-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PwZvTcvOfpNLxx6lgppEmfz/svR0oCRH6yiRYD0+8qJ7YUIx6QTqsPfinM/0NIUY zZnRO8pPEfFXX0FgTuK6XA== 0000950172-99-000686.txt : 19990607 0000950172-99-000686.hdr.sgml : 19990607 ACCESSION NUMBER: 0000950172-99-000686 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990604 GROUP MEMBERS: UNITED RENTALS INC /DE GROUP MEMBERS: UR ACQUISITION CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RENTAL SERVICE CORP CENTRAL INDEX KEY: 0001016572 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 330569350 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-49011 FILM NUMBER: 99640612 BUSINESS ADDRESS: STREET 1: 6929 EAST GREENWAY PARKWAY STREET 2: STE 200 CITY: SCOTTSDALE STATE: AZ ZIP: 85254 BUSINESS PHONE: 6029053300 MAIL ADDRESS: STREET 1: 6929 GREENWAY PARKWAY STREET 2: SUITE 200 CITY: SCOTTSDALE STATE: AZ ZIP: 85254 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: UNITED RENTALS INC /DE CENTRAL INDEX KEY: 0001067701 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 061522496 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: FOUR GREENWICH OFFICE PARK CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036223131 MAIL ADDRESS: STREET 1: FOUR GREENWICH OFFICE PARK CITY: GREENWICH STATE: CT ZIP: 06830 SC 14D1/A 1 SCHEDULE 14D1 AMENDMENT NO. 20 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 AMENDMENT NO. 20 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 RENTAL SERVICE CORPORATION (Name of Subject Company) UR ACQUISITION CORPORATION UNITED RENTALS, INC. (Bidders) COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) 76009V 10 2 (CUSIP Number of Class of Securities) UNITED RENTALS, INC. FOUR GREENWICH OFFICE PARK GREENWICH, CT 06830 ATTN.: BRADLEY S. JACOBS CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER TELEPHONE:(203) 622-3131 FACSIMILE:(203) 622-6080 (Name, Address and Telephone Number of Person authorized to Receive Notices and Communications on Behalf of Bidders) COPY TO: MILTON G. STROM, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE NEW YORK, NEW YORK 10022 TELEPHONE: (212) 735-3000 FACSIMILE: (212) 735-2000 UR Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of United Rentals, Inc., a Delaware corporation ("Parent"), and Parent hereby amend and supplement their Tender Offer Statement on Schedule 14D-1 (as amended from time to time, the "Schedule 14D-1"), filed with the Securities and Exchange Commission (the "Commission") on April 5, 1999, with respect to the Purchaser's offer to purchase all of the shares of common stock, par value $0.01 per share (collectively with the associated preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of April 16, 1999 (the "Rights Agreement"), between Rental Service Corporation and ChaseMellon Shareholder Services, L.L.C., the "Shares"), of Rental Service Corporation, a Delaware corporation (the "Company"), at a price of $22.75 per Share, net to the seller in cash (such price, or such higher price per Share as may be paid in the Offer, the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). Unless otherwise indicated herein, each capitalized term used but not defined herein shall have the meaning ascribed to such term in the Schedule 14D-1 or in the Offer to Purchase referred to therein. ITEM 10. ADDITIONAL INFORMATION. The information set forth in Item 10(f) of the Schedule 14D-1 is hereby amended and supplemented by the following information: On May 28, 1999, Parent filed a reply memorandum of law in support of its motion to dismiss the amended counterclaims of the Company under Section 14 of the Exchange Act (the "Reply Memorandum of Law") in the pending litigation between Parent and the Company, among others, in the United States District Court for the District of Connecticut (the "Connecticut Court"). Parent also filed declarations (the "Declarations") by each of the persons nominated by Parent to stand for election to the Company Board of Directors (the "Nominees"). In the Declarations, each of the Nominees declared, among other things, that he or she is neither an officer nor a director of Parent. On June 2, 1999, the Company filed a surreply memorandum of law (the "Company Surreply Memorandum") in opposition to Parent's motion to dismiss the amended counterclaims, filed on April 29, 1999, and a memorandum in response to the Nominee declarations (the "Company Response Memorandum"). In addition, on June 2, 1999, the Connecticut Court set June 11, 1999 as the date for the hearing concerning Parent's motion to dismiss and related matters. The foregoing is qualified in its entirety by reference to the complete text of the Reply Memorandum of Law, the Company Surreply Memorandum and the Company Response Memorandum, copies of which are filed as Exhibits (g)(17), (g)(18) and (g)(19) hereto, respectively, and which are incorporated by reference herein. ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (g)(17) Parent Reply Memorandum of Law in Support of the Motion to Dismiss the Amended Counterclaims, dated May 28, 1999, filed by Parent in the United States District Court for the District of Connecticut. (g)(18) Company Surreply Memorandum of Law in Opposition to Parent's Motion to Dismiss, dated June 2, 1999, filed by the Company in the United States District Court for the District of Connecticut. (g)(19) Company Memorandum in Response to Parent's Nominee Affidavits, dated June 2, 1999, filed by the Company in the United States District Court for the District of Connecticut. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. UR Acquisition Corporation By: /s/ John N. Milne -------------------------------- Name: John N. Milne Title: President United Rentals, Inc. By: /s/ Bradley S. Jacobs ------------------------------- Name: Bradley S. Jacobs Title: Chairman and Chief Executive Officer Date: June 4, 1999 INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT ------- ------- (g)(17) Parent Reply Memorandum of Law in Support of the Motion to Dismiss the Amended Counterclaims, dated May 28, 1999, filed by Parent in the United States District Court for the District of Connecticut. (g)(18) Company Surreply Memorandum of Law in Opposition to Parent's Motion to Dismiss, dated June 2, 1999, filed by the Company in the United States District Court for the District of Connecticut. (g)(19) Company Memorandum in Response to Parent's Nominee Affidavits, dated June 2, 1999, filed by the Company in the United States District Court for the District of Connecticut. EX-99 2 EXHIBIT (G)(17) - REPLY MEMORANDUM OF LAW UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT UR ACQUISITION CORPORATION and : UNITED RENTALS, INC., : Plaintiffs, CIVIL ACTION NO. : 399CV00625(DJS) -against- : JAMES L. KIRK, RENTAL SERVICE CORPORATION, and NATIONSRENT, INC., : May 28, 1999 Defendants. : REPLY MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS AMENDED COUNTERCLAIMS OF RENTAL SERVICE CORPORATION TABLE OF CONTENTS PAGE ---- TABLE OF AUTHORITIES........................................................ii PRELIMINARY STATEMENT........................................................1 ARGUMENT.....................................................................2 I. WHETHER THE DISCLOSURES ARE VIEWED SEPARATELY OR TOGETHER, RSC HAS FAILED TO ALLEGE ANY MATERIALLY MISLEADING URI DISCLOSURES OR OMISSIONS................................2 A. URI Has Neither Misrepresented