MCGRATH RENTCORP
EXHIBIT 10.4.1
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<TYPE>EX-10.4.1
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<FILENAME>f70700ex10-4_1.txt
<DESCRIPTION>EXHIBIT 10.4.1
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                                                                 EXHIBIT 10.4.1




                                MCGRATH RENTCORP

                         2000 LONG-TERM STOCK BONUS PLAN

                       1. PURPOSE OF PLAN; ADMINISTRATION

        1.1 PURPOSE. The intent and purpose of this 2000 Long-Term Stock Bonus
Plan (the "Plan") is to strengthen McGrath RentCorp, a California corporation,
by providing a means to attract and retain competent personnel and to provide to
participating officers and other key employees added incentive for high levels
of performance and for unusual efforts to improve the financial performance of
McGrath RentCorp. These purposes may be achieved through the grant of bonuses
consisting of shares of Common Stock of McGrath RentCorp to participating
officers and key employees.

        1.2 ADMINISTRATION. This Plan shall be administered by the Board of
Directors of McGrath RentCorp (the "Board"). Any action of the Board with
respect to the administration of the Plan shall be taken pursuant to majority
vote, or by the written consent of all of its members. Subject to the express
provisions of the Plan, the Board shall have authority to construe and interpret
the Plan, to define the terms used herein, and to prescribe, amend and rescind
rules and regulations relating to the administration of the Plan, and to make
all other determinations necessary or advisable for the administration of the
Plan. The determinations of the Board on the foregoing matters shall be
conclusive. Subject to the express provisions of the Plan, the Board shall
determine from the eligible class the individuals who shall receive stock bonus
grants, and the terms and provisions of such stock bonus grants (which need not
be identical). No member of the Board shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to the Plan
or any transaction thereunder.

        1.3 PARTICIPATION. Only officers and other key employees of McGrath
RentCorp, or of any subsidiary of McGrath RentCorp, shall be eligible for
selection to participate in the Plan upon approval by the Board. No member of
the Board shall be eligible to participate in the Plan as long as he or she is a
Director. An individual who has been granted a stock bonus (a "Participant")
may, if otherwise eligible, be granted additional stock bonuses if the Board
shall so determine.

        1.4 STOCK SUBJECT TO THE PLAN. Subject to the adjustments provided in
Section 2.1 below, the stock to be offered under the Plan shall be shares of
authorized but unissued Common Stock of McGrath RentCorp. The aggregate amount
of Common Stock to be issued under this Plan shall not exceed four hundred
thousand (400,000) shares, subject to adjustment as set forth in Section 2.1.1
below. If any shares which are the subject of a stock bonus grant shall be
unearned, or shall be forfeited and returned to McGrath RentCorp pursuant to the
terms of the applicable Stock Bonus Agreement, such shares shall again be
available for future grants under this Plan.

        1.5 STOCK BONUS AGREEMENT. All stock bonuses granted hereunder shall be
evidenced by a written Stock Bonus Agreement, which Agreement shall incorporate
the following terms:

            1.5.1 Term of Stock Bonus Agreement. Each stock bonus granted under
        this Plan shall be based upon a performance period to be determined by
        the Board.

            1.5.2 Number of Shares Granted. The number of shares granted to a
        Participant shall be a function of the Participant's salary at the
        beginning of the performance period, the market value of McGrath
        RentCorp's Common Stock at the beginning of the performance period, and
        the return on equity realized by McGrath RentCorp for its shareholders
        over the performance period, and/or such other criteria as may be
        determined by the Board for any particular stock bonus grants (which
        need not be identical).

            1.5.3 Vesting of Bonus Shares; Forfeiture on Termination of
        Employment. Once a Participant has earned bonus shares at the end of the
        performance period, those shares shall be subject to forfeiture and
        return to McGrath RentCorp upon termination of the Participant's
        employment with McGrath RentCorp for any reason whatsoever, with the
        risk of forfeiture lapsing over a period of continued employment.

            1.5.4 Other Terms and Provisions of Stock Bonus Agreement. The Stock
        Bonus Agreements under the Plan may contain such other terms and
        conditions as the Board may direct, and such other terms and conditions
        as the officers of McGrath RentCorp shall deem to be in the best
        interests of McGrath RentCorp which are not inconsistent with the terms
        of this Plan or those approved by the Board of Directors.

