof having been paid by RSC or any of
its affiliates pursuant to the NationsRent Merger Agreement or
otherwise. Absent NationsRent's consent or the occurrence of certain
events not within the control of RSC or United Rentals, certain of the
conditions to the United Rentals Offer are incapable of being, or are
unlikely to be, satisfied. Pursuant to the terms of the United Rentals
Offer, however, United Rentals could unilaterally waive, amend or
reduce the conditions to the United Rentals Offer and could improve the
consideration offered.
(4) The RSC Board's conclusion that, in light of the uncertainties in and
conditionality of the United Rentals Offer, the RSC Board would not
take any action which would permit NationsRent to terminate the
NationsRent Merger Agreement and collect the Termination Amounts and/or
have the right to exercise the NationsRent Option.
(5) The RSC Board's continuing belief that the NationsRent Merger
represents an attractive transaction for RSC's stockholders, consistent
with the RSC Board's long-term growth strategy and desire to enhance
long-term value for RSC's stockholders, and with significant strategic
benefits that will create a more competitive national equipment rental
company than either RSC or NationsRent would be individually, with a
higher potential for earnings growth, better cost savings and operating
efficiencies, a more diversified national customer base, as well as
beneficial overlap in operations and management, in overall business
strategies and in key geographic regions. The RSC Board made no
decision to sell RSC at the time RSC entered into the NationsRent
Merger Agreement.
(6) The RSC Board's commitment to protecting the best interests of RSC's
stockholders.
The Schedule 14D-9, which has been mailed to RSC stockholders, contains
the RSC Board's recommendation concerning the United Rentals Offer.
Five-Year Business Forecast
RSC does not as a matter of course make public forecasts as to its future
financial performance or operations. However, RSC's management provided Merrill
Lynch with a business forecast for the years ended 1999, 2000, 2001, 2002 and
2003 in connection with Merrill Lynch's evaluation of the United Rentals Offer.
A summary of the five-year business forecast is set forth below.
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RENTAL SERVICE CORPORATION
Five-Year Business Forecast for the Years Ended 1999-2003
<TABLE>
<CAPTION>
Year Ended
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<S> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------
(in millions, except per Share data)
Income Statement Data:
Total Revenues............................................ $ 763.0 $ 955.6 $1,187.2 $1,480.9 $1,846.9
Operating Income.......................................... 141.2 174.8 212.0 265.7 335.9
Interest Expense, Net..................................... 71.4 81.5 93.6 107.3 124.6
Provision for Income Taxes................................ 30.0 40.1 50.9 68.1 90.9
-------- -------- -------- -------- --------
Net Income................................................ $ 39.8 $ 53.2 $ 67.5 $ 90.3 $ 120.4
======== ======== ======== ======== ========
Diluted Earnings Per Share................................ $ 1.62 $ 2.16 $ 2.76 $ 3.69 $ 4.92
======== ======== ======== ======== ========
Balance Sheet Data:
Assets:
Rental Equipment, Net..................................... $ 810.4 $ 982.7 $1,192.4 $1,442.0 $1,751.2
Non-Rental Equipment, Net................................. 77.0 81.1 91.3 104.4 110.2
Other Assets, Net......................................... 623.5 616.1 619.6 621.6 643.6
-------- -------- -------- -------- --------
Total Assets.............................................. $1,510.9 $1,679.9 $1,903.3 $2,168.0 $2,505.0
======== ======== ======== ======== ========
Liabilities and Stockholders' Equity:
Total Debt and Long-Term Obligations...................... $ 919.5 $1,027.0 $1,190.3 $1,359.1 $1,570.0
Other Liabilities......................................... 134.2 142.5 137.0 142.7 148.3
-------- -------- -------- -------- --------
Total Liabilities......................................... 1,053.7 1,169.5 1,327.3 1,501.8 1,718.3
-------- -------- -------- -------- --------
Total Stockholders' Equity................................ 457.2 510.4 576.0 666.2 786.7
-------- -------- -------- -------- --------
Total Liabilities and Stockholders' Equity................ $1,510.9 $1,679.9 $1,903.3 $2,168.0 $2,505.0
======== ======== ======== ======== ========
Cash Flow Statement Data:
Net Income................................................ $ 39.8 $ 53.2 $ 67.5 $ 90.3 $ 120.4
Adjustments to Net Income to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization........................... 155.2 196.6 247.4 311.2 391.2
Other Non-Cash Items.................................... (13.9) (18.2) (24.4) (28.8) (37.8)
Changes in Operating Assets and Liabilities............. (0.1) 2.1 (21.0) (12.1) (31.1)
-------- -------- -------- -------- --------
Net Cash Provided by (Used in) Operating Activities....... $ 181.0 $ 233.7 $ 269.5 $ 360.6 $ 442.7
======== ======== ======== ======== ========
Capital Expenditures, Net of Disposals.................... $ (291.9) $ (341.2) $ (429.3) $ (529.4) $ (653.6)
======== ======== ======== ======== ========
</TABLE>
The five-year business forecast set forth above was not prepared with a view
to public disclosure or compliance with published guidelines of the 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 Consent
Revocation Statement should not be regarded as an indication that
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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.
The foregoing assumptions are subject to significant uncertainties and
contingencies, all of which are difficult to quantify and many of which are
beyond the control of RSC. Accordingly, the five-year business forecast is
inherently imprecise and there can be no assurance that forecasted financial
results set forth in, or the assumptions made in preparing, the five-year
business forecast will prove accurate, and actual results may be materially
greater or less than those contained in the five-year business forecast. RSC
does not presently intend to update or publicly revise the five-year business
forecast to reflect circumstances existing or developments occurring after the
preparation of such information or to reflect the occurrence of unanticipated
events.
THE RSC BOARD UNANIMOUSLY OPPOSES THE UNITED RENTALS CONSENT SOLICITATION
AND URGES YOU NOT TO SIGN THE BLUE CONSENT CARD SENT TO YOU BY UNITED RENTALS.
---
EVEN IF YOU PREVIOUSLY SIGNED AND RETURNED UNITED RENTALS' BLUE CONSENT CARD,
YOU CAN CHANGE YOUR CONSENT. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED
WHITE CONSENT REVOCATION CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
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<PAGE>
IF YOUR SHARES ARE HELD IN "STREET NAME," ONLY YOUR BROKER OR BANKER CAN VOTE
YOUR SHARES. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT
HIM OR HER TO VOTE A WHITE CONSENT REVOCATION CARD ON YOUR BEHALF TODAY.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL MACKENZIE PARTNERS TOLL-FREE AT (800)
322-2885. BANKS AND BROKERS SHOULD CALL COLLECT AT (212) 929-5500.
THIS CONSENT REVOCATION STATEMENT DOES NOT CONSTITUTE A SOLICITATION OF
PROXIES WITH RESPECT TO THE PROPOSED NATIONSRENT MERGER. ANY SUCH SOLICITATION
BY RSC WILL BE MADE ONLY BY MEANS OF SEPARATE PROXY MATERIALS COMPLYING WITH
THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
THE CONSENT PROCEDURE
On January 20, 1999, the RSC Board amended the Bylaws of RSC to adopt a record
date procedure in connection with written consent solicitations. Under the new
Bylaw, after receipt by RSC of a written request for a record date in connection
with a proposed stockholder action by written consent, the RSC Board is required
to fix a record date. The date fixed by the RSC Board as the record date must be
no later than ten days after the date on which the RSC Board acts. On April 13,
1999, United Rentals requested that the RSC Board set a record date with respect
to its solicitation. On [_____________], 1999, the RSC Board fixed
[___________], 1999 as the record date (the "Record Date") for determining
stockholders entitled to grant or revoke their written consents with respect to
the United Rentals Proposals. You are entitled to grant or revoke consents for
all Shares that you owned on the Record Date (even if you subsequently sold or
transferred any of those shares). As of the Record Date, [______________] Shares
were outstanding.