Nor Omitted Material Facts Concerning Its Financing Arrangements...............................3 B. URI's Schedule 14D-1 Filing Fully and Fairly Disclosed The Conditions To Its Cash Tender Offer.................................6 C. The Total Mix of URI's Tender Offer Disclosures Renders the Alleged Misstatements and Omissions Immaterial......................7 II. URI'S PUBLIC DISCLOSURES ADEQUATELY ADDRESS RSC'S PERCEIVED VIOLATIONS OF SECTION 14 OF THE EXCHANGE ACT.................9 CONCLUSION..................................................................10 TABLE OF AUTHORITIES CASES PAGE(S) - ----- ------- Abramson v. Nytronics, Inc., 312 F. Supp. 519 (S.D.N.Y. 1970) ...............9 Blanchette v. Providence & Worcester Co,, 428 F. Supp. 347 (D. Del. 1977) ...9 Burlington Industrial Inc., v. Edelman, 666 F. Supp. 799 (M.D.N.C. 1987), aff'd mem., No. 87-1622(L), 1987 WL 91498 (4th Cir. June 22, 1987) ....9 CRTF Corp. v. Federated Dep't Stores, Inc., (Mar. 28, 1993) reprinted in 1988 Transfer Binder Fed. Sec. L ...................................4 Chris-Craft Industrial, Inc. v. Piper Aircraft Corp., 480 F.2d 341 (2d Cir. 1972), rev'd on other grounds, 430 U.S. 1 (1977) .......2, 3, 5 Crouse-Hinds Co. v. InterNorth, Inc., 518 F. Supp. 416 (N.D.N.Y. 1980) ...5, 8 Electronic Specialty Co. v. International Controls Corp., 409 F.2d 937 (2d Cir. 1969) ....................................................1 Gould v. American Hawaiian, 331 F. Supp. 981 (D. Del. 1971) .................7 Greenapple v. Detroit Edison Co., 618 F.2d 198 (2d Cir. 1980) ...............6 In re Hunter Environmental Services Inc. Security Litig., 921 F. Supp. 914 (D. Conn. 1996) ..........................................3, 8 I. Meyer Pincus & Associates P.C. v. Oppenheimer & Co., 936 F.2d 759 (2d Cir. 1991) ........................................................7 Kohn v. American Metal Climax, Inc., 458 F.2d 255 (3d Cir. 1972) ............7 Macfadden Holdings, Inc. v. JB Acquisition Corp., 802 F.2d 62 (2d Cir. 1986) ..............................................................1, 8 Mills v. Electric Autolite Co., 403 F.2d 429 (7th Cir. 1968) ................7 New York City Employees Retirement System v. SEC, 45 F.3d 7 (2d Cir. 1995) .................................................................4 Norte & Co. v. Huffines, 304 F. Supp. 1096 (S.D.N.Y. 1968) aff'd in part, remanded in part on other grounds, 416 F.2d 1189 (2d Cir. 1969) .......7 In re PHLCorp. Security Tender Offer Litigation, 700 F. Supp. 1265 (S.D.N.Y. 1988) .......................................................8 Revlon, Inc. v. Pantry Pride, Inc., 621 F. Supp. 804 (D. Del. 1985) .........9 Swanson v. American Consumer Industrial, Inc., 415 F.2d 1326 (7th Cir. 1969) .................................................................7 TSC Industrial, Inc. v. Northway, Inc., 426 U.S. 438 (1976) .................8 The First Boston Corp., SEC No-Action Letter, 1985 WL 54285 (Sept. 3, 1985) .................................................................4 STATUTES PAGE(S) - -------- ------- Fed. R. Civ. P. 12(b)6 ......................................................2 15 U.S.C. ss. 78n(d), (e) ...................................................2 PRELIMINARY STATEMENT On May 20, 1999, the day after the May 19th conference with this Court, Rental Service Corp. ("RSC") and NationsRent, Inc. ("NationsRent") announced that they had mutually agreed to terminate their January 20, 1999 merger and stock option agreements.(1) RSC also announced that its board has requested a review and evaluation of its strategic alternatives from its financial advisors. Pending completion of this review, RSC continues to recommend that RSC shareholders reject United Rentals, Inc.'s ("URI") Tender Offer, not tender their shares and not consent to URI's proposals, which include the removal and replacement of RSC's board. RSC persists in misusing the Williams Act to attempt to thwart URI's Tender Offer rather than letting RSC shareholders make their own final determination.(2) The Second Circuit has cautioned against impeding the informed choice of shareholders of a target company through use of the Williams Act by incumbent management. While reversing an order granting injunctive relief that would have nullified shareholder preference for a tender offer, the Second Circuit also has cautioned that "just as Congress intended the Williams Act to favor neither side in a takeover contest, so too must the courts exercise care so as not to impede the informed choice of the shareholders of a target company." Macfadden Holdings, Inc. v. JB Acquisition Corp., 802 F.2d 62, 67 (2d Cir. 1986); Electronic Specialty Co. v. Int'l Controls Corp., 409 F.2d 937, 947 (2d Cir. 1969) (Friendly, J.) (in applying the Williams Act, "district judges must be vigilant against resort to the courts on trumped-up or trivial grounds as a means for delaying and thereby defeating legitimate tender offers"). - --------------------- (1) In an interview with Bloomberg Forum on May 26, 1999, defendant James Kirk, NationsRent's chief executive officer, said his company "viewed that the courts which [it] had been involved in . . . were going to knock down the [$40 million] break-up fee and the cross-option fee which they didn't seem to like, so really we had very little upside." (2) As the articles selected by RSC show, the financial community has no doubts about the bona fides of URI's Offer and financing. See Kopin Tan, United Rentals' Rival Offer Poses Challenge for NationsRent, Dow Jones News Service, Apr. 5, 1999 (RSC Appendix, Ex. No. 1) (URI's Offer "packs enough of a punch and premium to warrant a close look by shareholders and the [RSC] board" and "[URI] has lined up a formidable arsenal in terms of acquisition financing"). RSC's hollow complaint fails to allege any materially misleading statements or omissions by URI in violation of Sections 14(a) and (e) of the Securities Exchange Act of 1934 as amended (the "Exchange Act"), 15 U.S.C. ss. 78n(d), (e). RSC's belated filing of an Appendix on May 21, 1999, only after the Court directed it to do so, fails to remedy this fatal defect. Rather, the RSC Appendix supports dismissal of RSC's Exchange Act counterclaims pursuant to Fed. R. Civ. P. 12(b)6) by underscoring the fact that URI has fully and fairly disclosed in its tender offer materials the Goldman Sachs firm commitment to provide $2 billion of funds to consummate the Tender Offer, refinance certain indebtedness and for other corporate purposes, and the limited customary conditions contained therein. Moreover, after the statements appeared in the press about which RSC complains in this action, URI filed Amendment No. 5 to its Schedule 14D-1, which fully disclosed RSC's position about the financing and contained as an exhibit the full text of RSC's counterclaims. Consequently, all of RSC's claims relating to the allegedly omitted facts have already been disclosed to RSC shareholders. Accordingly, dismissal of RSC's First and Second Counterclaims with prejudice is warranted. ARGUMENT I. WHETHER THE DISCLOSURES ARE VIEWED SEPARATELY OR TOGETHER, RSC HAS FAILED TO ALLEGE ANY MATERIALLY MISLEADING URI DISCLOSURES OR OMISSIONS In order to state a claim, RSC must allege, among other things, that URI misrepresented or omitted to state material facts in connection with its Tender Offer. Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 362 (2d Cir. 1972), rev'd on other grounds, 430 U.S. 1 (1977). Information is material only "'if there is a substantial likelihood that a reasonable shareholder would consider it important to the investment decision.'" In re Hunter Envtl. Servs. Inc. Sec. Litig., 921 F. Supp. 914, 920 (D. Conn. 1996) (Squatrito, J.) (citations omitted). A. URI Has Neither Misrepresented Nor Omitted Material Facts Concerning Its Financing Arrangements RSC alleges that URI's April 5, 1999 press release is misleading because it asserted that URI has a "firm commitment" from Goldman Sachs to finance the Offer. See Amended Counterclaims and Jury Demand, dated April 22, 1999 ("RSC Countercl.") P. 14. In fact, RSC continues to ignore the firm commitment letter from Goldman Sachs, but has provided no reason for the Court to do so. Moreover, URI's disclosures relative to financing certainly are not materially misleading. URI's financing arrangements, which have been fully disclosed repeatedly, are subject to only customary conditions. See Offer to Purchase at 18-20, Commitment Letter (RSC App. Ex. No. 3). As disclosed in the Offer, conditions (3), (4) and (6) deal with material adverse events while the remaining three conditions deal with routine matters relating to closing the transaction. Accordingly, URI's disclosure that it has a "firm commitment" for financing is not false or misleading. In light of the customary financing conditions, RSC's reliance on Chris-Craft is totally misplaced. See Opposition to Motion to Dismiss Amended Counterclaim, dated May 17, 1999 ("RSC Opp.") at 7. In Chris-Craft, Piper, in a desperate attempt to prevent consummation of plaintiff's cash tender offer, agreed to sell unissued shares to a third party with the "intention" thereafter "to explore the desirability of a merger." 480 F.2d at 351. Pursuant to the agreement, the third party was given the option after six months to put the shares back to Piper at cost plus interest from the closing date. Id. Both Piper's letter to its shareholders and press release, the only documents distributed by Piper to its shareholders describing the agreement, failed to make any mention of the unusual put option. See id. at 351-52. The Second Circuit held that this was a material omission portraying the agreement as completed and favorable, when in fact the agreement was merely "a preliminary and conditional overture directed toward a possible merger." Id. at 365. Therefore, Chris-Craft has no relevance here. RSC's allegations that URI's public assertion that its Offer is "fully financed" is misleading (RSC Countercl. P. 23) also miss the mark; URI's assertion is reasonable. In the same SEC letter to the Honorable Leonard B. Sand of the Southern District of New York cited by RSC (see RSC Opp. at 13), the SEC acknowledged that once the offeror has received "firm financing commitments" for all of the money needed to complete the tender offer, the offer is "fully financed." CRTF Corp. v. Federated Dep't Stores, Inc., (Mar. 28, 1993) reprinted in 1988 Transfer Binder Fed. Sec. L. Rep. (CCH) P. 84,224, at 89,024.(3) Here, Goldman Sachs has given its "firm commitment" to provide $2 billion in financing for a Tender Offer, which, with the debt refinancing, is estimated to cost approximately $1.26 billion. See Offer to Purchase at 18 (RSC App. Ex. No. 3). Moreover, in Amendment No. 5 to its Schedule 14D-1, URI disclosed that the Tender Offer is "fully financed" because, given the Goldman Sachs firm $2 billion commitment, no other source of financing will be necessary to effect the transaction. Accordingly, the assertion that the Offer is "fully financed" is not a material misstatement. - ------------------------ (3) See also The First Boston Corp., SEC No-Action Letter, 1985 WL 54285, at *3 (Sept. 3, 1985) (acknowledging that "market out clauses" are standard aspects of "firm commitment underwriting" agreements and are appropriate when the "market out provision" can be exercised "upon the occurrence of a material, adverse event" since this does not permit abrogation of the obligation). Courts may treat SEC no-action letters as persuasive authority. New York City Employees Retirement Sys. v. SEC, 45 F.3d 7, 13 (2d Cir. 1995). In light of the foregoing, URI's assertions in its press release and interviews that its Offer is "all cash" and provides "certainty" are also not materially misleading, especially where RSC was asking its shareholders to approve the RSC/NationsRent merger with its attendant fluctuating value.(4) Furthermore, these assertions were made in conjunction with URI's 14D-1 filing, which fully and fairly disclosed URI's financing arrangements. See I.B. and I.C infra. Finally, RSC contends that URI's April 5, 1999 Summary Advertisement and Press Release, by including an expressly non-exhaustive list of conditions to the Offer, contained material omissions concerning the details of URI's financing arrangements. RSC Countercl. P. P. 14, 15. RSC's reliance on Chris-Craft for support is again misplaced. See RSC Opp. at 7, 10. In Chris-Craft, the published list of conditions, which omitted the uncommon put option, "gave the appearance of being exclusive." 480 F.2d at 365. In contrast, URI's conditions were expressly not exclusive. See RSC App. Ex. No. 3. Moreover, the mere inclusion in such summary documents of certain conditions, such as those pertaining to the then-proposed coercive RSC/NationsRent merger, is permissible, and including every condition of an offer in such summary documents is simply not required. Cf. Crouse-Hinds Co. v. InterNorth, Inc., 518 F. Supp. 416, 454, 456-57 (N.D.N.Y. 1980).(5) ---------------------- (4) See RSC App. Ex. No. 3 (noting that in January 1999, RSC and NationsRent agreed to a "stock swap then priced at $356 million"). (5) Confronted with a summary advertisement which listed termination of the target's proposed merger with a third party as a condition of the proposed tender offer but omitted the other conditions to the offer, the Crouse-Hinds court remarked: In devising its summary advertisement, InterNorth was confronted with the problem of quickly relating to the marketplace its position on whether it was unconditionally tendering for shares of Crouse-Hinds, in view of Crouse-Hinds' stated intention to merge with Belden. . . . [T]he marketplace was bound to wonder whether InterNorth was tendering for Crouse-Hinds alone, or Course- Hinds/Belden. Crouse-Hinds, 518 F. Supp. at 456. "[I]f InterNorth had not added the 'Belden condition' to its summary advertisement, it is conceivable that Crouse-Hinds could have objected, and reasonably so, that the summary advertisement would have been inaccurate and misleading." Id. at 457. B. URI's Schedule 14D-1 Filing Fully and Fairly Disclosed The Conditions To Its Cash Tender Offer URI neither buried nor failed to emphasize adequately the conditions to its Offer, including the financing conditions. URI satisfied its disclosure obligations by "steer[ing] a middle course, neither submerging a material fact in a flood of collateral data, nor slighting its importance through seemingly cavalier treatment." Greenapple v. Detroit Edison Co., 618 F.2d 198, 210 (2d Cir. 1980). RSC's claims of circumlocution, burial or scattering of material facts regarding the Offer's conditions in URI's Schedule 14D-1 filing simply cannot withstand scrutiny. See RSC Opp. at 7-11. The table of contents for the Offer to Purchase includes sections titled "Introduction," "Source and Amount of Funds" and "Conditions to the Offer." See Offer to Purchase (RSC App. Ex. No. 3). The Introduction provides a summary overview of the Offer. It includes only one subsection -- "Certain Conditions to the Offer" -- which alerts the reader to the fact that the conditions to the Offer include "receipt of financing pursuant to the Commitment Letter . . . as described in Section 14 [Conditions to the Offer]." Id. at 6. The Source and Amount of Funds section also directs the reader to Section 14, but only after again alerting the reader that while URI expects that financing will be available, "there can be no assurance that the Facilities will be consummated." Id. at 20-21. In addition, the customary conditions included in the Goldman Sachs Commitment Letter are clearly enumerated in a separate paragraph in this section.