                              2. OTHER PROVISIONS

        2.1 ADJUSTMENTS.

            2.1.1 Changes in Capitalization. Subject to any action by the
shareholders required by law, the number of shares of Common Stock covered by
this Plan and any outstanding Stock Bonus Agreement shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock of McGrath RentCorp resulting from a subdivision or consolidation of
shares or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of shares effected without receipt of
consideration by McGrath RentCorp (for this purpose, issuance of shares upon
conversion of convertible securities shall be deemed to be an issuance for which
McGrath RentCorp receives consideration).


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            2.1.2 Successor Corporations. The successor corporation in any
merger or consolidation of McGrath RentCorp shall be required to assume the
obligations under then outstanding Stock Bonus Agreements under this Plan.
Should McGrath RentCorp sell all or substantially all of its assets in a
transaction wherein the employees of McGrath RentCorp continue to be employed by
the purchasing corporation, such purchasing corporation shall likewise be
required to assume the obligations then outstanding under Stock Bonus Agreements
under this Plan.

            2.1.3 Adjustments by Board. Adjustments shall be made by the Board,
whose determination as to what adjustment shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of Common Stock
shall be issued under the Plan on account of any such adjustment.

        2.2 NO RIGHT OF EMPLOYMENT. Nothing contained in this Plan (or any Stock
Bonus Agreement pursuant to this Plan) shall confer upon any employee any right
to continue in the employ of McGrath RentCorp (or its subsidiaries) or interfere
in any way with the right of McGrath RentCorp (or its subsidiaries) to reduce
such Participant's compensation or to terminate such Participant's employment
with McGrath RentCorp or its subsidiaries.

        2.3 NON-TRANSFERABILITY. The rights granted to a Participant to receive
shares of McGrath RentCorp Common Stock under certain circumstances shall be
non-transferable by the Participant other than by will or the laws of descent
and distribution. McGrath RentCorp shall not be liable for the debts, contracts
or engagements of any Participant or his or her beneficiaries, and rights under
any Stock Bonus Agreement may not be taken in execution or by attachment or
garnishment, or by any other legal or equitable proceeding; nor shall the
Participant or his or her beneficiaries have any right to assign, pledge or
hypothecate any rights or benefits under such Agreements.

        2.4 AMENDMENT, EFFECTIVE DATE, TERMINATION.

            2.4.1 Amendment. The Board may at any time suspend, amend or
terminate this Plan.

            2.4.2 Effective Date of the Plan. This Plan shall be effective,
retroactive as of January 1, 2000, and shall be submitted to the shareholders of
McGrath RentCorp for approval by a vote of a majority of McGrath RentCorp's
outstanding capital stock entitled to vote thereon on or before December 31,
2000, and before any shares of McGrath RentCorp Common Stock shall be issued
under this Plan.

            2.4.3 Termination of the Plan. Unless previously terminated by the
Board, this Plan shall terminate at the close of business on December 31, 2009,
and no Stock Bonus Agreements shall be granted under it thereafter; but such
termination shall not affect any Stock Bonus Agreements theretofore entered into
under the provisions of this Plan.

                                                                 March 23, 2000





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                                MCGRATH RENTCORP

                       EXEMPLAR LONG-TERM STOCK BONUS PLAN

                                 XXXXX XXXXXXXX

                                2000-2002 PROGRAM


        This Agreement by and between Xxxxxx X. Xxxxxxx ("Xxxxxxx") and McGrath
RentCorp, a California corporation, provides that Xxxxxxx is a participant in
the 2000-2002 Program of the McGrath RentCorp 2000 Long-Term Stock Bonus Plan
under the following terms and conditions.

1.      INITIAL VALUES:    Salary                             $xxx,xxx
                           Base Stock Value:                    $xx.xx
                           Divisor:                                x.x
                           LTB Base Points:                      x,xxx
                           Initial EBITDA:                 $XX,XXX,XXX

2.      DEFINITIONS. For purposes of this Agreement, the following terms will
have the following meanings ascribed to such terms below.

        2.1 "Average Return on Equity" shall mean the numerical average of the
Returns on Equity calculated for each of the three fiscal years ending December
31, 2000, 2001 and 2002.