Under the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, stockholders may act without a meeting, without prior notice and
without a vote, if consents in writing setting forth the action to be taken are
signed by holders of outstanding shares having not less than the minimum number
of votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted. The action is
effective when the necessary number of written consents describing the action
taken, dated and signed by approving holders, are delivered to the corporation's
registered office in Delaware or principal place of business.
RSC's certificate of incorporation does not prohibit stockholder action by
written consent. The unrevoked consent of the holders of not less than (a) a
majority of the outstanding Shares entitled to vote on the Record Date must be
obtained within the time limits specified herein to adopt the United Rentals
Proposal Nos. 1 and 2, and (b) 66% of the outstanding Shares entitled to vote
on the Record Date must be obtained within the time limits specified herein to
adopt the United Rentals Proposal No. 3. None of the Proposals is subject to,
or conditioned upon, the adoption of any of the other Proposals; however,
Proposal No. 2 cannot be effected unless Proposal No. 1 is adopted.
RSC's Bylaws provide that each stockholder shall be entitled to vote each
share or fractional share of stock which has voting rights on the matter in
question. Under the DGCL, no written consent is effective to take the action
referred to therein unless, within 60 days of the earliest dated consent
delivered, written consents signed by a sufficient number of stockholders
required to take such action are properly delivered to the corporation.
Abstentions and broker non-votes will have the effect of a vote against the
United Rentals Proposals.
A stockholder may revoke any previously signed consent by signing, dating and
returning a WHITE Consent Revocation Card. If no direction is made on the
Consent Revocation Card with respect to one or more of the United Rentals
Proposals, or if a stockholder marks either the "revoke consent" or "abstain"
box on the Consent Revocation Card with respect to one or more of the United
Rentals Proposals, all previously executed consents with respect to such United
Rentals Proposals will be revoked. A consent may also be revoked by delivery of
a written consent revocation to RSC or United Rentals. STOCKHOLDERS ARE URGED,
HOWEVER, TO DELIVER ALL CONSENT REVOCATIONS TO MACKENZIE PARTNERS, INC., THE
FIRM ASSISTING RSC IN THIS SOLICITATION, AT 156 FIFTH AVENUE, NEW YORK, NEW YORK
10010. RSC requests that if a consent revocation is instead delivered to United
Rentals, a copy of the revocation also be delivered to RSC, c/o MacKenzie
8
<PAGE>
Partners, at the address set forth above, so that RSC will be aware of all
revocations. Any consent revocation may itself be revoked at any time by
signing, dating and returning to United Rentals a subsequently dated blue
consent card sent to you by United Rentals, or by delivery of a written
revocation of such consent revocation to RSC or United Rentals.
If any Shares that you owned on the Record Date were held for you in an
account with a stock brokerage firm, bank nominee or other similar "street name"
holder, you are not entitled to vote such Shares directly, but rather must give
instructions to the stock brokerage firm, bank nominee or other "street name"
holder to grant or revoke consent for the Shares held in your name. Accordingly,
you should contact the person responsible for your account and direct him or her
to execute the enclosed WHITE Consent Revocation Card on your behalf. You are
urged to confirm in writing your instructions to the person responsible for your
account and provide a copy of those instructions to RSC, c/o MacKenzie Partners,
at the address set forth above so that RSC will be aware of your instructions
and can attempt to ensure such instructions are followed.
YOU HAVE THE RIGHT TO REVOKE ANY CONSENT YOU MAY HAVE PREVIOUSLY GIVEN TO
UNITED RENTALS. TO DO SO, YOU NEED ONLY SIGN, DATE AND RETURN IN THE ENCLOSED
POSTAGE-PAID ENVELOPE THE WHITE CONSENT REVOCATION CARD WHICH ACCOMPANIES THIS
CONSENT REVOCATION STATEMENT. IF YOU DO NOT INDICATE A SPECIFIC VOTE ON THE
WHITE REVOCATION CARD WITH RESPECT TO ONE OR MORE OF THE UNITED RENTALS
PROPOSALS, THE CONSENT REVOCATION CARD WILL BE USED IN ACCORDANCE WITH THE RSC
BOARD'S RECOMMENDATION TO REVOKE ANY CONSENT WITH RESPECT TO SUCH PROPOSALS.
IF YOU DO NOT SUPPORT THE UNITED RENTALS PROPOSALS AND HAVE NOT SIGNED A
UNITED RENTALS CONSENT, YOU MAY SHOW YOUR OPPOSITION TO THE UNITED RENTALS
PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED WHITE CONSENT REVOCATION
CARD. THIS WILL BETTER ENABLE RSC TO KEEP TRACK OF HOW MANY STOCKHOLDERS OPPOSE
THE UNITED RENTALS PROPOSALS.
RSC has retained MacKenzie Partners to assist in communicating with
stockholders in connection with the United Rentals consent solicitation and to
assist in our efforts to obtain consent revocations. If you have any questions
about how to complete or submit your WHITE Consent Revocation Card or any other
questions, MacKenzie Partners will be pleased to assist you. You may call
MacKenzie Partners toll-free at (800) 322-2885. Banks and brokers should call
collect at (212) 929-5500.
THE UNITED RENTALS PROPOSALS
The "United Rentals Proposals" are to: (1) Remove all eight existing members
of the RSC Board and any person(s) elected or designated by any of such
directors to fill any vacancy or newly created directorship; (2) Elect Bradley
S. Jacobs, Richard N. Daniel, Richard J. Heckmann, Wayland R. Hicks, Stephanie
R. Joseph, John N. Milne, Michael J. Nolan, Raymond S. Troubh and Gerald Tsai,
Jr. (collectively, the "Nominees") as the directors of RSC; provided, that, in
the event that the RSC Board continues to be fixed at eight (or fewer)
directors, the Nominees who receive the greatest number of votes shall fill all
available seats on the RSC Board; and (3) Repeal each provision of RSC's Bylaws
or amendment thereto adopted subsequent to January 20, 1999 and prior to the
effectiveness of any of the Proposals.
None of the Proposals is subject to, or conditioned upon, the adoption of any
of the other Proposals; however, Proposal No. 2 cannot be effected unless
Proposal No. 1 is adopted.
9
<PAGE>
BOARD OF DIRECTORS
The names of the current members of the RSC Board, their ages as of April 19,
1999 and certain information about them are set forth below.
<TABLE>
<CAPTION>
Director
Name Age Since Positions And Offices With RSC
- ----------------------------------- ---- ------- ----------------------------------------------------
<S> <C> <C> <C>
Martin R. Reid..................... 56 1994 Chairman of the Board and Chief Executive Officer
William M. Barnum, Jr.............. 45 1992 Director
James R. Buch...................... 45 1995 Director
David P. Lanoha.................... 49 1998 Director
Christopher A. Laurence............ 31 1995 Director
Eric L. Mattson.................... 47 1996 Director
Britton H. Murdoch................. 41 1997 Director
John M. Sullivan................... 63 1997 Director
</TABLE>
The principal occupations and positions for the past five years and, in
certain cases prior years, of the directors and executive officers named above
are as set forth below.