(6) Id. Finally, Section 14 -- Conditions to the Offer -- lists, in separate paragraphs, the events which trigger URI's right to terminate the Offer. Id. at 27-31. These listed conditions are typical, including the one relating to financing, which permits termination if URI does not receive financing for the Offer pursuant to the Commitment Letter. Id. at 30. - ------------------------- (6) A copy of the Commitment Letter is also attached to the Schedule 14D-1. Thus, there is simply no merit to RSC's allegations that URI is attempting to deceive RSC shareholders. See I. Meyer Pincus & Assocs. P.C. v. Oppenheimer & Co., 936 F.2d 759, 763 (2d Cir. 1991) (material not buried where relevant material appeared on page 25, was explicitly referenced on page 5, and was listed in the Table of Contents and where summary stated that it was qualified by the more detailed material included in the document). The cases from which RSC tries to glean support for its frivolous claim that URI buried the Offer's conditions are inapposite and, in the case of Kohn, plainly contradictory. In its haste to quote from the portion of the District Court opinion dealing with buried disclosures (see RSC Opp. at 8), RSC failed to point out that the Third Circuit reversed the District Court's finding that the board's conflict of interest was buried. See Kohn v. American Metal Climax, Inc., 458 F.2d 255, 267 (3d Cir. 1972) ("The fact, relied upon by the district court, that the RST Board recommendation appears in boldfaced type whereas only part of the disclosures of conflicting interests so appears does not in our view, violate the equal prominence rule.") (Emphasis added).(7) - -------------------------- (7) The other cases cited by RSC also fail to provide it with any support because they are totally inapposite. See Gould v. American Hawaiian, 331 F. Supp. 981, 995-96 (D. Del. 1971) (conflict of interest buried where facts underlying conflict were interspersed throughout cover letter and proxy statement); Norte & Co. v. Huffines, 304 F. Supp. 1096, 1106 (S.D.N.Y. 1968) (fact was buried in unrelated section at the end of the proxy statement) aff'd in part, remanded in part on other grounds, 416 F.2d 1189 (2d Cir. 1969); Mills v. Electric Autolite Co., 403 F.2d 429, 434 (7th Cir. 1968) ("Had the proxy statement simply reported approval, without emphasis and along with the other facts, we might have a different situation." Instead, board approval was on pages 2 and 3 in bold while facts disclosing conflict were not emphasized and relegated to the end of the document.); Swanson v. American Consumer Indus., Inc., 415 F.2d 1326, 1330-1331 (7th Cir. 1969) (no issue of buried facts, but rather misleading and deceptive omissions). C. The Total Mix of URI's Tender Offer Disclosures Render the Alleged Misstatements and Omissions Immaterial RSC shareholders have all material information to assess Goldman Sachs' $2 billion commitment. As this Court previously held, "if the documents portray a picture substantially different from that painted by the plaintiff in the complaint, the court will base its decision on the scenario supported by the complete exhibits." Hunter Envtl., 921 F. Supp. at 918 (Squatrito, J.). Following the Court's request, RSC has finally provided the exhibits to this Court. They reveal no misleading statement or omitted fact the disclosure of which "would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). Accordingly, RSC has failed to state a claim against URI. Even assuming arguendo that URI's public statements were misleading -- and they were not -- RSC still fails to state a claim, since the facts underlying these statements are fully disclosed in URI's Schedule 14D-1 filing. See Macfadden Holdings, 802 F.2d at 71 (meaning of tender offer disclosures concerning condition was clear and Court repeated that it was '"not inclined to subject every tender offer to a nit-picking judicial scrutiny which will in the long run injure shareholders by preventing them from taking advantage of favorable offers."') (quoting DataProbe Acquisition Corp. v. Datatab, Inc., 722 F.2d 1, 5 (2d Cir. 1983) cert. denied, 465 U.S. 1052 (1984)); In re PHLCorp. Sec. Tender Offer Litig., 700 F. Supp. 1265, 1269 (S.D.N.Y. 1988) (arguably false statement in press release was not material where Offer to Purchase contained clear representations of pertinent facts). Similarly, RSC's claim that URI's press release and summary advertisement materially omitted conditions of the Tender Offer is baseless. See Hunter Envtl., 921 F. Supp. at 922 (Squatrito, J.) (failure to disclose uncertainty of process to get permit was immaterial as a matter of law since the information was credibly available from other sources); Crouse-Hinds, 518 F. Supp. at 457 (any potential for confusion from the necessarily selective disclosure required by summary publications is obviated by the tender offering materials). II. URI'S PUBLIC DISCLOSURES ADEQUATELY ADDRESS RSC'S PERCEIVED VIOLATIONS OF SECTION 14 OF THE EXCHANGE ACT RSC continues to ignore the fact that Amendment No. 5 to URI's Schedule 14D-1 renders RSC's Exchange Act counterclaims moot by fully disclosing RSC's and URI's positions concerning the financing, and attaching RSC's counterclaims. "Where there is a genuine and vigorous dispute as to the fact that illegal conduct occurred, only a good faith disclosure of the issue and the possible liability of the offeror is required by the Williams Act." Revlon, Inc. v. Pantry Pride, Inc., 621 F. Supp. 804, 812 (D. Del. 1985) (disclosure of allegations of complaint in tender offer was adequate) (citing Avnet, Inc. v. Scope Indus., 499 F. Supp. 1121, 1124-1126 (S.D.N.Y. 1980)); see Abramson v. Nytronics, Inc., 312 F. Supp. 519, 524-26 (S.D.N.Y. 1970) ("[r]egardless of the accuracy or completeness of the original proxy statement," disclosure requirements were met by letter quoting verbatim allegations of complaint).(8) RSC finds no support from Blanchette v. Providence & Worcester Co,, 428 F. Supp. 347 (D. Del. 1977). See RSC Opp. at 14. The court there required express disavowal in a subsequent letter to shareholders because the earlier Prospectus was found to have contained a statement that "was untrue." 