        2.2 "Base Rental Revenue" [Intentionally Omitted]

        2.3 "Base Stock Value" shall be the number set forth in Section 1 above.
(The Base Stock Value is the Stock Value as of January 1, 2000.)

        2.4 "Board" shall mean the Board of Directors of McGrath RentCorp.

        2.5 "Change in Control" shall mean that there has been a corporate
merger or consolidation, a sale of all or substantially all of the assets, or a
purchase of outstanding shares that results in a corporation, partnership,
person or group of persons (which corporation, partnership, person or group of
persons is not affiliated with Robert P. McGrath) owning (i) more than fifty
percent (50%) of McGrath RentCorp's outstanding voting securities or (ii) all or
substantially all of its assets and business.

        2.6 "EBITDA" for any particular fiscal year shall mean the Net Income of
McGrath RentCorp for that year, before taking into account any income or losses
derived from or expenses attributable to interest, income taxes, depreciation
and/or amortization, as such figures are disclosed in McGrath RentCorp's
published, audited financial statements for that year.

        2.7 "EBITDA Growth Percentage" shall mean that factor (expressed as a
percentage) compounded annually by which the Initial EBITDA would have to grow
to achieve a smooth growth of EBITDA over the fiscal years ended December 31,
2000, 2001 and 2002 equal to the actual Three-Year EBITDA.

        2.8 "Gross Rental Revenues" [Intentionally Omitted]

        2.9 "Initial EBITDA" shall be the number set forth in Section 1 above.
(The Initial EBITDA set forth above is the EBITDA for the fiscal year ended
December 31, 1999.)

        2.10 "LTB Base Points" shall be the number set forth in Section 1 above.
(The LTB Base Points set forth above were calculated by dividing (i) Xxxxxxx'
Base Salary as of the beginning of this Program by (ii) the Base Stock Value of
McGrath RentCorp's Common Stock as of the beginning of the Program, and then
(iii) that result by the Divisor set forth above.)

        2.11 "LTB Final Points" shall be a number calculated by multiplying the
LTB Base Points by the Multiplier Factor.



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        2.12 The "Multiplier Factor" shall be determined as specified in Section
3.1 below.

        2.13 The "Option to Repurchase" is the option granted by Xxxxxxx in
Section 6 below to McGrath RentCorp to purchase the Xxxxxxx Shares.

        2.14 "Return on Equity" for any particular fiscal year shall mean (i)
Net Income (after taxes) of McGrath RentCorp for that year divided by (ii) Total
Shareholders' Equity as of the first day of that year, as such figures are
disclosed in McGrath RentCorp's published, audited financial statements for that
year.

        2.15 "Stock Bonus Allocation" shall be the number of shares of McGrath
RentCorp Common Stock allocated to Xxxxxxx as a bonus under this Program, as
determined in accordance with Section 3.3 below.

        2.16 "Stock Value" as of a particular date shall mean the then current
fair market value of McGrath RentCorp's Common Stock determined by calculating
the average of the high and low prices reported for transactions in such Common
Stock for each of the five preceding days on which transactions occurred on
NASDAQ or any exchange on which the stock is then traded, as reported by The
NASDAQ Stock Market, Inc. In the event McGrath's Common Stock is not then traded
on NASDAQ or an exchange, the fair market value of the Common Stock shall be
determined by the Board in good faith.

        2.17 A "Successor to McGrath RentCorp" shall be (i) any corporation
which is the surviving corporation in a merger or consolidation with McGrath
RentCorp, or (ii) any corporation, partnership or person(s) which acquires all
or substantially all of the assets of McGrath RentCorp in a transaction wherein
a majority of the employees of McGrath RentCorp continue to be employed by such
purchaser.

        2.18 "Termination of Employment" shall mean the termination of Xxxxxxx'
employment with McGrath RentCorp (and its subsidiaries) for any reason
whatsoever, whether by voluntary resignation due to disability or otherwise, by
reason of Xxxxxxx' death, or at the election of McGrath RentCorp for any reason
whatsoever. A leave of absence approved by the Board of Directors of McGrath
RentCorp shall not be considered to be a Termination of Employment for purposes
of this Agreement.