MARTIN R. REID was elected as a Director and Chief Executive Officer of RSC
in June 1994 and became Chairman of the Board in October 1995. Mr. Reid was a
director of Tuboscope Vetco International Corporation ("Tuboscope"), a provider
of oilfield-related inspection and coating services, from October 1993 until
February 1998. Mr. Reid served as Chief Executive Officer of Tuboscope from May
1991 to October 1993 and as Chairman of the Board of Directors from October 1990
to April 1996. From September 1986 to June 1990, Mr. Reid was Chief Executive
Officer of Eastman Christensen Co., a provider of oil and gas drilling systems.
Mr. Reid was also Vice Chairman of Eastman Christensen Co. from August 1989 to
June 1990. Mr. Reid is a director of HDA Parts System, Inc.
WILLIAM M. BARNUM, JR. has served as a director of RSC since our formation
in 1992. He served as Chairman of the Board from June 1993 through October
1995. He is a general partner of Brentwood Buyout Partners, L.P. ("BBP"), the
general partner of Brentwood RSC Partners, L.P., a stockholder of RSC. He was
an associate at Morgan Stanley & Co. Incorporated from October 1981 until
joining Brentwood Associates, an affiliate of Brentwood RSC Partners, in July
1984. He is also a director of Quiksilver, Inc. and several privately held
companies.
JAMES R. BUCH has served as a director of RSC since October 1995. From
October 1990 through April 1996, he served as President and Chief Executive
Officer of Evans Rents, Inc. From April 1997 through December 1998, he served
as the Chief Executive Officer of Classroom Connect, Inc. Previously, he served
as Director of U.S. Operations for Brittania Security Group.
DAVID P. LANOHA has served as a director of RSC since January 1998. He
initially joined RSC as a Senior Vice President of Operations in conjunction
with the acquisition of Center Rentals & Sales ("Center Rentals") in December
1997. He served in various capacities at Center Rentals, most recently as
Chairman of the Board (from October 1989 to December 1997) and President (from
May 1984 to October 1989).
CHRISTOPHER A. LAURENCE has served as a director of RSC since October 1995.
He is a general partner of Brentwood Associates and a member of Brentwood
Private Equity LLC. Prior to joining Brentwood Associates in 1991, he was an
analyst at Morgan Stanley & Co. Incorporated. He is also a director of HDA
Parts System, Inc.
ERIC L. MATTSON has served as a director of RSC since December 1996. Mr.
Mattson is and has been Vice President and Chief Financial Officer of Baker
Hughes Incorporated ("BHI") since July 1993. For more than
10
<PAGE>
five years prior to 1993, Mr. Mattson was Vice President and Treasurer of BHI.
Mr. Mattson is also a director of Tuboscope.
BRITTON H. MURDOCH has served as a director of RSC since January 1997.
Since July 1997, he has been a Managing Director and Principal of V-Span, Inc.,
a privately held company. He also served as Chief Financial Officer of Internet
Capital Group, LLP, a privately held company, from 1997 until June 1998. He is
currently the Advisory Board Venture Partner for Internet Capital Group. From
1990 to 1996, he was Vice President and Chief Financial Officer of Airgas, Inc.,
an industrial gas distribution and manufacturing company. From 1987 to 1990, he
was Vice President of Corporate Development of Airgas. He is also a director of
Founders' Bank, a subsidiary of Susquehanna Bancshares, Inc.
JOHN M. SULLIVAN has served as a director of RSC since July 1997. He is
presently a director of the Scotts Company, Bell Sports Corp. and Silver Cinemas
International, Inc. From October 1987 to January 1993, Mr. Sullivan was
Chairman of the Board and Chief Executive Officer of Prince Holdings, Inc.
("Prince"). Prior to that and since September 1984, Mr. Sullivan was President
of Prince and Vice President of Chesebrough-Pond's, Inc.
BOARD MEETINGS AND COMMITTEES
During 1998, the RSC Board held seven meetings, inclusive of telephonic
meetings. Each director attended at least 75% of the total number of meetings
of the RSC Board, and of committees of the RSC Board on which he served, held
during the year.
The RSC Board has the following standing committees: the Audit Committee,
the Compensation Committee, the Acquisition Committee and the Nominating
Committee.
The Audit Committee was established on August 20, 1996 to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the scope and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of RSC's internal accounting controls. The Audit Committee consists of
Messrs. Buch, Mattson and Lanoha. The Audit Committee met two times during
1998.
The Compensation Committee was established on December 5, 1996 to establish
remuneration levels for executive officers of RSC and to implement RSC's stock
option plans and any other incentive programs. The Compensation Committee
consists of Messrs. Murdoch and Sullivan. The Audit Committee met two times and
the Compensation Committee met three times during 1998.
The Acquisition Committee was established on September 30, 1997 to approve
acquisitions in which the consideration to be paid by RSC is less than $10
million. The Acquisition Committee consists of Messrs. Reid and Laurence. The
Nominating Committee was established on February 25, 1998 to make
recommendations regarding the nomination of members of the RSC Board. The
Nominating Committee consists of Messrs. Barnum, Mattson and Murdoch.
RSC has established an Executive Committee 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.
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
11
<PAGE>
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.
EXECUTIVE OFFICERS OF RSC
Information concerning executive officers of RSC who are not also directors
is set forth below:
<TABLE>
<CAPTION>
Name Age Positions And Offices With RSC
- ------------------------------------------ ---- -------------------------------------------------------------------
<S> <C> <C>
Douglas A. Waugaman....................... 40 President and Chief Operating Officer
Robert M. Wilson.......................... 41 Executive Vice President, Chief Financial Officer, Secretary and
Treasurer
Ronald Halchishak......................... 51 Senior Vice President of Operations
David G. Ledlow........................... 40 Senior Vice President of Operations
John Markle............................... 43 Senior Vice President of Strategy and Chief Information Officer
David B. Harrington....................... 45 Senior Vice President of Human Resources
Milfred E. Howard......................... 51 Senior Vice President of Sales and Marketing
</TABLE>
The principal occupations and positions for the past five years and, in
certain cases prior years, of the executive officers named above are as follows:
DOUGLAS A. WAUGAMAN has served as Senior Vice President of Operations of
RSC since April 1997. In April 1999, he was promoted to the position of
President and Chief Operating Officer. From January 1994 through April 1997,
Mr. Waugaman served as Vice President, Chief Financial Officer, Secretary and
Treasurer of RSC. From June 1993 until joining RSC, Mr. Waugaman served as
Operations Manager for Plastiglide Manufacturing Corporation, a subsidiary of
Illinois Tool Works. From September 1991 until June 1993, Mr. Waugaman was Vice
President of Finance for Knapp Communications Corporation, a magazine publisher.
From September 1989 until September 1991, Mr. Waugaman was Controller for
Plastiglide Manufacturing Corporation. Mr. Waugaman is a Certified Public
Accountant, and has public accounting experience with Arthur Andersen and Co.
ROBERT M. WILSON joined RSC in April 1997 as Senior Vice President, Chief
Financial Officer, Secretary and Treasurer. In November 1998, he was promoted
to the position of Executive Vice President, Chief Financial Officer, Secretary
and Treasurer. From October 1994 until joining RSC, Mr. Wilson served as Senior
Vice President of Operations, Finance and Administration for Shade/Allied Inc.
From September 1989 through October 1994, Mr. Wilson served in various positions
at Simon Engineering plc, including Vice President of Finance for the United
States holding company of Simon Engineering plc and President of Simon LGI. Mr.