428 F. Supp. at 353-354 (emphasis added). Here, RSC, at best, has merely alleged misleading statements or omissions. - -------------------------- (8) See Burlington Indus. Inc., v. Edelman, 666 F. Supp. 799, 808 (M.D.N.C. 1987) (attaching copy of complaint alleging insider trading to amended filings adequately disclosed receipt of inside information), aff'd mem., No. 87-1622(L), 1987 WL 91498 (4th Cir. June 22, 1987). Finally, RSC argues in vain that URI's Amendment No. 5 failed to cure any alleged misrepresentations or omissions because it was filed two weeks after the Offer to Purchase, during which time shares may have been tendered. RSC Opp. at 15. As is clear from the Offer to Purchase, tendered shares could and still can be withdrawn. Offer to Purchase at 12 (RSC App. Ex. No. 3). CONCLUSION For the foregoing reasons and the reasons set forth in plaintiffs'-counter defendants' opening memorandum, this Court should dismiss RSC's amended counterclaims, with prejudice. PLAINTIFFS-COUNTER DEFENDANTS UR ACQUISITION CORPORATION and UNITED RENTALS, INC. and COUNTER- DEFENDANTS BRADLEY JACOBS, RICHARD HECKMANN, WAYLAND HICKS, JOHN MILNE, MICHAEL NOLAN AND GERALD TSAI, JR. By: /s/ Robin L. Smith --------------------------------------- Thomas J. Groark, Jr. (ct04245) Rihard M. Reynolds (ct06124) Phlip S. Wellman (ct09636) Robin L. Smith (ct13345) DAY, BERRY & HOWARD LLP City Place I Hartford, Connecticut 06103 (860) 275-0100 OF COUNSEL: Jay B. Kasner Clifford H. Aronson Steven J. Kolleeny SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 Third Avenue New York, New York 10022 (212) 735-3000 EX-99 3 EXHIBIT (G)(18) - COMPANY SURREPLY MOTION UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT - - - - - - - - - - - - - - - - - - - -x UR ACQUISITION CORPORATION : CIVIL ACTION NO. and UNITED RENTALS, INC. 399CV00625 (DJS) : Plaintiffs, : V. : JAMES L. KIRK, RENTAL SERVICE JUNE 2, 1999 CORPORATION and NATIONSRENT, INC. : Defendant. : - - - - - - - - - - - - - - - - - - - -x RSC'S SURREPLY IN OPPOSITION TO URI'S MOTION TO DISMISS TABLE OF CONTENTS I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 II. URI OMITTED AND MISSTATED THE CONDITIONAL NATURE OF ITS OFFER AND FINANCING IN VIOLATION OF SECTION 14 . . . . . . . . . . . 3 III. URI BURIES THE CONDITIONAL NATURE OF ITS FINANCING AND OFFER . . . . 7 IV. URI'S MISSTATEMENTS AND OMISSIONS ARE MATERIAL . . . . . . . . . . 10 V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 I. INTRODUCTION URI's argument in support of its motion to dismiss boils down to "nothing is perfect." URI asks the Court not to carefully scrutinize its statements made in connection with the Offer. URI also argues that if its initial statements were not entirely forthcoming, there is still no harm because URI's fifth amendment to the Offer provided the requisite disclosures. This is hardly a compelling defense. RSC's counterclaim and supporting exhibits present a clear violation of Section 14. First, URI announced its Offer through various press releases, public statements and advertisements that are designed to reach the largest number of investors. In these announcements, URI promoted its Offer based on the fact that it is "all cash," "fully financed" and offers "certainty" with "no lingering doubt." Although some conditions to the Offer were discussed in these announcements, financing was not. In fact, URI's Summary Advertisement in the Wall Street Journal provided a seemingly comprehensive list of seven key conditions of the Offer, but financing was not one of them. URI knew that these were the documents and disclosures that the investing public would actually read, and that it was unlikely that even a fraction of RSC stockholders would read URI's Tender Offer from cover to cover. While promoting its "all cash" Offer based on its "certainty," URI buried its cursory disclosures that the financing and the Offer generally were so conditional that URI had virtually unfettered discretion to proceed or not. URI's Offer to Purchase listed the same key conditions from the Summary Advertisement on the first page (plus an additional condition), further confirming that these were the fundamental conditions to the Offer. The Introduction further discussed these same conditions of the Offer in greater detail. There was no discussion about the financing condition there. Instead, investors were referred to Section 14, which contains a single sentence concerning financing in its last section. This single sentence did not clearly state that financing was conditional. If they knew what they were looking for at the start, investors might have had the persistence and fortitude to jump from the Introduction to Section 14, to the Exhibits, and back to Section 10, and they might have pieced together the conditional nature of URI's financing. Simply put, this type of fragmentation and circumlocution is not appropriate given the emphasis that URI placed on the financing and certainty of the Offer in its promotions. RSC had adequately alleged URI's conduct and has stated a viable claim. URI has offered no reason for this Court to terminate RSC's claim as a matter of law. II. URI OMITTED AND MISSTATED THE CONDITIONAL NATURE OF ITS OFFER AND FINANCING IN VIOLATION OF SECTION 14 Recognizing its obvious application here, URI strains to distinguish Chris-Craft Industries v. Piper Aircraft Corp., 480 F.2d 341, 365 (2d Cir. 1973) by arguing that the "put" option in Chris-Craft was "unusual" and a "desperate" act, while the conditions to URI's Tender Offer and its financing are "customary." (Reply, p. 3) At the outset, it should be noted that this type of self-serving assertion of fact cannot support a motion to dismiss; rather, all factual presumptions must be made in favor of RSC's counterclaim. More fundamentally, URI's argument is contrary to the holding in Chris-Craft: "We agree with the district court's conclusion that the agreement was not a 'sham' and that the 'put' was a rational and logical part of the agreement. But Piper's failure to describe the put in its press release, or in its subsequent letter to shareholders, constituted a material omission in violation of section 14(e)." Id. at 365. Here, URI not only omitted the required disclosure (or buried it in the back of its lengthy filing), but affirmatively represented in press interviews that its offer was "fully financed" and "all cash," offering greater "certainty" to RSC's stockholders. URI's conclusory assertion that the conditions to its Tender Offer are customary is also illogical. Far from "routine" as URI claims, the conditions of the Tender Offer are so extreme that the Offer is essentially illusory. For example, both URI's Tender Offer and its financing are conditioned on the absence of any litigation that might materially impact URI or RSC. Section 14(a) states that the Offer is conditioned upon the absence of any actual or threatened litigation that might challenge or impede URI's Offer. Apparently, this very case (as well as the action in Delaware state court) could trigger this condition and nullify the Offer. Of course, that is exclusively URI's decision. The Offer states that whether a such a litigation exists (or a host of other conditions) is determined by URI, in its sole discretion. In fact, URI's own conduct may give rise to one of the conditions that would nullify the Offer: "[URI may rescind the Offer] in the sole judgment of [URI] in any such case, and regardless of the circumstances (including any action or inaction by [URI]), giving rise to any such condition, makes it inadvisable to proceed with the Offer and or with such acceptance for