        2.19 "Three-Year EBITDA" shall be the numerical sum of McGrath
RentCorp's EBITDA for the three fiscal years ending December 31, 2000, 2001 and
2002.

        2.20 "Xxxxxxxs Shares" shall mean all securities of McGrath RentCorp now
owned by Xxxxxxxs or hereafter acquired by him in any manner whatsoever.

3.      CALCULATION OF STOCK BONUS ALLOCATION.

        3.1 Determination of Multiplier Factor. As soon as the audited financial
statements of McGrath RentCorp for the year ended December 31, 2002 have been
published, the Multiplier Factor shall be determined as follows.

        3.1.1 Growth in Rental Revenues as a Condition. [Intentionally Omitted]

        3.1.2 Average Return on Equity as a Function. The ROE Multiplier Factor
shall be determined as a function of the Average Return on Equity in the
following manner:

        3.1.2.1 In the event the Average Return on Equity is less than XX.XX%,
the ROE Multiplier Factor shall be zero (0);

        3.1.2.2 In the event the Average Return on Equity is XX.XX%, the ROE
Multiplier Factor shall be one (1.0);

        3.1.2.3 In the event the Average Return on Equity is greater than
XX.XX%, but less than XX.XX% the ROE Multiplier Factor shall be one (1.0) plus
the result of multiplying (i) the amount by which the Average Return on Equity
exceeds XX.XX% by (ii) 66.666667;

        3.1.2.4 In the event the Average Return on Equity is XX.XX%, the ROE
Multiplier Factor shall be two (2.0);

        3.1.2.5 In the event the Average Return on Equity is greater than
XX.XX%, but less than XX.XX%, the ROE Multiplier Factor shall be two (2.0) plus
the result of multiplying (i) the amount by which the Average Return on Equity
exceeds XX.XX% by (ii) 66.666667; and


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        3.1.2.6 In the event the Average Return on Equity is XX.XX% or greater,
the ROE Multiplier Factor shall be three (3.0).

        3.1.3 EBITDA Growth Percentage Growth Percentage as a Function. The
EBITDA Multiplier Factor shall be determined as a function of the EBITDA Growth
Percentage in the following manner:

        3.1.3.1 In the event the EBITDA Growth Percentage is less than XX.XX%,
the EBITDA Multiplier Factor shall be zero (0);

        3.1.3.2 In the event the EBITDA Growth Percentage is XX.XX %, the EBITDA
Multiplier Factor shall be one (1.0);

        3.1.3.3 In the event the EBITDA Growth Percentage is greater than XX.XX
%, but less than XX.XX %, the EBITDA Multiplier Factor shall be one (1.0) plus
the result of multiplying (i) the amount by which the EBITDA Growth Percentage
exceeds XX.XX % by (ii) 66.666667;

        3.1.3.4 In the event the EBITDA Growth Percentage is XX.XX %, the EBITDA
Multiplier Factor shall be two (2.0);

        3.1.3.5 In the event the EBITDA Growth Percentage is greater than XX.XX
%, but less than XX.XX %, the EBITDA Multiplier Factor shall be two (2.0) plus
the result of multiplying (i) the amount by which the EBITDA Growth Percentage
exceeds XX.XX % by (ii) 66.666667; and

        3.1.3.6 In the event the EBITDA Growth Percentage is XX.XX % or greater,
the EBITDA Multiplier Factor shall be three (3.0).

        3.1.4 Sum of Two Functions. The Multiplier Factor shall be one-half (
1/2) of the sum of the ROE Multiplier Factor plus the EBITDA Multiplier Factor.

        3.1.5 Adjustment in the Event of Capital Structure Change. In the event
of a significant change in the capital structure of McGrath RentCorp or in the
business conducted by it, the Board may, in its sole and absolute discretion,
determine that it would be equitable: (i) to revise the conditions based on
Average Return Equity or set new goals; or (ii) to declare that the purposes of
this Program had been met notwithstanding the failure to achieve an Average
Return on Equity of XX.XX % or greater; or (iii) to revise the conditions based
on EBITDA Growth Percentage or set new goals; or (iv) to declare that the
purposes of this Program have been met notwithstanding the failure to achieve an
EBITDA Growth Percentage of XX.XX % or greater; or alternatively, (v) the Board
may simply specify that the Multiplier Factor for this Program shall be a number
between 1.0 and 3.0.