Wilson is a Certified Public Accountant, and has public accounting experience
with Arthur Andersen and Co.
RONALD HALCHISHAK joined RSC in October 1991 as Vice President of
Purchasing and Director of Safety. He became Region Manager for California in
1994. He was appointed Regional Vice President of Operations in January 1995,
and was promoted to Senior Vice President of Operations in December 1996. Prior
to joining RSC, he worked for 13 years at Hertz Equipment Rental Corporation in
various positions, including Director of European Operations and Region Manager
of the Midwest Division.
DAVID G. LEDLOW joined RSC in conjunction with our acquisition of Walker
Jones Equipment, Inc. in 1992. He had been employed by Walker Jones since 1982,
serving most recently as its Vice President of Marketing. He was promoted to
Regional Vice President of Operations in February 1993, and to Senior Vice
President of Operations in December 1996.
JOHN MARKLE was promoted to the position of Senior Vice President of
Strategy and Chief Information Officer of RSC in November 1998. From January
1998 until this promotion, he served as a Senior Vice President of Operations of
RSC. He joined RSC in conjunction with the acquisition of Center Rentals in
12
<PAGE>
December 1997. Prior to joining RSC, he served as President of Center Rentals
since 1989. Prior to joining Center Rentals, he spent ten years with Power
Rental.
DAVID B. HARRINGTON joined RSC in June 1997 as Senior Vice President of
Human Resources. Prior to joining RSC, he worked for 19 years at General
Electric in various positions, including the most recent six years as Senior
Vice President of Human Resources for GE Capital Technology Management Services.
MILFRED E. HOWARD has served as Senior Vice President of Sales and
Marketing of RSC since August 1998. From June 1997 through July 1998, he served
as the Vice President of Sales for our industrial division. Prior to joining
RSC, he served as Vice President of Sales for Hertz Equipment Rental
Corporation.
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Shares outstanding as of March 31, 1999 by (1) any person known to
RSC to beneficially own 5% or more of any class of voting securities of RSC; (2)
each director and executive officer of RSC; and (3) all directors and executive
officers of RSC as a group. Except as otherwise indicated, each stockholder
listed below has informed RSC that such stockholder has (A) sole voting and
investment power with respect to such Shares, except to the extent that
authority is shared by spouses under applicable law, and (B) record and
beneficial ownership with respect to such Shares.
<TABLE>
<CAPTION>
Beneficial Ownership
Name of Beneficial Owner As of March 31, 1999 (1)
----------------------- ------------------------
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.
13
<PAGE>
(2) Based on a Schedule 13G for the year ended December 31, 1998 and filed on
February 8, 1999. In that Schedule 13G, Capital Research and Management
Company reported that it beneficially owned a total of 1,600,000 Shares. Of
those Shares, it had sole investment discretion with respect to all of the
Shares and had voting authority with respect to none of the Shares. The
address of Capital Research and Management Company is 333 S. Hope Street,
Los Angeles, California 90071.
(3) Based on a Schedule 13G for the year ended December 31, 1998 and filed on
February 5, 1999. In that Schedule 13G, Pilgrim Baxter & Associates, Ltd.
reported that it beneficially owned a total of 1,384,000 Shares. Of those
Shares, it had sole investment discretion with respect to all of the Shares
and had voting authority with respect to 965,800 of the Shares. The address
of Pilgrim Baxter & Associates, Ltd. is 825 Duportail Road, Wayne,
Pennsylvania 19087.
(4) Excludes Shares issuable upon exercise of options that are not exercisable
within 60 days of the date of the table set forth above, as follows: Mr.
Reid--330,058 Shares; Mr. Waugaman--112,000 Shares; Mr. Wilson--118,250
Shares; Mr. Halchishak--70,750 Shares; Mr. Ledlow--70,750 Shares; Mr.
Markle--67,771 Shares; Mr. Harrington--40,143 Shares; Mr. Howard--47,848
Shares; Mr. Barnum--6,875 Shares; Mr. Buch--5,975 Shares; Mr. Lanoha--9,375
Shares; Mr. Laurence--6,875 Shares; Mr. Mattson--6,875 Shares; Mr. Murdoch-
-6,875 Shares; and Mr. Sullivan--9,375 Shares.
(5) Includes Shares subject to vesting that may be repurchased by RSC if they
fail to vest.
(6) The address of this person is c/o Rental Service Corporation, 6929 E.
Greenway Parkway, Suite 200, Scottsdale, Arizona 85254.
(7) Mr. Barnum, a director of RSC, is a general partner of BBP, the general
partner of Brentwood RSC Partners, L.P., which owns 417,972 Shares.
Accordingly, Mr. Barnum may be deemed to be the beneficial owner of the
Shares owned by BBP and for purposes of this table they are included. Mr.
Barnum disclaims beneficial ownership of such Shares. The address of
Brentwood RSC Partners, L.P., Mr. Barnum and Mr. Laurence is 11150 Santa
Monica Boulevard, Suite 1200, Los Angeles, California 90025.
(8) The address of this person is c/o Rental Service Corporation, 11250 East
40th Avenue, Denver, Colorado 60239.
(9) The address of this person is c/o Baker Hughes Incorporated, 3900 Essex
Lane, Suite 1200, Houston, Texas 77027.
(10) The address of this person is c/o V-Span, 1100 First Avenue, Suite 400,
King of Prussia, Pennsylvania 19406.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires RSC's directors, officers and beneficial owners of
more than 10% of the Shares to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the Shares
and other equity securities of RSC. Based solely on its review of the copies of
such reports received by it, or written representations from reporting persons,
RSC believes that during the fiscal year ended December 31, 1998, its officers,
directors and holders of more than 10% of the Shares complied with all Section
16(a) filing requirements with the following exception: John Markle filed a
late Form 4 reporting one transaction.
14
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of RSC that are intended to be presented by such
stockholders at an annual meeting of RSC must be properly presented in
accordance with RSC's Bylaws. In addition, stockholder proposals that such
stockholders desire to have included in RSC's proxy statement for its 1999
annual meeting must have been received by RSC no later than January 29, 1999 in
order to be considered for possible inclusion in the proxy statement and form of
proxy relating to that meeting.
Under RSC's Bylaws, for business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of RSC. To be timely, a stockholder's notice shall
be delivered to the principal executive offices of RSC not later than the close
of business on the ninetieth (90th) day nor earlier than the close of business
on the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting (provided, however, that in the event that the
date of the annual meeting is more than thirty (30) days before or more than
seventy (70) days after such anniversary date, notice by the stockholder must be
so delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made by RSC). Such deadline is referred to herein
as the "Bylaw Deadline." In no event shall the public announcement of an
adjournment or postponement of an annual meeting commence a new time period for
the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth: (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Exchange Act and Rule 14a-11
thereunder (and such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made, and in the event that such business includes a
proposal to amend the Bylaws of RSC, the language of the proposed amendment; and
(c) as to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on RSC's books, and of such beneficial owner, (ii)
the class and number of shares of capital stock of RSC which are owned
beneficially and of record by such stockholder and such beneficial owner, (iii)
a representation that the stockholder is a holder of record of stock of RSC
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to propose such business or nomination, and (iv) a representation
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends to (a) deliver a proxy statement and/or form of proxy to
holders of at least the percentage of RSC's outstanding capital stock required
to approve or adopt the proposal or elect the nominee and/or (b) otherwise
solicit proxies from stockholders in support of such proposal or nomination.
RSC may require any proposed nominee to furnish such other information as it may
reasonably require to determine the eligibility of such proposed nominee to
serve as a director of RSC.