payment or payment." (RSC Exh. 3, p. 30.) Concurrent with the announcement of its Offer, URI filed an action in Delaware, and two days later it filed this action; both of these actions relate to the Offer and virtually guaranteed that RSC or NationsRent would at least threaten a responsive action that would nullify the Offer. As a result, the Offer was essentially conditional from minute one. That is not customary. URI apparently thinks that "customary" and "standard" conditions are never actually satisfied. The first deadline for the Offer (April 30) occurred nearly one month ago, and the conditions for the Offer and its financing have still not been satisfied. URI's silence on this point speaks volumes. Next, URI tries to distinguish Chris-Craft's disapproval of Piper's press release because the list of conditions contained in it gave an appearance of exclusivity, but did not reveal the put option. Id. at 365. URI argues that its list of conditions was expressly not exclusive, so Chris-Craft does not apply. (Reply, p. 5.) Again, URI ignores the express language of Chris-Craft: "The [press] release did reveal that the agreement was subject to the approval of the Piper and Grumman boards as well as other conditions. The published list of conditions [in Piper's press release] gave the appearance of being exclusive, thus solidifying the impression that the sale was all but formally completed." Id. URI's Summary Advertisement and Tender Offer are even worse than the press release struck down in Chris-Craft. Here, URI displayed its list of conditions twice, in two separate documents, thereby giving an even stronger impression that that list was the exclusive list of conditions. URI also claims that its failure to include the financing condition in the list was justifiable because not every condition needs to be disclosed in summary materials. This argument is specious. First, including one more sentence in the Summary Advertisement or the first page of the Offer would not impose an onerous burden on URI. More importantly, URI's decision not include the financing condition illustrates its intent to create an illusory offer that is at the very heart of RSC's claims. URI promoted its Offer based on the fact that it was "all cash," "fully financed" and provided "certainty." But when it is time to disclose the conditions of the Offer, financing is not important enough to make it on the list. This classic "bait and switch" scheme is misleading investors. III. URI BURIES THE CONDITIONAL NATURE OF ITS FINANCING AND OFFER URI concedes that the Second Circuit has adopted the Buried Facts and Similar Emphasis Doctrines (Reply, p. 6), but nevertheless claims that it has not violated these restrictions. The cases cited by URI do not support its argument. Rather, they further establish that it is a violation of the securities laws to give important items "cavalier treatment." Greenapple v. Detroit Edison Co., 616 F.2d 198, 210 (2d Cir. 1980). URI's reliance on Greenapple is misplaced. There, the Second Circuit addressed a motion for summary judgment (not a motion to dismiss) attacking plaintiff's Section 11 claim (plaintiff conceded there was no scienter) based on plaintiff's allegation that defendant's adherence to a government mandated accounting technique was misleading. Plaintiff argued that Edison's listing of a balancing accounting entry (the AFDC) as "other income" was misleading. The court held: "In preparation of the prospectus, Detroit Edison adhered to a government mandated accounting system, whose principles have long been recognized as appropriate to regulated industries. It made a fair disclosure of unsurpassed depth. It received the assistance of both the SEC and FPC and its discussion of AFDC was approved by those agencies. Under all the circumstances, we find that the prospectus was not materially misleading. . . ." Id. at 211 (emphasis added). Although the Second Circuit held that Edison's use of the government mandated accounting technique was not misleading, the court also stated that: "[T]he intended audience will be extremely broad, encompassing both sophisticated financial analysts and untutored lay persons. As the principal goal of the Securities Act is disclosure, close questions will generally be resolved in favor of the inclusion of information. . . . The import of the information conveyed must be neither oversubtle nor overplayed, its meaning accurate, yet accessible." Id. at 210 (citations omitted). (1) URI's reply brief merely confirms that its earlier statements did not satisfy this standard. While URI's Chairman and CEO touted its Offer as "all cash" and "fully financed," URI's 14D-1 buried the conditional nature of its financing and its Offer. URI's reply brief tries to describe its disclosures in the best light possible, but in doing so it underscores the fragmented and circuitous nature of the inadequate disclosures. (Reply, p. 6.) For example, URI claims that the Introduction to the Offer adequately disclosed the financing condition. (Id.) But the opposite is true. The Summary Advertisement listed seven key conditions to the Offer. Those seven (plus an additional one) are repeated in bold print on the first page of the Offer. Then, the Introduction describes each of these eight conditions, again in bold print, in a six-page section describing the conditions of the Offer. ----------------------------- (1) URI's reliance on I. Meyer Pincus & Assoc. v. Oppenheimer & Co., 936 F.2d 759 (2d Cir. 1991) is also misplaced. There, the plaintiff alleged that defendant's statement that closed-end stocks fre- quently trade at a "discount or a premium" to their value was misleading because it suggested that the stock traded at a premium. The court rejected plaintiff's claim, finding the statement to be accurate and cautious. Id. at 763. That case is clearly distinguishable from the present case. RSC is not alleging that a statement which clearly includes both positive and negative statements is merely disclosing the positive components and "buy- ing" the negative components. Unlike I. Meyer, URI initially promoted its Offer based on the fact that it was "all cash," "fully financed" and provided "certainty" and did not place equal emphasis on the conditions to those statements. If the defendant in I. Meyer had first promoted its stock as likely to achieve a premium through repeated public state- ments, the court would no doubt have reached a different conclusion. Financing is not one of the conditions, nor its it described in bold print like the others. Rather, at the very end, between two bold printed statements, there is a sentence that says the Offer is subject to other conditions described in Section 14, including financing. It also says that these conditions may be waived by URI. This a perfect example of a violation of the Buried Fact and similar Emphasis Doctrines. It does not end there. Section 14 of the Offer describes ten more conditions to the Offer in a densely worded four page section. At the very end, there is one sentence: "(j) Borrower shall not have received the financing for the Offer and the Proposed Merger pursuant to the Commitment Letter;" (RSC Exh. 3, p. 30.) This sentence does not sufficiently emphasize this condition in proportion to the emphasis that URI gave in promoting the Offer as "all cash" and "fully financed." Indeed, this single sentence does not reveal