        3.2 Calculation of LTB Final Points. As soon as the Multiplier Factor
has been determined in accordance with Section 3.1 above, the LTB Final Points
shall be calculated by multiplying the LTB Base Points by the Multiplier Factor.

        3.3 Allocation of Stock Bonus. Xxxxxxx shall be allocated one (1) share
of McGrath RentCorp Common Stock for each LTB Final Point, or portion thereof,
calculated in accordance with Section 3.2 above.

        3.3.1 The number of shares of McGrath RentCorp Common Stock to be
allocated to Xxxxxxx pursuant to this Section 3.3 shall be proportionally
adjusted for any increase or decrease in the number of outstanding shares of
Common Stock of McGrath RentCorp resulting from a subdivision or consolidation
of shares, or for the payment of a stock dividend (but only on the Common
Stock), or for any other increase or decrease in the number of such shares
effected without receipt of consideration by McGrath RentCorp. Adjustments under
this Section 3.3.1 shall be determined by the Board, whose determination as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.

        4. ISSUANCE OF SHARE CERTIFICATES.

        4.1 Issuance of Stock Certificates. As soon as reasonably practical
following the determination of Xxxxxxx' Stock Bonus Allocation, McGrath RentCorp
shall cause five stock certificates to be issued in the name of Xxxxxxx, each
one evidencing twenty percent (20%) of the number of shares of McGrath RentCorp
Common Stock allocated to him as a Stock Bonus.

        4.2 Delivery and Re-Delivery of Stock Certificates. McGrath RentCorp
shall deliver all five (5) stock certificates to the Xxxxxxx, and the Xxxxxxx
shall promptly redeliver back to McGrath RentCorp four (4) of the stock



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certificates to be held by McGrath RentCorp for later redelivery to the Xxxxxxx
in accordance with, and subject to, the forfeiture provisions set forth in
Section 5 below.

        4.3 Option to Receive a Portion in Cash. With respect to 20% of the
shares of Common Stock delivered to Xxxxxxx pursuant to Section 4.2 above, or
with respect to any shares redelivered to him in accordance with Section 5.2
below, Xxxxxxx may elect, by written notice given to McGrath RentCorp not less
than ten (10) days nor more than thirty (30) days prior to the delivery or
redelivery of a certificate evidencing such shares, to receive the Stock Value
of such shares in cash, in lieu of the issuance and delivery of such shares. For
purposes of determining the Stock Value of such shares, the Stock Value shall be
calculated as of the date of such notice.

        4.3.1 Notwithstanding the foregoing right to elect to receive cash, the
maximum amount of cash which Xxxxxxx shall have the right to receive in lieu of
the issuance and delivery of shares shall be forty percent (40%) of the
aggregate Stock Value of Xxxxxxx' entire Stock Bonus Allocation.

        5. FORFEITURE UPON TERMINATION OF EMPLOYMENT.

        5.1 Termination of Employment Prior to End of Program. In the event of
Xxxxxxx' termination of employment prior to December 31, 2002, Xxxxxxx shall
have no right to receive any Stock Bonus Allocation nor any certificates
evidencing any shares of McGrath RentCorp Common Stock to be issued pursuant to
this Agreement.

        5.2 Subsequent Delivery of Stock Certificates. Provided Xxxxxxx s has
remained in the employ of McGrath RentCorp, or its subsidiaries, continuously
from the date hereof through the applicable subsequent certificate delivery
date, one certificate evidencing twenty percent (20%) of the Stock Bonus
Allocation held in the possession of McGrath RentCorp in accordance with Section
4.2 above, shall be delivered to Xxxxxxx on December 31, 2003, and another one
of the certificates shall be delivered to Xxxxxxx each December 31 thereafter
for as long as Xxxxxxx remains in the continuous employ of McGrath RentCorp, or
its subsidiaries, until December 31, 2006, at which time all five stock
certificates shall have been delivered to Xxxxxxx.