Additionally, in the event that the number of directors to be elected to the
RSC Board at an annual meeting is increased and there is no public announcement
by RSC naming all of the nominees for director or specifying the size of the
increased RSC Board at least one hundred (100) days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by the Bylaws shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of RSC not later
than the close of business on the tenth (10th) day following the day on which
such public announcement is first made by RSC.
Notwithstanding the foregoing, in order to include information with respect
to a stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the Exchange Act.
If a stockholder wishes to present a proposal at RSC's annual meeting in the
year 1999 and the proposal is not intended to be included in RSC's proxy
statement relating to that meeting, the stockholder must give advance
15
<PAGE>
notice to RSC prior to the Bylaw Deadline for such meeting determined in
accordance with the Bylaws, as described above. If a stockholder gives notice of
such a proposal after the Bylaw Deadline, the stockholder will not be permitted
to present the proposal to the stockholders for a vote at the meeting.
Securities and Exchange Commission rules establish a different deadline for
submission of stockholder proposals that are not intended to be included in
RSC's proxy statement with respect to discretionary voting (the "Discretionary
Vote Deadline"). The Discretionary Vote Deadline for the year 1999 annual
meeting is 45 calendar days prior to the anniversary of the mailing date of the
proxy statement for the 1998 annual meeting. If a stockholder gives notice of
such a proposal after the Discretionary Vote Deadline, RSC's proxy holders will
be allowed to use their discretionary voting authority to vote against the
stockholder proposal when and if the proposal is raised at RSC's year 1999
annual meeting. Because the Bylaw Deadline is not capable of being determined
until RSC publicly announces the date for its next annual meeting, it is
possible that the Bylaw Deadline may occur after the Discretionary Vote
Deadline. In such a case, a proposal received after the Discretionary Vote
Deadline but before the Bylaw Deadline would be eligible to be presented at next
year's annual meeting and RSC believes that its proxy holders would be allowed
to use the discretionary authority granted by the proxy card to vote against the
proposal at the meeting without including any disclosure of the proposal in the
proxy statement relating to such meeting.
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table. 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
Other Stock Underlying
Name and Principal Business Salary ($) 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.
(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.
16
<PAGE>
(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 $4.1 million (based on the market price of the
Shares as reported on the NYSE on December 31, 1998). This restricted stock
is subject to vesting in equal installments over four years from the
respective dates of grant; however, the vesting may be accelerated under
certain circumstances, including a change of control.
(5) In January 1998, Mr. Reid entered into an employment agreement with RSC. In
connection with this agreement, Mr. Reid's 200,000 then-outstanding options
to purchase Shares became immediately exercisable. Additionally, Mr. Reid
was granted stock options to purchase 190,000 Shares vesting in equal
installments over four years (or earlier if certain performance criteria are
met, or upon a change of control). On February 25, 1998, Mr. Reid
surrendered options to purchase 57,000 Shares. These surrendered options are
not included in this table. On April 29, 1998, Mr. Reid was granted stock
options to purchase 40,411 Shares vesting in equal installments over four
years (or earlier if certain performance criteria are met, or upon a change
of control).
(6) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
Options Granted to Certain Executive Officers. The following table sets forth
information concerning individual grants of stock options made by RSC during the
year ended December 31, 1998 to its Chief Executive Officer and each of its four
other most highly compensated executive officers:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of
----------------------------------------------------------------------------- Stock Price
Percent of Total Appreciation for
Number of Options Granted to Exercise or Base Option Term
Securities Underlying Employees in Fiscal Price per Share Expiration -----------
Options Granted (1)(2) Year 1998 ($) 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 1,344 0.2% 26.38 4/15/08 22 56
Operating Officer 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).
17
<PAGE>
(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 $15.13 per Share.
(3) Includes options to purchase 57,000 Shares surrendered by Mr. Reid on
February 25, 1998.
(4) Mr. Waugaman was appointed President and Chief Operating Officer of RSC on
April 13, 1999.
Options Exercised by Certain Executive Officers. The following table sets
forth information (on an aggregated basis) concerning each exercise of stock
options made during the year ended December 31, 1998 by RSC's Chief Executive
Officer and each of its four other most highly compensated executive officers
and the year-end value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised "In-the-Money" Options
Options at Fiscal Year-End at Fiscal Year-End (2)
--------------------------- ----------------------
Number of
Shares Acquired Value
on Exercise (1) Realized ($) Exercisable Unexercisable Exercisable ($) Unexercisable ($)
--------------- ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Martin R. Reid -- -- 200,000 173,411 -- --
Chairman and Chief
Executive Officer
Douglas A. Waugaman (3) -- -- 25,000 91,000 -- --
President and Chief
Operating Officer
Robert M. Wilson -- -- 18,750 72,250 -- --
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Ronald Halchishak 11,150 $247,387 37,510 49,750 $11,988 $5,916
Senior Vice President of
Operations
David G. Ledlow 6,006 150,090 37,500 49,750 11,831 5,916
Senior Vice President of
Operations
</TABLE>
(1) As of 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.
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.
18
<PAGE>
The Reid Employment Agreement may be terminated by Mr. Reid or RSC at any
time, with or without cause. In addition, if requested by the RSC Board, Mr.
Reid will resign as Chief Executive Officer, but will remain as Chairman of the
Board and devote at least 50% of his time to RSC. Beginning with the first full
year after his resignation, Mr. Reid's base salary and corresponding bonus
opportunity would each be reduced to $250,000. The RSC Board may also request
that Mr. Reid step down as Chairman of the Board, and, in such circumstance, Mr.
Reid would remain an RSC employee at a base salary not less than $125,000,
depending on the time he devotes.
Except where there has been a "change of control," if Mr. Reid's active
employment in all capacities is terminated by RSC without "cause" (as defined
in the Reid Employment Agreement), Mr. Reid will be entitled to receive
severance pay equal to his then-current base salary through the remaining term
of the Reid Employment Agreement plus the maximum bonus opportunity available if
he had continued in the position from which he was terminated. Additionally, Mr.
Reid will be entitled to immediate vesting of all his unvested options and
restricted stock. In addition, for the remainder of the term of the Reid
Employment Agreement, Mr. Reid will be treated as an active employee for
purposes of all benefits and will be entitled to health insurance coverage until
age 65. No severance pay or benefit continuation will be available if Mr. Reid
is terminated for cause or if he resigns (other than due to a breach of the Reid
Employment Agreement by RSC) or is asked by the RSC Board to resign as Chief
Executive Officer or step-down as Chairman of the Board. Under the Reid
Employment Agreement, a "change of control" includes (1) the acquisition by
any person (other than any employee benefit plan maintained by RSC) of
beneficial ownership of 50% or more of the Shares; (2) the disposition of all or
substantially all of the business of RSC pursuant to a merger, consolidation or
other transaction in which either RSC is not the surviving company or the
stockholders of RSC immediately prior to the transaction do not continue to own
at least 60% of the surviving corporation immediately after the transaction; or
(3) individuals who constituted the RSC Board as of January 14, 1998 cease for
any reason to constitute at least a majority of the RSC Board (provided that any
individual whose election or nomination to the RSC Board was approved by at
least two-thirds of the directors comprising the RSC Board as of the date of the
Reid Employment Agreement shall be considered as though such individual were a
member of the RSC Board as of January 14, 1998, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
election contest with respect to the election or removal of directors or other
actual or overtly and publicly threatened solicitation of proxies or consents by
or on behalf of a person or entity other than the RSC Board).