the conditional nature of the financing at all. Instead, a more reasonable interpretation of this sentence in context is that this is merely a hypothetical possibility that might nullify the Offer. URI does not reveal the truly conditional nature of the financing through this single cryptic sentence. The Offer requires investors to jump from section to section and infer volumes of important information from cursory references. This is precisely the type of fragmentation and circumlocution that courts have repeatedly struck down. URI does not offer any reason to dismiss this claim as a matter of law. IV. URI'S MISSTATEMENTS AND OMISSIONS ARE MATERIAL URI ultimately argues that if it made omissions and misstatements concerning the conditional nature of its financing and Offer, that such wrongful acts were not material and therefore are not actionable. (Reply, p. 8.) URI's argument that the financing and conditional nature of the Offer are not material is incorrect. Indeed, this argument is contrary to URI's own promotion of its Offer, which centered on the alleged financing and certainty of the Offer. The cases cited by URI do not support its argument. In both MacFadden Holdings, Inc. v. JB Acquisition Corp., 802 F.2d 62 (2d Cir. 1986) and In re PHLCORP Sec. Litig., 700 F. Supp. 1265 (S.D.N.Y. 1988), the courts held that clear, prominent disclosures prohibited any reasonable investor from being misled. In PHLCORP, the court dismissed plaintiffs' claim based on the directors' conflict of interest because "defendants prominently disclosed the conflicts of interest." However, the court upheld plaintiffs' Section 14 claim based on defendant's failure to include appraisal information. Even though the SEC historically did not require such information, the court held that: "In general, reliable information going to the financial condition of a company must be disclosed especially if the same material or equally valuable material is not otherwise available." Id. at 1272. See also In re Hunter Environmental Services, Inc. Sec. Litig., 921 F. Supp. 914, 922 (D. Conn. 1996) (applying the higher standard of scrutiny under the Reform Act, the court held that the defendant made repeated disclosures in June, November and December 1992 which prevented any omission in an October 1992 press release from being material). In MacFadden, the court found that the defendant "consistently represented that the offer and withdrawal period would expire at a fixed time on a specific date." Id. at 71. In fact, defendant provided that information: "from the very inception of [the] offer. . . . The statement . . . was printed on the cover of the June 5th Offer in bold-faced, capital letters. . . . [I]t again informed the shareholders . . . by printing the exact time and date . . . on the cover of the June 19th Supplement in bold-faced capital letters. Similarly, the press release referred only to a specific time and date." Id. In our case, URI did just the opposite. URI's press releases and Summary Advertisement did not disclose the financing condition at all, and its later disclosures did not disclose the financing condition along with the other conditions, in bold-faced capital letters, but buried this condition through repeated short cross-references. The information regarding URI's financing for the Offer was exclusively in URI's possession and would clearly affect a reasonable investor's decision concerning the Offer. There was no alternative source or earlier disclosure for such information as in Hunter or PHLCORP. Thus, URI's suggestion that its misstatements and omissions were not material is without merit. URI's argument that its fifth amendment to the Schedule 14D-1 corrects the false impression is also incorrect and illogical. URI's fifth amendment does nothing more than attach the pleadings from this action that suggest the parties have a dispute. URI does not provide any definitive information regarding the conditionality of its Offer or its financing. Not surprisingly, the cases cited by URI do not support its absurd assertion that it can omit and misstate material facts, but correct such omissions and misstatements by merely filing the parties' pleadings. In Revlon, Inc. v. Pantry Pride, Inc., 621 F. Supp. 804, 812 (D. Del. 1985), Revlon claimed that Pantry Pride's July prospectus was unlawful and created potential liability for the company that should have been disclosed in Pantry Pride's later tender offer for Revlon. The court held that Pantry Pride's disclosure of the dispute regarding its July prospectus was adequate, and an admission of guilt was not required where the underlying charge was disputed. Id. at 812-813. Revlon supports the very rule stated in RSC's opposition. If there is an underlying disputed claim, then the offeror need only disclose the existence of the claim. But Revlon does not support URI's position that it can remedy its defective Offer to Purchase, omitting and misstating material facts, by merely acknowledging a dispute. Such a disclosure does not give the investor any useful information. See also Abramson v. Nytronics, Inc., 312 F. Supp. 519, 524 (S.D.N.Y. 1970) (addressing a target corporation's duty to respond to a tender offer through a 14D-9, holding that the corporation's recommendations need not present "an exhaustive, dispassionate, and evenly balanced presentation of conflicting interpretations of the facts"). As in Blanchette v. Providence & Worchester Co., 428 F. Supp. 347, 354 (D. Del. 1977), URI's supplemental statement cannot correct an earlier inadequate disclosure unless it clearly identifies and "disavows" the misleading statement. Any other rule would create an unworkable result where a tender offeror could conceal material facts, then after it is sued for issuing an unlawful offer, it could merely disclose the litigation. This type of disclosure is clearly contrary to the purpose of the securities laws to ensure reliable information that can assist the investor's decision. Far from "disavowing" its earlier misleading statements and correcting the deficiencies described in RSC's pleadings, URI's fifth amendment states that URI vigorously disputes the allegations in RSC's counterclaim. Thus, an investor reading URI's fifth amendment is not any better informed about the conditional state of URI's financing and Offer. V. CONCLUSION For the foregoing reasons, URI's motion to dismiss should be denied. DEFENDANT AND COUNTERCLAIMANT RENTAL SERVICE CORPORATION By: /s/ Mark V. Connolly ---------------------------------------- William H. Champlin III CT04202 Mark V. Connolly OF COUNSEL CT05677 Marc W. Rappel TYLER COOPER & ALCORN, LLP James J. Farrell CityPlace - 35th Floor LATHAM & WATKINS Hartford, CT 06103-3488 633 W. 5th Street, (860) 725-6200 Suite 4000 Fax: (860) 278-3802 Los Angeles, CA 90071 Its Attorneys (213) 485-1234 CERTIFICATION This is to certify that on June 2, 1999 I have served a copy of the foregoing by hand delivery upon the following counsel: Thomas J. Groark, Jr. Richard M. Reynolds Philip S. Wellman Robin L. Smith Day, Berry & Howard, LLP CityPlace I Hartford, CT 06103 and served a copy via U.S. mail upon the following counsel and pro se parties of record by causing it to be mailed on this 2nd day of June, 1999 postage prepaid and properly addressed to: Joseph B. Frumkin William Sipes Sullivan & Cromwell 125 Broad St. New York, NY 10004 Jay