        5.3 Termination of Employment Subsequent to December 31, 2002. In the
event of Xxxxxxx' Termination of Employment subsequent to December 31, 2002,
Xxxxxxx shall have the right to retain, subject to the Option to Repurchase set
forth in Section 6 below all share certificates evidencing Stock Bonus
Allocations which had been delivered to him pursuant to Sections 4.2 or 5.2
above prior to his Termination of Employment; however, upon his Termination of
Employment, such share certificates still held at that time by McGrath RentCorp
pursuant to Section 4.2 or 5.2 above shall be immediately forfeited by him, and
the shares evidenced thereby shall be deemed canceled and returned to the status
of authorized but unissued shares of McGrath RentCorp, and Xxxxxxx shall have no
further rights or claims thereto.

        6. OPTION TO REPURCHASE. Upon Termination of Employment, Xxxxxxx shall,
and does hereby, offer for sale to McGrath RentCorp, all, but not less than all,
of the Xxxxxxx Shares on the terms specified in this Section 6.

        6.1 Notice of Exercise. In order to exercise the Option to Repurchase
the Xxxxxxx Shares, McGrath RentCorp shall give notice of its intention to so
exercise to Xxxxxxx, or to his personal representative in the event of his death
or incapacity, within three (3) months following his Termination of Employment.

        6.2 Repurchase Price. The Repurchase Price for the repurchase of the
Xxxxxxx Shares shall be the Stock Value as of the date of Termination of
Employment or as of the date of the giving of the notice of exercise of the
Option to Repurchase, with the election of which price shall apply being stated
in the notice of exercise.

        6.3 Terms of Payment. Payment of the Repurchase Price shall be made at
the time that the notice of exercise of the Option to Repurchase is given.
McGrath RentCorp may first offset against the Repurchase Price due to Xxxxxxx
any amount of indebtedness owed by Xxxxxxx to McGrath RentCorp. Payment of the
net amount of the Repurchase Price after the offset of indebtedness shall be as
follows:

        6.3.1 One-third (?) thereof in cash or by check; and

        6.3.2 The remaining two-thirds (?) thereof by means of the delivery of a
Promissory Note, bearing interest at the rate of nine percent (9%) per annum on
the unpaid principal amount, and payable in ten (10) equal annual installments
of principal plus accrued interest, commencing one year from the date thereof.
Such Note shall permit prepayment of any amount by McGrath RentCorp at any time
without penalty.

        6.4 Other Shareholders. McGrath RentCorp may assign, partially or
completely, its Option to repurchase to one or more of its shareholders, and
each such assignee shall have the right to repurchase the Xxxxxxx Shares in his,
her or its



<PAGE>   7

own name and for his, her or its own account, all on the same terms and
conditions specified in this Section 6; provided, that the exercise of the
Option to Repurchase as so assigned shall result in the repurchase of all of the
Xxxxxxx Shares.

        6.5 Restrictive Legend. The certificates evidencing the Xxxxxxx shares
shall be endorsed with an appropriate legend referring to the Option to
Repurchase granted by this Section 6. Xxxxxxx shall immediate cause to be
delivered to McGrath RentCorp all certificates evidencing Xxxxxxx Shares which
are currently outstanding so that they may be imprinted with such a legend. Such
certificates shall be returned to Xxxxxxx after they have been imprinted with
the appropriate legend.

        6.6 Permitted Transfers. Notwithstanding the provisions of this Section
6, nothing herein shall prevent Xxxxxxx from making a bona fide sale or gift of
any of the Xxxxxxx Shares.

        7. RESTRICTED ACTIVITIES.

        7.1 Unfair Trade Practices. Xxxxxxx acknowledges that the success of
McGrath RentCorp's business as conducted depends to a large extent upon the
business practices and methods used by it and upon the knowledge of the needs,
preferences and particularities of each of its customers and suppliers, which
practices, methods and knowledge are continuously developed by McGrath RentCorp.
Xxxxxxx further acknowledges that these practices, methods and knowledge
constitute trade secrets which are valuable assets belonging to McGrath
RentCorp. Accordingly, Xxxxxxx agrees that, during his employment with McGrath
RentCorp and for a period of five (5) years immediately following his
Termination of Employment, he shall not, either directly or indirectly, (i)
disclose to any person, firm or corporation, or use himself in any way, any
trade secret of McGrath RentCorp (except as may be required in the course of his
employment with McGrath RentCorp and for its benefit), or (ii) call on, solicit,
divert or take away, or attempt to call on, solicit, divert or take away any
person, firm or corporation who is a customer of or a supplier to McGrath
RentCorp, or who is being solicited by McGrath RentCorp at the time of Xxxxxxx'
Termination of Employment, or who had been a customer of or supplier to McGrath
RentCorp during the six months immediately preceding Xxxxxxx' Termination of
Employment.