Upon a change of control, all of Mr. Reid's unvested stock options and
restricted stock will vest. In addition, if within 24 months after a change of
control, Mr. Reid is terminated without cause or voluntarily terminates his
employment for "good reason" (as defined in the Reid Employment Agreement),
then, in place of other severance payments, he will receive a payment equal to
two and one-half times his highest base salary and annual bonus opportunity
during the term of the Reid Employment Agreement prior to the change of control.
RSC must also continue to provide Mr. Reid with health and life insurance
comparable to that in effect on the date of the change of control for 30 months
or until he is re-employed and eligible for health and life insurance benefits
from a new employer that are at least as favorable as those provided by RSC. In
addition, Mr. Reid will either be fully vested in his account under RSC's 401(k)
plan (as described herein) upon the change of control or receive payments equal
to the unvested portion of that account. RSC must also transfer to Mr. Reid the
company-owned car he was using at the time of the change of control or pay him
two and one-half times his annual car allowance.
During the term of the Reid Employment Agreement, and for four years after
any termination of employment for any reason, Mr. Reid cannot directly or
indirectly engage in any business that competes with RSC, whether as an owner,
director, officer, employee, consultant or otherwise, subject to limited
investments in public companies and a pre-existing loan to a family member.
If Mr. Reid's employment is terminated as a result of his death or
disability, all of his unvested options and restricted stock will vest, and he
or his estate will receive his unpaid base salary through the date of such death
or disability plus a pro rata portion of his maximum bonus opportunity for that
year.
In connection with the execution of the Reid Employment Agreement, RSC
accelerated the vesting of Mr. Reid's 200,000 then-outstanding options to
purchase Shares and those options became immediately exercisable.
19
<PAGE>
Restricted Stock and Option Grants. On January 14, 1998, Mr. Reid was
granted options to purchase 190,000 Shares, vesting in equal installments over
four years (or earlier if certain performance criteria are met), and 10,000
shares of restricted stock, vesting in equal installments over four years.
However, the options will vest immediately if Mr. Reid presents a chief
executive officer succession plan that is approved by the RSC Board, but in no
event earlier than one year from the grant of such options. In addition, the
vesting of the restricted stock may be accelerated under certain circumstances,
including a "change of control" (as defined in the Reid Employment Agreement).
On February 25, 1998, Mr. Reid surrendered to RSC options to purchase 57,000
Shares. 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.
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.
Severance Agreements
RSC has entered into severance agreements (collectively, the "Severance
Agreements") with six of its executive officers 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
20
<PAGE>
payment equal to 100% of the executive officer's base salary, plus a pro rata
portion of the current-year bonus opportunity, plus life, disability, accident
and group health insurance benefits substantially similar to those received by
the executive officer immediately prior to termination for a 12 month period. In
addition, all stock options granted prior to 1996, all stock options scheduled
to vest in the year of termination and one-third of all other stock options held
by such executive officer, if any, shall become vested and exercisable effective
as of the day immediately prior to the date of termination of the executive
officer. As consideration for these benefits, each of Messrs. Wilson,
Halchishak, Ledlow, Harrington and Howard agreed that during the term of their
Severance Agreement and for 12 months after termination of employment for any
reason they would not solicit any customers of RSC or hire or offer employment
to any of RSC's employees. Mr. Waugaman agreed that during the term of his
Severance Agreement and for 3 months after termination of employment for any
reason he would not solicit any customers of RSC or hire or offer employment to
any of RSC's employees. The Severance Agreements: (1) with Messrs. Halchishak
and Ledlow will continue in effect through December 31, 2001, (2) with Mr.
Wilson will continue in effect through April 14, 2000, (3) with Messrs.
Harrington and Howard will continue in effect through May 30, 2000, and (4) with
Douglas A. 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, and all restricted stock immediately vests following a termination
that gives rise to the benefits under the Executive Severance Agreements. The
Executive Severance Agreements also provide that, for twelve months following a
termination that gives rise to the benefits thereunder, the executive officers
will not compete with RSC. Under the Executive Severance Agreements, the term
"change of control" has the same meaning given to such term in the Reid
Employment Agreement.
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.
21
<PAGE>
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.
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.
22
<PAGE>
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 benefit of $500,000 for both groups. RSC may purchase life insurance
to fund payment of benefits under the SPP, and benefits would continue after a
participant's retirement, with eligibility to begin upon the earlier of (1) the
participant reaching age 62 or (2) the participant reaching age 55 with at least
seven years of service to RSC.
Employee Qualified Stock Purchase Plan
In 1997, RSC adopted the Employee Qualified Stock Purchase Plan (the "QSP
Plan"). In general, the QSP Plan authorizes RSC's employees to purchase Shares,
through payroll deductions, at a purchase price of 85% of the fair market value
of such Shares. The QSP Plan is intended to help RSC attract and retain
experienced and capable persons who can make significant contributions to RSC's
growth and success and to align their interests with those of RSC's
stockholders.
The QSP Plan provides for the issuance of up to 250,000 Shares. The QSP
Plan also provides for appropriate adjustments in the number and kind of Shares
subject to the QSP Plan and to outstanding purchase rights in the event of a
stock split, stock dividend or certain other similar changes in the Shares and
in the event of a merger, reorganization, consolidation or certain other types
of recapitalizations.
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.
23
<PAGE>
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.
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.
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 in December 1997, RSC
entered into leases for certain of Center Rentals' facilities with David P.
Lanoha, a director of RSC, and certain partnerships affiliated with Mr. Lanoha.
The leases initially expire in 2002, with options to extend for three periods of
five years each. The aggregate annual rent under such leases is $720,000. RSC
believes the terms of these leases are no less favorable than those that could
be obtained from unaffiliated third parties. Prior to the acquisition, 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.
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 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 United Rentals
Offer, including approving the United Rentals 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
24
<PAGE>
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.
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 United Rentals Offer and by RSC regarding the anticipated schedule for the
special meeting of RSC's stockholders in connection with the NationsRent Merger.
In addition, the 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
United Rentals Offer, in either case, unless and until the defendants comply in
full with all applicable provisions of the federal securities laws.
On April 8, 1999, 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
United Rentals Offer relating to the Financing Condition.
SOLICITATION OF CONSENT REVOCATIONS
Consent revocations may be solicited by mail, telephone, facsimile
transmission or other electronic media and in person. Solicitation of consent
revocations may be made by directors, officers and regular employees of RSC for
which they will receive no additional compensation.
In addition, RSC has retained MacKenzie Partners to assist in the solicitation
of the consent revocations, for which MacKenzie Partners will receive reasonable
and customary compensation and will be reimbursed for its reasonable out-of-
pocket expenses. RSC has also agreed to indemnify MacKenzie Partners for certain
liabilities in connection with this solicitation. Approximately 45 persons will
be employed by MacKenzie Partners to solicit stockholders.
Banks, brokers, custodians, nominees and fiduciaries will be requested to
forward solicitation material to beneficial owners of Shares. RSC will reimburse
banks, brokers, custodians, nominees and fiduciaries for their reasonable
expenses for sending solicitation material to the beneficial owners.
The entire cost of soliciting the consent revocations (including, without
limitation, costs, if any, relating to advertising, printing, fees of attorneys,
financial advisors, proxy solicitors, accountants, public relations,
transportation, litigation and related expenses and filing fees) will be borne
by RSC. RSC estimates that total expenditures relating to the RSC Board's
solicitation of the consent revocations will be approximately $[ ].
