When Peter Ehrenberg testified in a Georgetown, Del., courtroom in December, it marked a first in the Lowenstein Sandler M&A partner's 34-year career. Never before had he taken the witness stand to defend one of his contracts. Then again, nothing like what happened between his client, Cerberus Capital Management, and United Rentals Inc. had ever befallen one of his deals.

The trouble started Nov. 14, when Cerberus announced that it was backing out of a $4 billion agreement to buy United Rentals. That a private equity buyout collapsed was hardly unique -- the latter half of 2007 was the worst of times for the credit markets, and by extension, for dozens of deals signed earlier in the year. Suddenly, lenders had no way to off-load the huge loans they had agreed to issue to finance multibillion-dollar private equity deals. With the banks looking for any possible way out of their debt commitments, deals seemed to blow up every week. United Rentals was just the latest casualty. But this is where the similarity to most other failed deals ends.

The deal lawyers worked nights and weekends to get a contract signed while the banks were still amenable to financing the highly leveraged buyout. They were successful: On July 22, both sides agreed that Cerberus would pay $34.50 a share for the rental company. But in drafting the language, the lawyers had left vague a key provision that specified what United Rentals could do if Cerberus backed out of the deal. United Rentals claimed that a clause in the contract gave it the right of specific performance -- the ability to force Cerberus to close the deal, provided the financing was still there. Cerberus claimed that its only obligation was to pay a $100 million breakup fee. Five days after Cerberus bowed out of the deal, United Rentals filed suit in the Delaware Court of Chancery, seeking to force Cerberus back to the altar for a shotgun wedding. After reviewing the contract, Chancellor William Chandler III concluded that the wording in the clauses was ambiguous enough to warrant a trial.

As the deal lawyer who drafted the contract for Cerberus, Ehrenberg was in the unenviable position of having to defend decisions he'd made under pressure months earlier. At trial, he and other Lowenstein lawyers testified that they repeatedly made clear to United Rentals lawyer Eric Swedenburg, then a senior associate at Simpson Thacher & Bartlett, that specific performance wasn't acceptable and that Swedenburg had said he understood. But Ehrenberg's testimony didn't explain his rationale for why he hadn't simply crossed out the clause that was causing all the trouble. Instead, Ehrenberg had nullified the clause -- or so he thought -- by adding a sentence at the end that made it "subject to" another clause, the $100 million breakup fee clause. "I'm not aware of any mistakes in drafting," he testified. But he did concede that it might have been simpler to delete the offending section. (Ehrenberg declined to comment for this story.)

At the time the deal was drafted, in July, the breakup fee remedy was common; the specific performance remedy was not. Swedenburg also declined to comment for this story but a lawyer familiar with the case says that Swedenburg understood Cerberus' position on the contract yet also realized that, as written, the contract left some wiggle room. "Lawyers live with ambiguity if they think it advantages them," this lawyer says. It wasn't Swedenburg's job to tell Ehrenberg that there was a bigger hole in the contract than he may have realized.

Kevin Rinker, a Debevoise & Plimpton partner who practices in the area of private equity and who presented a case study of the deal to his fellow partners, agrees with this analysis. From the testimony, he says, it appears Ehrenberg won a point during the negotiations but then failed to clearly articulate it in the contract. Kenneth Adams, a former Jones Day and Winston & Strawn lawyer who now advises law firms on contract matters, goes a step further. "It was a major failure of drafting," he says. "What happens if and when someone walks is a do-not-pass-go issue."

Lawyers familiar with the deal say they believe the United Rentals case offers a glimpse into a little-noticed but common practice: Deal lawyers often agree to contracts with ambiguous language for the sake of compromise. Whether this is what happened here, or whether Ehrenberg simply made a mistake, is unknown, but the lesson is clear. "Not­withstanding the pressures of the deal, you really have to think hard about every provision," Rinker says.

United Rentals was founded in 1997 by Bradley Jacobs, who had made his fortune consolidating waste removal companies. His goal was to do the same for the scattered, mostly family-owned heavy equipment rental industry. A year into its existence, United Rentals had acquired 38 rental companies accounting for 109 stores in 20 states. By 2007, the company, based in Greenwich, Conn., had 700 locations and had grown into the largest equipment rental company in the world, with annual revenues of more than $3.5 billion.

Convicted terrorism plotter Jose Padilla will serve his term at a Colorado federal prison known as “Supermax” for its strict, isolated conditions and roster of infamous inmates, prison officials said Friday.

Padilla, 37, was sent from a Miami prison to the high-security facility in Florence, Colo., on Thursday, said Bureau of Prisons spokeswoman Felicia Pounce. Padilla was sentenced in January to about 17 years, but counting time already served and good behavior deductions his projected release date is Feb. 9, 2021 — or about 13 years.

At Florence, Padilla joins such well-known inmates as “Unabomber” Theodore Kaczynski, Sept. 11 attacks plotter Zacarias Moussaoui and Eric Rudolph, convicted of the 1996 Olympics bombing. Other neighbors among the 485 inmates are attempted shoe-bomber Richard Reid, FBI turncoat Robert Hanssen and Oklahoma City bombing conspirator Terry Nichols.

Padilla attorney Michael Caruso said in an e-mail Friday that Supermax is “a living hell” where inmates spend most days in 7-foot-by-12-foot cells and have little contact with the outside world. Caruso noted that others convicted of supporting terrorism, such as the “Lackawanna Six” group in upstate New York, were not sent to the nation’s toughest prison.

Caruso called the decision “yet another example of Jose being treated differently and in a more punitive fashion than others who have been accused of similar crimes. I genuinely fear that Jose’s mental health will erode to an even greater degree.”

Padilla and two co-defendants were convicted in August of three terrorism-related charges after a three-month trial in Miami federal court. The other two men, 45-year-old Adham Amin Hassoun and Kifah Wael Jayyousi, 46, remained in custody Friday at Miami’s downtown detention center.

The three were part of a support cell that sent money, recruits and supplies to Islamic extremist groups around the world, prosecutors said at trial. They had faced possible life sentences, but each was given lesser terms by U.S. District Judge Marcia Cooke.

All three are appealing their convictions and sentences, and federal prosecutors are also appealing the sentences as too lenient.

Padilla was arrested in May 2002 at Chicago’s O’Hare International Airport on suspicion of plotting with al-Qaida to detonate a radioactive “dirty bomb” in the U.S., although those allegations were not made at his trial. Testimony showed that Hassoun recruited Padilla at a Florida mosque to attend an al-Qaida terrorist training camp in Afghanistan.

Padilla, a U.S. citizen, was held in military custody for 3 1/2 years and was the subject of numerous legal challenges to his continued detention. He also claimed he was mistreated and tortured at a Navy brig, but Bush administration officials denied that.