B. Kasner Steven J. Kolleeny Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Robert A. Izard Bradford S. Babbitt Robinson & Cole 280 Trumbull Street Hartford, CT 06103-3597 /s/ Mark V. Connolly ------------------------------- Mark V. Connolly EX-99 4 EXHIBIT (G)(19) - COMPANY RESPONSE MEMORANDUM UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT - - - - - - - - - - - - - - - - - - - -x UR ACQUISITION CORPORATION : CIVIL ACTION NO. and UNITED RENTALS, INC. 399CV00625 (DJS) : Plaintiffs, : -against- : JAMES L. KIRK, RENTAL SERVICE JUNE 2, 1999 CORPORATION and NATIONSRENT, INC. : Defendants. x - - - - - - - - - - - - - - - - - - - - RSC'S MEMORANDUM IN RESPONSE TO URI'S NOMINEE AFFIDAVITS On April 19, 1999, URI filed a preliminary consent solicitation with the SEC, seeking to nominate its own board members to the board of directors for its competitor, RSC. This was a clear violation of Section 8 of the Clayton Act, 15 U.S.C. section 19, which prohibits interlocking directorates of competing companies. On April 22, RSC filed a counterclaim and motion for preliminary injunction against URI. In response, URI declared that its original nominees were appropriate but it nevertheless proposed new nominees who were hand picked by URI, had already agreed to support URI's tender offer for RSC, and would be paid $25,000 merely for agreeing to stand for election. The only thing that URI disclosed about the new nominees was that they are not presently officers or directors of URI, so the new nominees may still violate the Clayton Act if they have a business relationship with URI. See Square D Co. v. Schneider S.A., 760 F. Supp. 362, 366 (S.D.N.Y. 1991) (holding that defendants cannot "evade section8 liability simply by calling its agents on the competitor's board something other than either officers or directors."); Treves v. Servel, Inc., 244 F. Supp. 773, 776 (S.D.N.Y. 1965) (refusing to dismiss Section 8 claim on the merely because interlocking directors resigned on the ground that defendant had not satisfied its heavy burden of proving action would not be repeated). On May 19, 1999, this Court ordered URI to produce affidavits on May 28, 1999, from each of its newly proposed nominees, describing any business relationship between the nominees (or any of their close family members) and URI or any of URI's officers or directors. Rather than issue a written order, the Court relied on URI's good judgment to produce thorough affidavits that would address the issues raised in RSC's counterclaim and motion for preliminary injunction. The Court stated: "Because I'm not going to write an order to that effect, you should get a copy of the record here, and I'm going to rely on your good judgment to be overly careful on what you provide, rather than parsimonious. The more you supply and the more I feel satisfied that these are clean as the pure driven snow, the less problem we're going to have. It will prevent everybody from going to the next stage on this one issue." (May 19, 1999 Court Transcript, p. 34, 1.3 - 10) (emphasis added). Unfortunately, the URI nominee affidavits do not provide the necessary information. The affidavits state in conclusory form that there is no current employment relationship between URI and the nominees, without revealing any factual basis for such conclusions. Even more troubling, the affidavits are all written in the present tense, and fail to disclose if there is any historic relationship between URI (or any its predecessors, affiliates, directors or officers and any of the nominees). A historic business relationship that was terminated just prior to the candidates' nomination is precisely the type of relationship that the affidavits were intended to disclose, but do not. For example, as drafted, the affidavits do not disclose that David A. Bonner's law firm (Katten Muchin & Zavis) performed an extensive amount of work for URI's Chairman and CEO Bradley Jacobs and his predecessor company, United Waste. RSC is informed and believes that such a long standing business relationship exists, but the affidavit does not disclose it. Indeed, none of the affidavits address a former or current relationship between the nominees and United Waste, even though this issue was expressly raised at the May 19, 1999 hearing: MR. RAPPEL: I wanted to include a predecessor which was managed by United Rentals' chairman up until a couple of years ago, a company called United Wastes Systems, Inc. *** THE COURT: I'm trying to define business relationship as any kind of a legal or beneficial relationship in any entity, other than just being a stockholder in the same corporation that's a public corporation that neither of them control or are officers or directors of. For example, they both own shares of stock in General Motors. That's not enough, unless they're on the board of General Motors or a significant holder, like maybe Mr. Perot was. (Court Transcript, p. 32, 1.3 - 6, p. 33, 1.5 - 13.) Another deficiency throughout the affidavits is that they "protest too much" because they deny any relationship at all, implying that the nominees were selected virtually at random. These nominees were not selected at random, so there is some undisclosed relationship. The affidavit of Raymond Troubh provides a good example. Mr. Troubh declares that he is a director of Triarc Companies, Inc. and that Gerald Tsai, a director of URI, is also on the Triarc board. Incredibly, Mr. Troubh declares that he never discussed URI with Mr. Tsai. Moreover, the declaration is silent on whether Messrs. Troubh and Tsai have ever discussed RSC. This type of conclusory, selective disclosure is the very definition of parsimonious. In short, the nominee affidavits do not make the requisite disclosures and further evidence the need for RSC to take limited expedited discovery on this issue in order to definitively resolve this portion of the case. URI has squandered the opportunity to resolve this matter on an expedited basis with its affidavits. To prevent a potential violation of the Clayton Act, RSC should be authorized to proceed with short (one half day) depositions of the nominees immediately. DEFENDANT AND COUNTERCLAIMANT RENTAL SERVICE CORPORATION By: /s/ Mark V. Connolly ---------------------------------- William H. Champlin III CT04202 Mark V. Connolly OF COUNSEL CT05677 Marc W. Rappel TYLER COOPER & ALCORN, LLP James J. Farrell CityPlace - 35th Floor LATHAM & WATKINS Hartford, CT 06103-3488 633 W. 5th Street, (860) 725-6200 Suite 4000 Fax: (860) 278-3802 Los Angeles, CA 90071 Its Attorneys (213) 485-1234 CERTIFICATION This is to certify that on June 2, 1999 I have served a copy of the foregoing by hand delivery upon the following counsel: Thomas J. Groark, Jr. Richard M. Reynolds Philip S. Wellman Robin L. Smith Day, Berry & Howard, LLP CityPlace I Hartford, CT 06103 and served a copy via U.S. mail upon the following counsel and pro se parties of record by causing it to be mailed on this 2nd day of June, 1999 postage prepaid and properly addressed to: Joseph B. Frumkin William Sipes Sullivan & Cromwell 125 Broad St. New York, NY 10004 Jay B. Kasner Steven J. Kolleeny Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Robert A. Izard Bradford S. Babbitt Robinson & Cole 280 Trumbull Street Hartford, CT 06103-3597 /s/ Mark V. Connolly -------------------------------------- Mark V. Connolly -----END PRIVACY-ENHANCED MESSAGE-----