Approximately $[ ] has been expended by RSC to date.
25
<PAGE>
ABSENCE OF APPRAISAL RIGHTS
Pursuant to the DGCL, the stockholders of RSC are not entitled to appraisal
rights in connection with the United Rentals Proposals.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the Securities and Exchange Commission, each
member of the RSC Board, certain executive officers and other employees of RSC
and certain other persons may be deemed to be a "participant" in RSC's
solicitation of revocations of consent. The principal occupations and business
addresses of each participant are set forth in Annex A. Information about the
present ownership by directors and certain executive officers of RSC of RSC's
securities is provided in this Consent Revocation Statement, and the present
ownership of RSC's securities by other participants is listed on Annex A.
26
<PAGE>
ANNEX A
INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
AND EMPLOYEES OF RSC AND OTHER PARTICIPANTS WHO MAY ALSO
SOLICIT REVOCATIONS OF CONSENTS
The following tables set forth the name, principal business address and the
present office or other principal occupation or employment, and the name,
principal business and the address of any corporation or other organization in
which such employment is carried on, of the directors and certain executive
officers and employees of RSC and other representatives of RSC who may also
solicit revocations of consents from stockholders of RSC. Unless otherwise
indicated, the principal occupation refers to such person's position with RSC
and the business address is Rental Service Corporation, 6929 East Greenway
Parkway, Suite 200, Scottsdale, Arizona 85254.
DIRECTORS
The principal occupations of RSC's directors who are deemed participants in
the solicitation are set forth in "Board of Directors" on pages 10 and 11 of the
Consent Revocation Statement. The name, business and address of the other
participants' organization of employment are as follows:
<TABLE>
<CAPTION>
Name Principal Business Address
- ---- --------------------------
<S> <C>
Martin R. Reid Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
William M. Barnum, Jr. Brentwood RSC Partners, L.P.
11150 Santa Monica Boulevard, Suite 1200
Los Angeles, California 90025
James R. Buch Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
David P. Lanoha Rental Service Corporation
11250 East 40th Avenue
Denver, Colorado 60239
Christopher A. Laurence Brentwood RSC Partners, L.P.
11150 Santa Monica Boulevard, Suite 1200
Los Angeles, California 90025
Eric L. Mattson Baker Hughes Incorporated
3900 Essex Lane, Suite 1200
Houston, Texas 77027
Britton H. Murdoch V-Span
1100 First Avenue, Suite 400
King of Prussia, Pennsylvania 19406
John M. Sullivan Rental Service Corporation
6929 East Greenway Parkway, Suite 200
Scottsdale, Arizona 85254
</TABLE>
<PAGE>
EXECUTIVE OFFICERS, MANAGEMENT AND OTHER EMPLOYEES
The principal occupations of certain of RSC's executive officers and
certain other members of management who are deemed participants in the
solicitation are set forth below. The principal business address of each of
such persons is that of RSC.
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Robert M. Wilson Executive Vice President, Chief Financial Officer, Secretary
and Treasurer
</TABLE>
INFORMATION REGARDING OWNERSHIP OF RSC'S SECURITIES BY PARTICIPANTS
None of the participants owns any of RSC's securities of record but
not beneficially. The number of Shares held by directors and certain executive
officers is set forth in "Security Ownership" on pages 13 and 14 of the Consent
Revocation Statement.
INFORMATION REGARDING TRANSACTIONS IN RSC'S SECURITIES BY PARTICIPANTS
The following table sets forth purchases and sales of Shares by the
participants listed below during the past two years. Unless otherwise
indicated, all transactions are in the public market.
<TABLE>
<CAPTION>
Number of Shares
Name Transaction Date Acquired or (Sold) Footnote
- -------------------------- ---------------- ------------------ ---------
<S> <C> <C> <C>
William M. Barnum 06/04/97 (2,495,770) (1)
04/21/98 23,953 (2)
04/21/98 (617,953) (3)
12/03/98 (200,000) (3)
12/03/98 7,767 (2)
Martin R. Reid 12/23/97 (44,407) (4)
01/22/98 (50,278) (5)
01/28/98 431 (6)
02/05/98 (9,393) (5)
07/13/98 497 (6)
01/28/99 731 (6)
Christopher L. Laurence 04/21/98 1,236 (2)
12/03/98 400 (2)
Britton H. Murdoch 05/22/98 1,000 (7)
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Robert M. Wilson 05/15/98 75 (7)
12/15/98 1,000 (7)
01/28/99 828 (6)
</TABLE>
- ----------------------
(1) Sale of stock in public offering by Brentwood RSC Partners, L.P. Mr. Barnum
disclaims beneficial ownership of such Shares.
(2) Receipt of Shares from Brentwood RSC Partners, L.P.
(3) Distribution of Shares by Brentwood RSC Partners, L.P. Mr. Barnum disclaims
beneficial ownership of such Shares.
(4) Sale of stock in public offering.
(5) Transfer pursuant to divorce settlement.
(6) Issued under the QSP Plan.
(7) Purchase of stock in open market.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED AND
MORGAN STANLEY & CO. INCORPORATED
Certain employees of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Morgan Stanley & Co. Incorporated ("Morgan Stanley") may
also assist in the solicitation of proxies, including by communicating in
person, by telephone or otherwise with a limited number of institutions, brokers
or other persons who are stockholders of RSC. Neither Merrill Lynch nor Morgan
Stanley will receive any separate fee for its solicitation activities. Merrill
Lynch and Morgan Stanley are investment banking firms that provide a full range
of financial services for institutional and individual clients. Although
neither Merrill Lynch nor Morgan Stanley admit that they or any of their
respective directors, officers, employees or affiliates are a "participant," as
defined in Schedule 14A promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or that such Schedule 14A requires the
disclosure of certain information concerning Merrill Lynch and Morgan Stanley,
each of Merrill Lynch and Morgan Stanley may assist RSC in such a solicitation.
In the normal course of business, each of Merrill Lynch and Morgan Stanley may
trade securities of RSC for its own account and the account of its customers
and, accordingly, may at any time hold a long or short position in such
securities. As of April 16, 1999, Merrill Lynch held a net long position of 436
Shares. As of April 15, 1999, Morgan Stanley held a net long position of 61,300
Shares. In addition, in the normal course of business, Merrill Lynch and Morgan
Stanley may finance their respective securities positions by bank and other
borrowings and repurchase and securities borrowing transactions.
Information with respect to the employees of Merrill Lynch who may be deemed
"participants" is set forth below. None of the individuals named below owns any
Shares or has engaged in any transaction involving the Shares during the past
two years. The principal business address of Merrill Lynch and each of the
persons listed below is Merrill Lynch & Co., World Financial Center, 250 Vesey
Street, North Tower, New York, New York 10281.
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Paul A. Stefanick Managing Director
James H. Caldwell Vice President
Jack C. MacDonald Vice President
</TABLE>
3
<PAGE>
Information with respect to the employees of Morgan Stanley who may be
deemed "participants" is set forth below. None of the individuals named below
owns any Shares or has engaged in any transaction involving the Shares during
the past two years. The principal business address of Morgan Stanley and each of
the persons listed below is Morgan Stanley & Co. Incorporated, 1585 Broadway,
New York, New York 10036.