        7.2 Covenant Not to Compete. In order to protect the element of good
will purchased in part by payment of the Repurchase Price for the Xxxxxxx
Shares, and as part of the consideration for the payment of the Repurchase Price
in the event McGrath RentCorp (or some of its shareholders) purchases all of the
Xxxxxxx Shares, Xxxxxxx agrees, for a period of two (2) years after such
purchase, not to engage or participate, or cause any other person, firm or
corporation to become engaged, in any activity or business within the
geographical regions within which McGrath RentCorp conducts its business as of
the date of Termination of Employment, either directly or indirectly, as an
employee, agent, representative, partner, owner, director, officer or investor,
which is in the same or similar business as McGrath RentCorp. For purposes of
this Section 7.2, a purchase of the Xxxxxxx Shares shall be deemed to have
occurred when McGrath RentCorp (and/or other shareholders) tenders the
Repurchase Price in accordance with Section 6.3 above.

        7.3 Enforcement. Xxxxxxx agrees that a violation on his part of any of
the terms of this Agreement shall cause irreparable damage, the exact amount of
which is impossible to ascertain, and for that reason agrees that McGrath
RentCorp (and/or the other shareholders) shall be entitled to a decree of
specific performance of the terms hereof and/or an injunction restraining
further violations; said right to be in addition to any other remedies available
under law.

        8. SUCCESSOR TO MCGRATH RENTCORP.

        8.1 Assumption of Program Obligations by Successor. Any Successor to
McGrath RentCorp shall be required to assume the obligations then outstanding
under this Program, or in the alternative, to enter into a substitute program
which is approved and accepted by Xxxxxxx in writing, which approval and
acceptance shall not be unreasonably withheld.

        8.2 Termination of Employment. As used in this Section 8 only,
"Termination of Employment" shall not include a termination of Xxxxxxx'
employment by reason of his voluntary resignation due to disability or otherwise
or by reason of his death.

        8.3 Effect of Change in Control. In the event of a Termination of
Employment at the time of a Change in Control or thereafter,

        8.3.1 The share certificate delivery schedule set forth in Sections 4
and 5 above shall accelerate and the full Stock Bonus Allocation shall vest as
of the date of such Termination of Employment notwithstanding Section 5.3 above,
and all share certificates then held by McGrath RentCorp pursuant to Section 4.2
above shall be delivered to Xxxxxxx; and

        8.3.2 In the event Xxxxxxx ' Termination of Employment is prior to
December 31, 2002, the determination of the Multiplier Factor in Section 3.1
above shall be made as of the last fiscal quarter completed prior to the
Termination of Employment, with appropriate adjustments to the calculation
therein of the Average Return on Equity.


<PAGE>   8

        9. MISCELLANEOUS PROVISIONS.

        9.1 Tax Withholding. McGrath RentCorp (or any of its subsidiaries which
employ Xxxxxxx) shall have the right to deduct any sums that federal, state or
local tax law requires to be withheld with respect to the issuance of Common
Stock under this Program or as otherwise may be required by such laws. McGrath
RentCorp (or such subsidiary) may require, as a condition to issuing shares of
Common Stock under this Program, that Xxxxxxx or his beneficiaries pay any sums
that federal, state or local tax law requires to be withheld with respect to
such issuance.

        9.2 Privileges of Stock Ownership. Xxxxxxx shall not be entitled to the
privileges of stock ownership as to any shares of Common Stock which have been
allocated to him but for which certificates have not been issued and delivered
to him.

        9.3 Non-Transferability of Stock Bonus Allocation. The right granted
hereby to Xxxxxxx to receive shares of McGrath RentCorp Common Stock under
certain circumstances shall be non-transferrable by Xxxxxxx other than by will
or the laws of descent and distribution. McGrath RentCorp shall not be liable
for the debts, contracts or engagements of Xxxxxxx or his beneficiaries, and
rights under this Program may not be taken in execution or by attachment or
garnishment, or by any other legal or equitable proceeding; nor shall Xxxxxxx or
his beneficiaries have any right to assign, pledge or hypothecate any rights or
benefits hereunder.