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
R. Bradford Evans Managing Director
Paul J. Taubman Managing Director
Glenn R. Robson Principal
Neil B. Morganbesser Principal
Pietro Cinquegrana Vice President
</TABLE>
Merrill Lynch serves as RSC's financial advisor in connection with the
proposed NationsRent Merger. In connection with the commencement of the United
Rentals Offer, RSC supplemented and modified its engagement of Merrill Lynch
such that the terms and conditions of Merrill Lynch's engagement as RSC's co-
financial advisor in all circumstances are as follows:
(1) Merrill Lynch has received a retention fee in an amount equal to
$2 million;
(2) a fee equal to $8 million (against which the fee paid under clause
(1) above will be credited) will be payable if, during the period of
Merrill Lynch's engagement or within 2 years thereafter, any merger,
consolidation or other business combination or alternative restructuring or
acquisition transaction involving RSC, including the United Rentals Offer
(but excluding the NationsRent Merger), is consummated or any person
acquires more than 40% of RSC's voting capital stock or a substantial
portion of RSC's assets or RSC enters into a definitive agreement which
subsequently results in such an acquisition transaction, which fee will be
payable upon the closing of such acquisition transaction (or, in the case
of the United Rentals Offer, upon the first purchase of Shares pursuant to
the United Rentals Offer);
(3) a fee equal to $6 million (against which the fee paid in clause
(1) above will not be credited) will be payable if the NationsRent Merger
is consummated; and
(4) a fee equal to $8 million (against which the fee paid under clause
(1) above will be credited) will be payable in the event, among other
things, RSC has not consummated any acquisition transaction described in
clause (2) or (3) above by April 5, 2000, which fee will be payable in cash
on April 5, 2000.
RSC has also engaged Morgan Stanley as its co-financial advisor in
connection with the United Rentals Offer. RSC has agreed to pay Morgan Stanley
an aggregate fee equal to $5 million, comprised of (1) a retention fee equal to
$1 million, which has been paid, and (2) an additional fee equal to $4 million
payable upon the earlier of April 5, 2000, or the consummation of, among other
things, any merger, consolidation or other business combination involving RSC
(including the NationsRent Merger) or any acquisition of a majority of the
voting stock of RSC or all or substantially all of its assets.
Pursuant to the engagements of Merrill Lynch and Morgan Stanley, RSC has
also agreed to reimburse each of Merrill Lynch and Morgan Stanley, respectively,
for certain reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of legal counsel) and to indemnify each of Merrill Lynch and
Morgan Stanley and certain respective related parties from and against certain
liabilities, including liabilities under the federal securities laws, arising
out of their respective engagements.
4
<PAGE>
MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS
Except as described in this Annex A or in the Consent Revocation
Statement, none of the participants nor any of their respective affiliates or
associates (together, the "Participant Affiliates"), (1) directly or indirectly
beneficially own any Shares or any securities of any subsidiary of RSC or (2)
has had any relationship with RSC in any capacity other than as a stockholder,
employee, officer and director. Furthermore, except as described in this Annex A
or in the Consent Revocation Statement, no Participant Affiliate is either a
party to any transaction or series of transactions since January 1, 1998, or has
knowledge of any currently proposed transaction or series of transactions, (1)
to which RSC or any of its subsidiaries was or is to be a party, (2) in which
the amount involved exceeds $60,000, and (3) in which any Participant Affiliate
had, or will have, a direct or indirect material interest.
Except for the employment agreements described in the Consent
Revocation Statement, no Participant Affiliate has entered into any agreement or
understanding with any person respecting any future employment by RSC or its
affiliates or any future transactions to which RSC or any of its affiliates will
or may be a party. Except as described in this Annex A or in the Consent
Revocation Statement, there are no contracts, arrangements or understandings by
any Participant Affiliate within the past year with any person with respect to
RSC's securities.
5
<PAGE>
[FORM OF CONSENT REVOCATION CARD]
PRELIMINARY COPY -- SUBJECT TO COMPLETION, DATED APRIL ___, 1999
WHITE CONSENT REVOCATION CARD
THIS REVOCATION OF CONSENT IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF RENTAL SERVICE CORPORATION
IN OPPOSITION TO THE UNITED RENTALS' CONSENT SOLICITATION.
Revocation of any and all consents heretofore executed with respect to the
matters set forth herein, as described in the statement enclosed herewith.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "REVOKE CONSENT" ON EACH
PROPOSAL SET FORTH BELOW.
YOUR REVOCATION OF CONSENT IS IMPORTANT. PLEASE INDICATE YOUR OPPOSITION TO THE
UNITED RENTALS PROPOSALS BY MARKING, SIGNING, DATING AND MAILING THIS CARD TODAY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF NOT OTHERWISE MARKED, THIS REVOCATION
OF CONSENT REVOKES ALL PREVIOUS CONSENTS.
1. Remove all eight existing members of the RSC Board and any person(s) elected
or designated by any of such directors to fill any vacancy or newly created
directorship.
/ / REVOKE CONSENT / / DO NOT REVOKE CONSENT / / ABSTAIN
2. Elect Bradley S. Jacobs, Richard N. Daniel, Richard J. Heckmann, Wayland R.
Hicks, Stephanie R. Joseph, John N. Milne, Michael J. Nolan, Raymond S.
Troubh and Gerald Tsai, Jr. (collectively, the "Nominees") as the directors
of RSC; provided, that, in the event that the RSC Board continues to be fixed
at eight (or fewer) directors, the Nominees who receive the greatest number
of votes shall fill all available seats on the RSC Board.
/ / REVOKE CONSENT / / DO NOT REVOKE CONSENT / / ABSTAIN
3. Repeal each provision of RSC's Bylaws or amendment thereto adopted subsequent
to January 20, 1999 and prior to the effectiveness of any of the Proposals.
/ / REVOKE CONSENT / / DO NOT REVOKE CONSENT / / ABSTAIN
(continued and to be dated and signed on reverse side)
<PAGE>
INSTRUCTION: TO REVOKE CONSENT, WITHHOLD REVOCATION OF CONSENT OR ABSTAIN FROM
REVOKING THE CONSENT FOR THE ELECTION OF ALL THE PERSONS NAMED ON
THE REVERSE, CHECK THE APPROPRIATE BOX ON THE REVERSE. IF YOU WISH
TO REVOKE THE CONSENT TO THE ELECTION OF CERTAIN OF THE PERSONS
NAMED ON THE REVERSE, BUT NOT ALL OF THEM, CHECK THE "REVOKE
CONSENT" BOX ON THE REVERSE AND WRITE THE NAME OF EACH SUCH PERSON
AS TO WHOM YOU DO NOT WISH TO REVOKE CONSENT IN THE FOLLOWING
SPACE:
------------------------------------------------------------------
IN THE ABSENCE OF DISSENT OR ABSTENTION BEING INDICATED ON THE REVERSE, THE
UNDERSIGNED HEREBY REVOKES CONSENT TO EACH ACTION LISTED ON THE REVERSE.
None of the Proposals is subject to, or conditioned upon, the adoption of any of
the other Proposals; however, Proposal No. 2 cannot be effected unless Proposal
No. 1 is adopted.
Please sign exactly as name appears on stock certificates or on label affixed
hereto. When shares are held by joint tenants, both should sign. In case of
joint owners, EACH joint owner should sign. When signing as attorney, executor,
administrator, trustee, guardian, corporate officer, etc., give full title as
such.
Dated: ------------------------------------
- --------------------------------------------
Signature
- --------------------------------------------
Signature, if held jointly
- --------------------------------------------
Title of Authority
IN ORDER FOR YOUR REVOCATION OF CONSENT TO BE VALID, IT MUST BE DATED.
PLEASE MARK, SIGN, DATE AND MAIL YOUR REVOCATION OF CONSENT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
2