        9.4 No Effect on Employment. Nothing contained in this Agreement shall
confer upon Xxxxxxx any right to continue in the employ of McGrath RentCorp (or
its subsidiaries) or constituted any contract or agreement of employment.

        9.5 Governmental Regulations. This Program, the grant of Stock Bonus
Allocations and the issuance of Common Stock hereunder shall be subject to all
applicable rules and regulations of governmental authorities. At the time of the
issuance of any shares of Common Stock to Xxxxxxx under this Program, and as a
condition to the issuance of such shares, Xxxxxxx shall give such
representations and warranties in writing to McGrath RentCorp as its legal
counsel shall deem appropriate to insure compliance with applicable securities
laws and regulations. McGrath RentCorp may place upon the certificates
evidencing the shares of Common Stock being issued legends referring to
restrictions on transfer as may be appropriate in connection with compliance
with applicable securities laws and regulations.

        10. STANDARD PROVISIONS.

        10.1 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if delivered personally, (ii) on the date of
transmission if sent by facsimile transmission with printed proof of electronic
receipt, (iii) on the date of delivery if delivered by a courier service with
proof of delivery, or (iv) on the third business day after mailing if mailed by
first class mail, certified, return receipt requested, postage prepaid, to the
following addresses:

        If to McGrath RentCorp, then to:        McGrath RentCorp
                                                5700 Las Positas Road
                                                Livermore, CA 94550
                                                Attn: Randle F. Rose
                                                Facsimile No.:  1-925-453-3200

        With a copy to:                         Christopher Ream, Esq.
                                                2600 El Camino Real, Suite 410
                                                Palo Alto, CA 94306
                                                Facsimile No.:  1-650-856-8448

        If to Xxxxxxx, then to:                 Xxxxxx X.. Xxxxxxx
                                                McGrath RentCorp
                                                5700 Las Positas Road
                                                Livermore, CA  94550
                                                Facsimile No.:  1-925-453-3200

        10.2 Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment to this Agreement shall be binding unless executed in writing by
the party to be charged. No waiver of any of the provisions of this Agreement
shall be



<PAGE>   9

deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.

        10.3 Remedies. The rights and remedies provided to any party herein
shall be cumulative and in addition to any other or further rights or remedies
available at law or in equity.

        10.4 Disputes. All disputes, controversies and claims arising out of or
relating to this Agreement, or the interpretation, construction, performance or
breach hereof shall be settled by arbitration in accordance with the rules of
the American Arbitration Association, regardless of whether one of the parties
fails or refuses to participate; and such arbitration shall take place in
Alameda County, State of California. Judgment upon the award rendered by the
arbitrator may be entered in any Court having jurisdiction thereof.
Notwithstanding the foregoing, either party hereby may bring an action in the
Superior Court of the State of California in and for Alameda County for
injunctive relief. In the event any court action is instituted, or a referral is
made to arbitration, to settle any dispute arising under this Agreement or to
enforce any right or obligation hereunder, the prevailing party shall be
entitled to recover its or his attorney fees and other expenses associated
therewith.

        10.5 Severability. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, the meaning of such provision shall be construed
(to the extent feasible) so as to render the provisions valid and enforceable,
and if no feasible construction would save the provision, its invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement; rather this Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.

        10.6 Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California as applied to
contracts that are executed and performed entirely in California.

        10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall be constitute one and the same instrument.

        IN WITNESS WHEREOF this Agreement has been executed and delivered as of
the ________ day of February, 2001, by the undersigned Chairman of the Board and
Chief Executive Officer of McGrath RentCorp, thereunto duly authorized by the
Board of Directors of said corporation, and by Xxxxxxx.

                                       MCGRATH RENTCORP

                                       By

                                       Robert P. McGrath, Chairman of the Board
                                       and Chief Executive Officer

                                       -----------------------------------------
                                       XXXXXX X . XXXXXXX



</TEXT>
</DOCUMENT>
